FIDIC / Legal Reference: Alternative to measurement — used in EPC and lump sum contracts
A payment structure under which the employer pays the contractor upon achievement of defined project milestones rather than through monthly measurement of work done. Milestone payments are common in EPC and lump sum construction contracts in the UAE.
What it means in practice
Milestone payment schedules are particularly common in UAE infrastructure, oil and gas, and large-scale residential development contracts. Each milestone must be clearly defined in terms of what must be completed and what evidence the contractor must provide to claim payment.
Where a milestone is achieved, the contractor submits a milestone claim to the Engineer or employer. The employer is required to pay within the period specified in the contract. If the milestone is disputed, the contractor must either comply with the employer’s outstanding requirements or dispute the rejection through the contractual dispute resolution process.
Where disputes arise
Milestone payment disputes arise where: the milestone completion criteria are vague or ambiguous; the employer withholds payment on technicalities while the milestone has been substantively achieved; or the contractor’s programme slips such that it is unable to achieve milestones in the sequence anticipated.
UAE Context
Milestone payment arrangements are prevalent in UAE developer-contractor agreements for residential and mixed-use projects. In some cases, milestone payments are linked to government authority approvals — creating dependencies on third-party actions that can delay both the milestone and the associated payment.
Related terms
Milestone payment disputes and entitlement certification are handled by e-Basel as part of our construction payment claims advisory services in the UAE.
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