# Factory Construction Progress Payments Explained > How factory design and build payments are staged: progress claims, retention, liquidated damages and what to check. URL: https://factorybuilder.my/guide/factory-progress-payments/ Last-Modified: 2026-11-10 Tags: factory construction progress payment, progress claim construction, retention sum, liquidated damages malaysia menu\_book Decision guide // Design and Build Factory # How Progress Payments Work in a Factory Design and Build Contract How factory design and build payments are staged: progress claims, retention, liquidated damages and what to check. Published 10 November 2026 · 5 min read ![Quantity surveyor measuring completed work on a factory site](/images/featured/quantity-surveyor-measuring-completed-work-on-fact.webp) ## Paying for Work as It Is Done You know how a factory build can feel like a long string of invoices? Most of the stress comes from not knowing what each one is for. Factory construction progress payment works in stages, not in one lump sum, and the principle is simple: **you pay for work that has been done**. We’re Factory Builder Malaysia, the factory and warehouse arm of QDB Ventures Sdn Bhd, a Cheras-based contractor. How that principle is written into your contract decides how well protected you are. This guide covers the main payment terms in a design and build factory [/design-and-build-factory/ →](/design-and-build-factory/) contract, using Malaysian rules where they apply. We’ll go through progress claims, retention and liquidated damages, then a checklist to run before you sign. ### Progress Claims Tied to Work Done A **progress claim** is the contractor’s request for payment for work completed in a period or at a stage. Two approaches are common: - **Monthly valuations:** the work done each month is measured and valued - **Stage payments:** payment at defined milestones, such as foundations, frame, roof and services Either way, a quantity surveyor should check the claim against the work on site before you pay. Payment timing matters too. The Shearn Delamore law firm notes that CIPAA, Malaysia’s Construction Industry Payment and Adjudication Act 2012, gives the paying party 10 working days to serve a payment response once a payment claim is served. Both sides should know that clock exists. CIPAA also bans “pay when paid” clauses, according to Christopher & Lee Ong. That protects the contractor and its subcontractors, so work on your site doesn’t stall over a payment chain you can’t see. An amendment Act took effect on 1 January 2026, though it mainly updated references to the AIAC (the Asian International Arbitration Centre). The core payment rules haven’t changed. ![Printed payment schedule beside a calculator on a desk](/images/content/printed-construction-payment-schedule-beside-calcu.webp) ### Retention **Retention** is a portion of each payment held back. It gives the contractor a reason to finish properly and fix defects. Law firm Shearn Delamore describes the usual Malaysian practice as 5% of the contract sum, released in two tranches. The first half comes back at practical completion. The second half comes back at the end of the defects liability period, once defects are made good. The PAM Contract 2018 (the Pertubuhan Akitek Malaysia form) sets its retention at a maximum of 5% of the contract sum, according to PAM’s own 2024 practice note. Defects liability periods typically run from 12 to 36 months. Check the figure in your contract, because a longer period holds your retention for longer. ### Liquidated Damages **Liquidated damages** are a pre-agreed sum the contractor pays for each day or week the work runs late beyond the completion date. They’re set in the contract. Extensions of time may apply for delays outside the contractor’s control, such as approved variations. Under PAM 2018 and the AIAC standard form, the contractor generally has to give notice within 28 days of a delay event, according to Shearn Delamore. Late notice can weaken an extension claim, so ask who tracks these dates. Malaysian law adds a twist for anyone searching “liquidated damages Malaysia”. Section 75 of the Contracts Act 1950 entitles the injured party to reasonable compensation not exceeding the named sum. Malaysian courts have followed the Selva Kumar v Thiagarajah line of cases, which expects the claimant to show actual loss. So set a rate that reflects your real daily cost of delay, such as lost production or rented space, and keep records. | Term | Purpose | What to check | | --- | --- | --- | | Progress claims | Pay for work done | Stages match measurable work; payment response period (10 working days under CIPAA) | | Retention | Security for completion and defects | Percentage (often 5%), release points, defects liability period | | Liquidated damages | Compensation for delay | Rate, cap, extension of time notice rules (28 days under PAM 2018) | | Variations | Pay for agreed changes | Valued in writing before work | > **Payment should follow progress** > > A schedule that front-loads payments before work is done shifts risk onto you. Ask what each stage pays for. ## What to Check in the Payment Schedule Run through this list before you sign. If any line is unclear, ask for it to be written into the contract. - Each payment stage is tied to work you can see and measure - Any upfront payment is explained, for example for design or material orders - Retention terms, percentage and release points are clear - Liquidated damages rate and extension of time rules are stated - Variations are valued separately, in writing, before the work proceeds - The final account process at the end is described An upfront payment isn’t a red flag by itself. Design fees and long-lead items such as steel or roofing sheets often justify one. The point is that you can see what it covers. ## Payments and Trust Clear payment terms protect both sides. You know what you’re paying for, and the contractor knows when they’ll be paid. That’s why factory construction progress payment terms are worth an hour of your time before any site work starts. For the other contract terms to review, read how to choose a factory contractor [/guide/how-to-choose-a-factory-contractor/ →](/guide/how-to-choose-a-factory-contractor/) . For how changes are handled, see keeping control in design and build [/guide/design-and-build-control-variations/ →](/guide/design-and-build-control-variations/) . Planning a build on your own industrial land in Selangor? Send us your draft payment schedule and we’ll walk through it with you before you commit. helpQuick answers ## Frequently Asked Questions ### What is a progress claim? expand\_more A claim for payment based on work completed and valued during a period or at a stage. It is usually checked by a quantity surveyor before payment. ### What is retention? expand\_more A portion of each payment held back until the work is complete and defects are made good. Part is often released at completion and the rest at the end of the defects liability period. ### What should I check? expand\_more That payment stages match measurable work, that retention terms are clear, that liquidated damages are stated, and that variations are valued separately and in writing. ### Is a large deposit normal? expand\_more Be cautious. Payments should generally follow work done. Ask what any upfront payment covers, such as design or material orders, and how it is secured. menu\_bookKeep reading ## Related Guides ### How to Choose a Factory Contractor: Checks Before You Sign Checks before appointing a factory contractor: CIDB registration, completed work, submissions and key contract terms. [How to Choose a Factory Contractor: Checks Before You Sign →](/guide/how-to-choose-a-factory-contractor/) ### Keeping Control in Design and Build: Approvals, Specifications and Variations Stay in control in design and build: design sign-off points, written specifications, variations and regular updates. [Keeping Control in Design and Build: Approvals, Specifications and Variations →](/guide/design-and-build-control-variations/) ### The Design and Build Process for a Factory, Step by Step From brief to handover: plan and budget, design, engineering, quotation, approvals, construction and owner decisions. [The Design and Build Process for a Factory, Step by Step →](/guide/design-and-build-process-factory/) ### Design and Build vs Separate Architect and Contractor Design and build vs separate architect and contractor: responsibility, coordination, timing and when each suits. [Design and Build vs Separate Architect and Contractor →](/guide/design-and-build-vs-architect-and-contractor/) From guide to project ## Learn more about Design and Build Factory One contract covering design, engineering and construction for owners who have industrial land but no drawings yet. Every quotation lists inclusions, exclusions and responsibilities. View service [/design-and-build-factory/ →](/design-and-build-factory/) Request a Quotation [/contact/ →](/contact/)