# Deposits and progress payments

Payment bases, milestone events, advance credits and retention, with bounded procurement examples and illustrative arithmetic.

Reviewed: 2026-10-30

Tags: commercial, payment-terms

## Meaning and scope

A deposit is an initial payment toward an agreed price in the example below.
Names vary by contract. GANGLOFF SCOMA's machinery terms also call a
pre-departure installment a deposit.
[GANGLOFF SCOMA, General Terms of Sale, §6](https://gangloff-scoma.com/en/general-terms-of-services/).

## Illustrative arithmetic: cumulative milestones

On an illustrative fixed price of **10,000 currency units (CU)**, a 20%
deposit pays **2,000 CU**. The next milestone brings cumulative payment to
50%, so the deposit counts toward the 5,000 CU target and **3,000 CU** is
due. The final milestone brings cumulative payment to 100%, leaving
**5,000 CU** due. Assume all prior amounts were paid as scheduled, one
unchanged currency and no tax, freight, fees, retention, refunds or price
adjustments.

| Event | Cumulative amount permitted | Previously paid | New payment |
| --- | ---: | ---: | ---: |
| Initial deposit | 0.20 × 10,000 = 2,000 CU | 0 CU | 2,000 CU |
| Intermediate milestone | 0.50 × 10,000 = 5,000 CU | 2,000 CU | 3,000 CU |
| Final milestone | 1.00 × 10,000 = 10,000 CU | 5,000 CU | 5,000 CU |

The three new payments total **10,000 CU**. Adding a further 50% installment on
top of the deposit at the intermediate event would produce 7,000 CU paid by that
point, contradicting the stated 5,000 CU cumulative amount. Conversely, if a
schedule explicitly described each percentage as an additional installment, the
cumulative interpretation above would not apply.

The subtraction works only under the stated cumulative-payment assumptions.
A percentage of a revised price, a particular line item or a remaining balance
has a different denominator. Payment percentages are dimensionless; their
monetary result has the currency unit of the stated price base. This example
contains no currency conversion or inference about work completed.

## Payment bases and variants

**Advance**, **interim**, **progress** and **delivery payment** can have precise
meanings within a particular procurement system. Under the United States Federal
Acquisition Regulation (FAR), a commercial interim payment follows some work,
whereas a commercial advance payment precedes any work. A delivery payment is
for accepted supplies or services, including accepted partial deliveries.
These definitions apply within FAR Part 32; they are not definitions for every
private sale. [FAR 32.001](https://www.acquisition.gov/far/32.001).

A payment schedule describes amounts and triggers. Its wording alone does not
establish a particular order's physical completion, acceptance or actual receipt
of funds. Refund rights, enforceability, title, risk, tax treatment, accounting
control and revenue recognition are outside this reference's conclusions.

The basis determines what a payment amount measures. The following comparison
combines source definitions with explanatory distinctions; it does not classify
an unspecified customer contract.

| Basis | Meaning in the cited context | Important distinction |
| --- | --- | --- |
| Advance funding | FAR 32.102(a) describes money advanced in anticipation of complete performance, expected to be recovered from payments due during performance. | It is not measured by performance. |
| Costs incurred | FAR 32.102(b) describes progress financing based on costs as work proceeds. | This category excludes percentage/stage-of-completion payments, accepted partial deliveries and performance-based payments. |
| Event or performance criterion | FAR 52.232-32(c)(1) requires successful accomplishment of the specified event or criterion. | A scheduled date alone does not satisfy that criterion. |
| Work accomplished | FAR 52.232-5(b) bases construction progress payments on approved estimates of work meeting contractual quality standards. | This construction clause is a distinct example, not a default for manufactured goods. |

Sources: [FAR 32.102(a)–(b)](https://www.acquisition.gov/far/32.102),
[FAR 52.232-32(c)](https://www.acquisition.gov/far/52.232-32),
[FAR 52.232-5(b)](https://www.acquisition.gov/far/52.232-5).

**Synthesis:** a percentage of incurred cost, a percentage of the selling price,
a percentage of physical work and a percentage of parts delivered measure
different things. None can be substituted for another without an explicit
relationship. A payment equal to half the price does not, by arithmetic alone,
mean half the parts are finished.

