The Complete Guide to Construction Payment Terms

Payment Structure Matters

How payments are structured affects project cash flow, risk, and success for both owners and contractors.

Common Payment Structures

Fixed Price/Lump Sum

Total price agreed upfront. Payments tied to milestones. Risk on contractor for cost overruns.

Time and Materials

Pay for actual labor and materials plus markup. More flexible but less cost certainty.

Cost Plus

Reimburse costs plus a fee (fixed or percentage). Owner bears cost risk.

Progress Payments

Most projects use progress payments tied to milestones or percentage complete.

Retainage

A percentage (typically 5-10%) held until project completion to ensure punch list completion.

Payment Terms

Common terms are Net-30 from invoice date. Clear terms prevent payment disputes.

Bidroom's System

Our escrow-based milestone payments provide security for both parties and ensure fair, timely payment.