The timing of contract payments and the conditions under which payments will be made also need to be specified in the contract. Common payment arrangements are:

•  Full payment on contract completion: This is the most common method of payment and involves payment of the agreed contract price on the successful delivery of all contract deliverables by the contractor.

•  Progress payments: These are periodic payments to a contractor for work completed, usually tied to time. They are a means of financing the contractor until the final delivery under the contract. They are often used in fixed price contracts when the contract extends over a reasonable period of time. Progress payments should be based on the worth of the work to the acquiring entity. If this cannot be determined, they are usually based on an estimate of the costs incurred by the contractor.

•  Milestone payments: These are typically progress payments based on certain events being achieved.

• Advance payments: These are payments made prior to work being completed on a contract. These payments are usually made when there is a significant capital requirement needed in order to obtain facilities and other resources necessary to commence the work. Payments made in advance, before the supply of any deliverable, should be treated with caution and avoided whenever possible. If unavoidable, these types of arrangements should be protected by enforceable financial securities provided by reputable third parties. The inherent risk posed by advance payments may be mitigated by offering only a partial up-front payment, with the majority of payment to be made upon the successful completion of the contract.

Payments made in advance, before the supply of any deliverable, should be treated with caution and avoided whenever possible.