The cost base can itself have restrictions. FAR 52.232-16(a) includes specified
cost exclusions, subcontract-payment conditions, prior-payment deductions and
limits tied to incomplete work and contract price. Consequently, applying a
percentage to a supplier's unrestricted total expenditure would not reproduce
that clause's calculation. The clause's base text and alternates also differ;
its published percentages are not generic deposit or progress-payment rates.
[FAR 52.232-16(a) and alternates](https://www.acquisition.gov/far/52.232-16).

## Events, requests, approval and payment

An event, a request for payment, approval of that request and payment itself are
separate concepts. Under FAR 52.232-32(c), the contracting officer determines
whether the event or performance criterion has been achieved and can require
substantiation. Approval of a payment request expressly does not constitute
Government acceptance of the contracted supplies or services. Paragraph (l)
requires the request to contain the documentation specified by the contractual
basis for payment. Thus a milestone label alone does not supply its documentary
conditions. [FAR 52.232-32(c), (l)](https://www.acquisition.gov/far/52.232-32).

GANGLOFF SCOMA §6 distinguishes initial deposit receipt, payment before workshop
departure and balance invoicing upon final site receipt. Its offer prevails over
contradictory general terms (§2), and prior written agreement can vary those
terms (§1). The webpage therefore does not establish a particular order's terms.
[GANGLOFF SCOMA, §§1–2, 6](https://gangloff-scoma.com/en/general-terms-of-services/).

**Synthesis:** a dispatch record concerns shipment; a site receipt concerns
arrival; a payment request concerns a claim for money. A contract can link these
events, but their dates and meanings do not become interchangeable. A future
due date is also distinct from evidence that funds have been received.

## Crediting advances and retaining amounts

**Crediting an advance** reduces a later amount payable to account for money
already paid. FAR uses **liquidation** for recouping financing by reducing a
payment for accepted supplies or services. This use of liquidation concerns
payment recovery, not the winding up of a business.
[FAR 32.001, definitions of delivery payment and liquidate](https://www.acquisition.gov/far/32.001).

Different clauses specify different recovery mechanics. FAR 52.232-16(b)
describes deductions from subsequent payments, with a stated exception for
termination for convenience and provision for an alternate liquidation rate.
FAR 52.232-32(d) instead provides percentage or designated-amount deductions
from delivery payments, distinguishing delivery-item and whole-contract bases.
These are clause-specific mechanisms, not a universal rule that every deposit
is credited entirely against the next invoice.
[FAR 52.232-16(b)](https://www.acquisition.gov/far/52.232-16),
[FAR 52.232-32(d)](https://www.acquisition.gov/far/52.232-32).

**Retention**, **retainage** or a **holdback** describes an amount withheld from
payment under the applicable terms. Its basis and release condition matter.
For example, FAR 52.232-5(e) calls for full progress payment when progress is
satisfactory; its retention provision is conditional on unsatisfactory progress.
It also has separate rules at substantial completion and for separately priced,
completed and accepted divisions of work. This does not establish an automatic
retention percentage for every construction payment, much less a machinery sale.
[FAR 52.232-5(e)](https://www.acquisition.gov/far/52.232-5).

**Synthesis:** an advance credit accounts for money previously paid; retention
accounts for money withheld. Deducting the same advance twice understates the
remaining price. Treating retained money as already received overstates cash
paid. A contract can combine these mechanisms, but each needs its own basis.

## Source versions and coverage limits

The FAR pages consulted display **FAC 2026-01, effective March 13, 2026**.
The cited base clauses are **52.232-16 (November 2021)**,
**52.232-32 (April 2012)** and **52.232-5 (May 2014)**. They concern United States
federal procurement in their respective prescribed contexts, including the
construction-specific scope of 52.232-5. An incorporated contract clause,
alternate, modification or agency provision can differ from the website's base
text. [32.001](https://www.acquisition.gov/far/32.001),
[32.102](https://www.acquisition.gov/far/32.102),
[52.232-16](https://www.acquisition.gov/far/52.232-16),
[52.232-32](https://www.acquisition.gov/far/52.232-32),
[52.232-5](https://www.acquisition.gov/far/52.232-5).

GANGLOFF SCOMA's English terms have no visible revision date. Section 16 specifies
French law and gives binding value only to the French text. The English page
supports terminology examples, not conclusions about translation or legal effect.
Sources were consulted on **October 30, 2026 (PDT)**. These examples establish no
universal schedule, refund rule, ownership transfer, accounting treatment or
customer payment policy.
[GANGLOFF SCOMA, §16](https://gangloff-scoma.com/en/general-terms-of-services/).

## Related reference

[Commercial terms](index.md)