A build at Tana Beru is funded as it proceeds. Material purchase follows payment, so the contract structure that works is a series of stage payments released against physical, verifiable milestones — not a large deposit and a balance on delivery. Two clauses do most of the protecting: payment on inspection rather than on invoice date, and a retention held until after handover.
Why the money moves this way
An independent crew on a beach does not carry the working capital to buy months of hardwood in advance. Timber for the next stage is bought with the payment for the last one. That is the actual cash mechanics, and it explains behaviour that owners sometimes misread as unreliability: work slowing when a payment is late is not leverage, it is the absence of material.
It also explains why a conventional deposit-and-balance structure fits badly. A large upfront deposit funds nothing in particular and gives the owner no leverage afterwards. A balance-on-delivery structure asks the crew to finance the entire build. Stage payments match the money to the work.
Milestones that can actually be verified
A payment milestone is only useful if a person standing on the sand can say yes or no without argument. These qualify:
| Milestone | Verifiable because |
|---|---|
| Keel, stem and sternpost erected and aligned | It is either standing on the blocks or it is not |
| Garboard strake fitted | The first plank against the keel is present and fastened |
| Turn of the bilge planked | The hardest curve is closed; fairness can be sighted |
| Sheer strake closed | Shell complete |
| Framing complete | Frames counted, spacing measured against specification |
| Deck beams and decking laid | Physically present |
| Caulking complete, hull faired, primer applied | Visible before it disappears under topcoat |
| Launch | The vessel is afloat |
What does not qualify: “hull 60% complete”, “substantially advanced”, “structure well progressed”. Percentage milestones cannot be verified, which means they cannot be disputed, which means they always resolve in favour of whoever holds the money. Keep them out. The build timeline sets the same milestones out as a programme.
Clause one: payment on inspection, not on date
The payment trigger should be the signed milestone certificate, not the calendar. In practice: the yard notifies that a milestone is reached, the owner’s representative attends within an agreed number of days, inspects, lists any defects, and either signs off or specifies what must be corrected before sign-off. Payment follows the signature.
This protects both sides more than owners expect. The yard gets a defined, fast route to being paid and cannot be strung along by an absent owner. The owner never pays for work that has not been done or has been done wrong. The inspection scope at each milestone is covered in newbuild supervision.
Clause two: retention
Hold a percentage of the contract value beyond handover — released after an agreed period, or after the first haul-out, whichever the parties prefer. The reason is specific to wooden vessels: some defects only appear once the hull has been afloat and has taken up. Weeping that does not reduce, a seam that keeps working, a fastening area that stains — these show up in the first months, not on launch day.
Without a retention, the owner’s only remedy after handover is goodwill. With one, there is a defined mechanism and a reason for it to be used.
The asymmetry owners underestimate
A late payment does not cost you the length of the delay. It costs the delay plus re-mobilisation, because the crew will move to another hull and finish that stage before returning to yours. Two weeks late can easily become six weeks lost. This is documented behaviour rather than a threat, and it is one of the four variables in what drives build time.
The mirror error is paying early to be helpful — against a milestone that has not been inspected, or ahead of schedule to “keep things moving”. That converts your leverage into someone else’s working capital and removes the mechanism that was protecting you. Pay on time, on inspection, and not before.
What else belongs in the payment schedule
- Currency and account. Values stated in USD; the receiving account named in the contract, with no mid-build changes accepted informally.
- Timber precondition. Whether the first payment is conditional on seasoned stock being present — see the timber page.
- Variation procedure. How a change is priced and approved in writing before it is built. In a build with no drawings, undocumented variations are the main source of dispute.
- Defect remedy and re-inspection. What happens when a milestone is inspected and fails.
- Delay consequences on both sides, stated symmetrically.
- Scope boundary. Which payments cover hull only and which, if any, cover machinery and fit-out — see commissioning a build.
- Title and risk. When ownership of the partly built hull and of delivered timber passes.
Documentation is part of the payment
Attach the deliverable to the milestone: timber legality documents with the timber payment, the photographic record and signed certificate with each stage, equipment certificates and manuals before final release. Documentation gathered during the build exists; documentation requested at handover frequently does not. It matters at registration, at insurance and at resale — see registration and classification.
The short version
Stage payments against physical milestones. Payment on inspection, never on date. A retention past handover. Written variations. Documentation attached to each release. Contracts in this service class are issued by PT Komodo Galangan Nusantara with values in USD, and it is worth having the payment schedule reviewed before signature rather than after the first dispute.
Frequently asked questions
Why are wooden vessel builds paid in stages rather than by deposit?
Because material purchase follows payment. An independent crew does not carry the working capital to buy months of hardwood in advance, so timber for the next stage is bought with the payment for the last one.
Which milestones should payments attach to?
Physical, checkable ones — keel and stem erected, garboard fitted, turn of the bilge planked, sheer strake closed, framing complete, decking laid, caulking and primer complete, launch. Percentage-complete milestones cannot be verified and should be excluded.
What is the most important payment clause?
Payment released on a signed milestone inspection rather than on an invoice date. It protects the owner from paying for work not done and protects the yard from an absent owner delaying a legitimate payment.
What is a retention and why does it matter for a wooden hull?
A percentage of the contract value held beyond handover. It matters because some defects only appear once the hull has been afloat and taken up — weeping that does not reduce, a seam that keeps working — which is after launch, not on launch day.
Is it helpful to pay early?
No. Paying ahead of an inspected milestone converts the owner’s leverage into someone else’s working capital and removes the mechanism that was providing protection. Pay on time, on inspection, and not before.