HomeMy WebLinkAboutContracts - Milestone Payment Policy - Submitted by Mayor Pr (2) 2000 Main Street,
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City of Huntington Beach 92648
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File#: 25-248 MEETING DATE: 4/1/2025
Subject:
Item Submitted by Mayor Pro Tern Casey McKeon and Mayor Pat Burns - Contracts - Milestone
Payment Policy
Recommended Action:
Direct staff to create a milestone payment policy.
Attachment(s):
1. McKeon and Burns - Council Member Item Report
City of Huntington Beach Page 1 of 1 Printed on 3/26/2025
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City Council Meeting - Council Member Items Report
To: City Council
From: Casey McKeon, Mayor Pro Tern and Pat Burns, Mayor
Date: April 1, 2025
Subject: MILESTONE PAYMENT POLICY
ISSUE STATEMENT
The City's existing practice for contract payments on services, such as on-call service
agreements, involves the contractor submitting a monthly invoice within an agreed-upon not-to-
exceed compensation, term, and start date. The invoice is then verified for services rendered,
and payment is processed. However, not all on-call agreements require monthly payments, and
some agreements may follow a fee schedule, including publicly bid Public Works contracts,which
are subject to strict bid and fee regulations.
A milestone-based payment policy involves making payments at predefined stages of the project
or work specified in the agreement. Each milestone represents a key stage of work that has been
completed and approved. By breaking payments down into milestones, both the City and vendors
can manage risks more effectively. Key benefits of milestone-based payments include:
1. Reducing Financial Risk: For the City, milestone payments minimize the risk of paying too
much upfront for work that may not be completed. For the contractor or service provider,
milestone payments ensure compensation as the project progresses, rather than waiting
for a lump sum at the end.
2. Ensuring Accountability and Progress: Milestones act as progress checkpoints.
Contractors are incentivized to meet specific objectives before receiving payment,
encouraging them to stay on schedule and maintain high-quality work.
3. Improving Cash Flow: Milestone payments provide a steady stream of payables and
receivables, avoiding the need to wait for a large payment at the project's conclusion.
When entering into contracts for large projects, it is beneficial to include provisions for progress
payments tied to specific milestones.
RECOMMENDED ACTION
Direct staff to create a milestone payment policy.
ENVIRONMENTAL STATUS
Not applicable.
STRATEGIC PLAN GOAL
Non Applicable-Administrative Item
2000 Main Street,Huntington Beach,CA 92648 I www.huntingtonbeachca.gov
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