Quick answer
At a glance
A construction payment application is the contractor's periodic (usually monthly) request for payment covering work completed and materials stored to date, billed against a schedule of values. On AIA projects it is submitted on form G702 with a G703 continuation sheet, the architect certifies it, retainage is withheld, and the owner pays the certified amount, typically within 30 days.
Key takeaways
What you need to know
- A pay application bills work completed plus materials stored to date against the schedule of values (SOV), less retainage and prior payments.
- The AIA G702 is the application/certificate; the G703 continuation sheet breaks the contract sum into SOV line items billed by percent complete.
- Retainage (commonly 5-10%) is withheld each period and released at or after substantial completion.
- Lien waivers, certified payroll (on prevailing-wage jobs), and stored-material documentation are common conditions of payment.
- Most rejections come from math errors, over-billing percent complete, or missing backup — accuracy gets you paid faster.
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The schedule of values is the foundation
Before the first billing, the contractor submits a schedule of values (SOV) that divides the total contract sum into line items (for example: mobilization, foundations, framing, MEP rough-in, finishes). Each line gets a dollar value, and the values must add up to the contract sum.
Every payment application then reports percent complete for each line. Bill 30% complete on a $100,000 framing line and you've earned $30,000 on that item this period. A clear, honest SOV is what makes the rest of the process smooth.
AIA G702 and G703
On most commercial projects the billing runs on two standard AIA forms:
- G702 — Application and Certificate for Payment: the one-page summary. It rolls up the totals, applies retainage, subtracts previous payments, and shows the current payment due. The contractor signs it and the architect certifies it.
- G703 — Continuation Sheet: the line-by-line detail behind G702. For each SOV item it shows scheduled value, work completed from previous applications, work completed this period, materials presently stored, total completed and stored to date, percent complete, balance to finish, and retainage.
You don't have to use AIA forms, but the G702/G703 structure is the industry norm and most owners and lenders expect it. You can assemble a compliant pay app with the AIA G702/G703 pay application builder.
What goes into each application
| Component | What it means |
|---|---|
| Work completed this period | Value earned on each SOV line during the billing window |
| Materials presently stored | Delivered but not yet installed material, with documentation |
| Total completed and stored to date | Cumulative earned value |
| Retainage | Percentage withheld (commonly 5-10%) |
| Less previous payments | What the owner already paid |
| Current payment due | The bottom line for this period |
Retainage and stored materials
Retainage is money the owner holds back each period — typically 5-10% — as security that the contractor will finish and correct any deficiencies. It's released at or after substantial completion, and many contracts reduce it once the job is partway done. Tracking accrued retainage matters: it's often the difference between a profitable and a break-even job at closeout.
Stored materials can be billed before installation if the contract allows, but owners usually require proof — invoices, proof of insurance, on-site or bonded off-site storage, and sometimes a bill of sale — before paying for material that isn't yet in place.
The approval cycle and lien waivers
The typical flow: the contractor submits the application → the architect or owner reviews and certifies the amount actually earned → the owner pays, commonly net 30. Subcontractor applications roll up into the general contractor's application, so subs are usually paid after the GC is paid (pay-when-paid and prompt-payment rules vary by state and contract).
Lien waivers are typically exchanged with each payment — conditional waivers with the application and unconditional waivers once payment clears. On prevailing-wage work, certified payroll is often a condition of payment too.
Why pay apps get rejected (and how to avoid it)
- Math and percent-complete errors — totals that don't tie out, or billing more complete than the work supports.
- Missing backup — no lien waivers, no stored-material documentation, missing certified payroll.
- SOV problems — front-loaded values or line items that don't match the contract.
Clean, well-documented applications submitted on the owner's schedule get certified and paid faster. Pair disciplined billing with solid change order management and a clear handle on retainage.
Bottom line
A payment application turns project progress into cash: build an accurate schedule of values, bill honest percent-complete on G702/G703, document stored materials, track retainage, and include the required waivers. The cleaner the application, the faster it gets certified and paid.
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FAQ
Frequently Asked Questions
What is a construction payment application?
It is a contractor's formal, periodic request for payment for work completed and materials stored during a billing period, usually submitted monthly. It itemizes progress against the schedule of values, subtracts retainage and previous payments, and shows the current amount due.
What are AIA forms G702 and G703?
G702 is the Application and Certificate for Payment — the summary cover sheet the contractor signs and the architect certifies. G703 is the Continuation Sheet that lists each schedule-of-values line item with scheduled value, work completed this period, materials stored, percent complete, and retainage.
How is retainage handled in a payment application?
Retainage is a percentage (commonly 5-10%) withheld from each payment as security for completion. It accumulates over the project and is typically released at substantial completion or final payment, sometimes reduced once the job is partially complete.
Why do construction payment applications get rejected?
Common reasons include arithmetic errors, billing a higher percent complete than the work supports, missing or unsigned lien waivers, no documentation for stored materials, and missing certified payroll on prevailing-wage projects. Clean, well-supported applications are approved faster.
How long does it take to get paid after submitting a pay app?
After the architect or owner certifies the application, payment terms are commonly net 30, though contract terms and prompt-payment statutes vary. Subcontractor payments usually follow the general contractor receiving the owner's payment.
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