Milestone payment schedule
A milestone payment schedule splits the price of a project into payments that fall due when defined parts of the work are finished and accepted, for example 30% at signing, 40% at the prototype and 30% on delivery. It ties cash to progress, so the client pays for results and the supplier is not funding the whole project.
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Sample Milestone payment schedule clauses
Milestone Payment Schedule. The Research Project Awardee shall segregate and track all Research Project costs separately and shall document the accomplishments of each payable milestone under each Research Project Award. Acceptance of Milestones shall be contingent upon approval from the Government’s Sponsor Office Technical Representative (SOTR) detailed in Clause No. 11 Technical and Administrative Representatives. Milestone payments will be paid in the amount indicated in the attached Milestone Payment Schedule (Attachment A).
Remaining Contract Value $28,063,210 WO 003 is funded in accordance with the Milestone Payment Schedule and Criteria in Appendix A.
As consideration to the EPC Contractor, Tri-State will pay the EPC Contractor $195,611,863.00, which payment will be made over time in accordance with a milestone payment schedule. The first payment is due when Tri-State issues the notice to proceed.
Source
NORTHWESTERN CORPProgress Payments. Payment will be made in installments (each a “Milestone Payment”) upon completion of the milestones for the performance of the Work as set forth in Exhibit B-3 (the “Milestone Payment Schedule”). After any Initial Payment, Seller will submit a Disbursement Request to NorthWestern requesting payment upon the satisfaction of each milestone set forth in the Milestone Payment Schedule. NorthWestern will pay each Disbursement Request within thirty (30) Days of confirmation of satisfaction by Seller of the applicable milestone. In the event of a dispute regarding an invoice, NorthWestern shall pay the undisputed amount to Seller pursuant to the terms of this Contract and NorthWestern shall further notify Seller of the amount(s) in dispute and the basis for the dispute. When the billing dispute has been resolved, NorthWestern shall pay the amount owed within ten (10) Days of the date of such resolution.
Promptly following the expiration of the Review Period and, if applicable, the Resolution Period, pursuant to Section 1.7(b)(iii), the Securityholders’ Agent shall deliver or cause to be delivered to Acquirer an updated spreadsheet setting forth each Company Securityholder’s Milestone Pro Rata Share of such Milestone Payment and the amount of cash and number of shares of Acquirer Common Stock payable to each Company Securityholder and the Unpaid Company Transaction Expenses with respect to such Milestone Payment (such updated spreadsheet, the “Milestone Payment Schedule”); provided, that the aggregate amount of such cash and shares of Acquirer Common Stock (valued at the Applicable Acquirer Stock Price) payable to the Company Securityholders shall not exceed the applicable Milestone Payment. Acquirer and the Exchange Agent shall be entitled to rely on the Milestone Payment Schedule without any investigation and none of Acquirer or any of its Affiliates shall have any Liability whatsoever with respect to any such calculations in the Milestone Payment Schedule. Acquirer shall pay, or cause to be paid by the Exchange Agent or Surviving Corporation, to the Company Securityholders in accordance with their respective Milestone Pro Rata Shares (as set forth in the Milestone Payment Schedule) any Milestone Payment owed to the Company Securityholders in accordance with a Milestone Report within [***] Business Days of the delivery of the Milestone Payment Schedule and in accordance with Section 1.4.
MILESTONE PAYMENT SCHEDULE. The Project Agreement Holder shall document the accomplishments of each Project Payable Milestone under each Project Agreement. Acceptance of Milestones shall be contingent upon approval from the Government Agreements Officer Representative (AOR) detailed in Clause No. 9, Technical and Administrative Representatives. Milestone payments will be paid in the amount indicated in the attached Milestone Payment Schedule (Attachment A).
Source
NOVAVAX INC (NVAX)MILESTONE PAYMENT SCHEDULE. The milestones below are for reference and costs for the project will be invoiced monthly on a cost reimbursable basis as the work progresses.
“Milestone Payment Schedule” means the schedule attached hereto as Exhibit C-2.
“Monthly Progress Payment” means the payment to be made to Company on months and as indicated on the Milestone Payment Schedule attached hereto as Exhibit C-2.
Milestone Payments. Seres shall pay Bacthera the Final CapEx Amount (as it may be adjusted under this Agreement) upon completion by Bacthera of the applicable milestones set forth in and in accordance with the following milestone payment schedule (the “Milestone Payment Schedule”).
What is a milestone payment?
A milestone payment is a part of the contract price that becomes due when a defined stage of the work, the milestone, is finished and accepted. Instead of paying everything upfront or at the end, the client pays in steps: for example 30% when the contract is signed, 40% when a working prototype is approved and 30% on final delivery.
A milestone payment schedule is the list of those steps in the contract. For each milestone it states the deliverable, how acceptance works, the amount or percentage, and the target date.
How does a milestone payment schedule work?
- The parties split the project into milestones. Each one ends in something you can check, such as approved designs, a tested feature or an installed machine.
- Each milestone gets a share of the price. The shares add up to 100% of the contract value.
