The wall is perpetually damp because of conditions on the outside of the foundation. Parging the inside would do nothing to correct the real problem unless the dampness is very, very minor and would likely fail in a short period of time. In truth, there is nothing you can do on the inside of a basement wall to correct outside drainage problems. Collecting the water and directing it to a drain is possible.

I did ask the contractor to look at the total situation, whether the outside wall should be resurfaced, etc. He said all it needs is an inside coat. You can't "collect" the water coming through on the inside, it just makes the wall damp!
So I still have the original question.

Parging is used as an air barrier (p.10) and substrate for dampproofing on the exterior of a block foundation. (Abovegrade, it is also a sacrificial layer for salt damage and is cosmetic purpose.) It is not a vapour barrier; it is not a water barrier. Eventually, the vapour drive from exterior to interior will push the parging off the wall; it will do nothing to stop the vapour drive, capillary rise or just plain ground water from entering your basement.

Negative side waterproofing (from the interior) is possible, but is always second choice to stopping the water from entering the wall in the first place.

Your contractor is misinformed at best.

Here is a link that might be useful: Understanding Basements

It's a VERY MINOR dampness problem. That is why he recommended parging the inside. He said it would be more effective than Drylok, etc., because it's thicker. He said they have a mix they use with fibers in it.
Likely, I don't really need to do *anything* to the inside of the wall before finishing it. I'm going to use materials that can't rot or feed mold, to finish the wall. Not wood, not regular drywall.
I do know why it's damp there. Many years ago, there was a gutter in that area that leaked a lot. Fixed about 10 years ago, but it probably wore away some of the tar that was painted on the outside of the wall.
Yes, I could spend a lot of money to get someone to dig down around that wall, put a membrane on the outside. But as he said, and this seems sensible to me, try the easy, inexpensive thing first. If it really doesn't work - and it probably wouldn't cause me any problems if it doesn't, THEN I can hire someone to do the expensive thing.

This doesn't sound like traditional parging at all. It sounds more like a cement based, fiber-reinforced waterproofing coating. This is most effective as an an exterior coating.

Over time, the vapour drive from exterior to interior will likely push it off the wall onto the floor. (BTW, this doesn't happen when it's applied to the exterior below grade because the drive is always to the inside.)

A proven interior coating is spray or brush-applied crystalline waterproofing. When activated by water in the concrete pores, it fills those pores and can't be pushed off as it is part of the concrete. Crystalline waterproofing is used on concrete water storage and water treatment plant vessels.

i agree - if water is coming in the basement, the right way to fix it is to seal the outside. trapping water inside the wall(by waterproofing the inside) is not the best for the foundation. parging looks and works great on dry basement walls. try running a dehumidifier, and see what areas remain damp...and most of the time, it can be fixed with grading and gutters - if that gutter was fixed 10 years ago, and its still damp, then that isnt the only problem - water is running towards the house instead of away somewhere.

Parging block will not stop the moisture, what you have to do is allow the moisture/water to bypass your block. We do this all the time in areas with high water table.

One way of doing this is to install perimeter drain tied into the sump-pump, which is a big job they gave to break up concrete along the perimeter, install the drain system and tie that to the pump.

Another way which is less evasive and it works well in homes where you have crushed stone and plastic under the slab and a sump-pump already installed. You break up small pockets in the slab along the foundation 4' on center, drill the block and install 3/4-1" PVC pipe, put the plastic back and fill the hole. Now all the moisture water has a place to escape and it will keep your wall dry.

Here is something to give you an idea, you can disregard the pipe that was for another job.

Drain tile won't do jack for summer condensation issues.