What is Financial Progress of a Project?

What is the meaning of financial progress for a project? The answer is there is no one answer for this question. Different people have different definitions of project financial progress. Some of the definitions of project financial progress are as follow:

1. Interim progress claim is considered as planned financial progress and the payment made is considered as actual financial progress.
2. Planned financial is the amount of money budgeted for the work (budgeted cost) and actual financial progress is how much money was spent for the work that been done (actual cost).
3. Planned financial progress is the value of work planned, and the actual financial progress is the value of work done.

I often get questions from my students about the financial progress reports received for their projects. Most of the reports use interim claim amounts and total payments made as the planned and actual financial progress.

Planning is an arrangement in advance to achieve something within a set time. The amount of interim progress claim is not really a planning. The amount is calculated based on the amount or quantity of work done, thus it is an actual achievement. If it is an actual achievement, it should be called actual financial progress, not planned financial progress.

There were cases where clients can’t made payment for the interim progress claims because lack of funding. Let say the value of work done is RM 10 million, but the payment made was only RM 8 million due to insufficient fund. So, what is the actual financial progress? RM 10 million or RM 8 million? If actual financial progress is taken as RM 8 million, this will indicate a delay in financial progress. There was a project where the contractor was penalised because of the delay which was not their fault but rather the inability of the client to pay the interim progress claim in full.

If the amount of interim progress claim made is considered as actual financial progress, then what should we call the amount of actual amount paid for the interim progress claim? Certainly it could not be called as actual financial progress.

For me, the financial progress determine based on budgeted cost and the actual cost spent is relevant for the contractor’s own project financial performance reporting. The clients or the contract administrators are not interested to know how much money contractor budgeted and spent for the works, any way the contractors are not willing to disclose those information. They are more interested in the value of works, namely value of work planned (planned financial progress) and value of work done (actual financial progress). This is what is practiced by JKR Malaysia project teams. The planning to get funding will be based on planned financial progress, and the interim progress claim payment will be made based on actual financial progress.

If value of work done is the actual financial progress, then what should we call the progress of interim progress claim payment? How about interim claim payment progress?