- The supplier delivers and asks for acceptance. The client reviews the work within a set period, such as 10 business days.
- Acceptance triggers the invoice. Once the milestone is accepted, or the review period passes without objection, the supplier invoices and the normal payment term (for example Net 30) runs.
Milestone payment schedule examples
| Project | Example split |
|---|---|
| Software development | 30% at signing, 40% at the working prototype, 30% at go-live |
| Website or design project | 50% at signing, 50% on final approval |
| Consulting engagement | 20% at kickoff, 40% at the interim report, 40% at the final report |
| Construction | Deposit, then payments at foundation, frame, roof and completion, often with 5% to 10% retainage held back until handover |
| Biotech or pharma licensing | Fixed amounts paid when the product reaches a clinical trial phase, regulatory approval or a sales target |
A software contract might use 30/40/30 or 10/20/30/30/10. The first payment covers setup costs, and the last one is big enough that the supplier still cares about final acceptance.
Milestone payments vs. progress payments vs. time and materials
| Milestone payments | Progress payments | Time and materials | |
|---|---|---|---|
| Paid when | A defined deliverable is accepted | At regular intervals, for the share of work done | Monthly, for hours and costs |
| Amount | Fixed per milestone | Based on percentage of completion or costs incurred | Varies with effort |
| Risk for the client | Low: pays only for accepted results | Medium: depends on how progress is measured | High: pays for effort, not results |
| Common in | Software, consulting, R&D, licensing | Construction, government contracts | Open-ended or changing work |
US federal contracts make the same split. FAR Subpart 32.10 covers performance-based payments, which are paid when milestones are reached, while progress payments under FAR Subpart 32.5 are based on the costs the contractor has incurred.
How to structure milestone payments in a contract
- Make each milestone checkable. “Design approved in writing by the Client” works. “Design phase complete” invites a dispute.
- Set an acceptance period and a deemed acceptance rule. If the client says nothing within 10 business days, the milestone counts as accepted. This keeps payments from stalling.
- Weight the payments to the work. An upfront payment covers setup. Keep a final payment large enough to secure the last deliverables.
- Say what happens when dates move. If the client causes a delay, the milestone date moves with it. A change order adjusts the schedule when the scope changes.
- Link to the payment terms. Accepted milestones are invoiced and paid under the contract’s billing and payment terms, including interest on late payment.
- Cover termination. If the contract ends early, the client pays for accepted milestones and the work done towards the current one.
Milestone payment schedule clause example
Sample clause: Milestone payment schedule
Add this clause to a contract, send it and get it signed in fynk.
Use it in fynk for freeHow to keep track of milestone dates and payments
Once the contract is signed, the milestone dates are easy to lose in a PDF. In fynk, the milestone amounts, percentages and dates are fields in the contract, so every new contract built from the template uses the same approved wording and only the numbers change. Date fields go into the contract calendar, and reminders tell the project lead before an acceptance period or a payment falls due.
Which contracts use a milestone payment schedule?
Fixed-price software and IT projects, consulting and freelance agreements, construction and EPC contracts, research and joint development agreements, and licensing deals in biotech and pharma. These free templates already include milestones:
Free templates with this clause
- Contract proposal template for software and IT services A ready milestone payment schedule table: 10% at kickoff, 20% on design approval, 30% at the prototype, 30% at final delivery and 10% at project closure. Use template
- Subcontractor agreement template Each completed milestone needs a completion report, followed by a review period with deemed acceptance if the contractor stays silent. Use template
- Construction contract template After a deposit at signing, each stage in the payment schedule is paid once that part of the work is complete, never ahead of the work done. Use template
Related clauses
- Upfront payment An upfront payment is money the customer pays before the work starts or the goods are delivered, either the full price or a share of it. It covers the supplier's setup costs and shows the customer is committed, and the contract should say whether it is refundable.
- Retainage Retainage is a common contract clause in construction agreements where a portion of the payment is withheld by the client until the project is completed to their satisfaction. This practice ensures that contractors have an incentive to finish the work properly and address any deficiencies before receiving the final payment.
- Inspection and acceptance The "Inspection and Acceptance" clause outlines the buyer's right to examine and evaluate the goods or services provided by the seller before formally accepting them. This clause typically includes the process, timeline, and conditions under which the buyer can reject goods or services that do not meet specified quality or performance standards.
- Billing and payment terms Billing and payment terms, also called invoice terms and conditions, set out when you invoice, when the customer has to pay, how they can pay, and what happens if they pay late or dispute an invoice. They belong in the contract first and are repeated on every invoice.
Frequently asked questions
A milestone payment is money paid when a defined stage of a project is completed and accepted, instead of paying the full price upfront or at the end.
There is no fixed rule. It should cover the supplier's setup costs, and small creative projects sometimes ask for half upfront. Keep the final payment large enough that the supplier stays motivated to finish.
Milestone billing invoices a fixed amount when a specific deliverable is accepted. Progress billing invoices at regular intervals for the percentage of work completed, which is common in construction.
Usually a fixed-price contract with a milestone payment schedule. In US government contracting, payments tied to milestones are called performance-based payments.
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