Project with progress payments will usually call for a payment application, which a subcontractor will submit to the general contractor (GC), usually on a monthly basis. The payment application will often include several documents together that support the contractor’s request for payment. A continuation sheet is typically included in a pay application, along with a change order and other documentation. The GC, property owner, and lender will typically review the pay applications for all of the second-tier subcontractors, and either approve or redline them. Redlining is a form of rejection that highlights the error or disagreement.
Listing the work and materials on a payment application only provides part of the story. In order to properly review the payment application, the real meat and potatoes are found on the second page: The continuation sheet.
What is a continuation sheet?
A continuation sheet is a full breakdown of all work and materials that a contractor provides to a project. It separates the entire contract sum into portions of work, using the schedule of values as a base. This is a useful supplement to provide the necessary details to get approval on a payment application.
Basically, the continuation sheet helps the GC and property owner see at a glance how far along a contractor is on the project. After the contractor fills out the sheet, the GC can see how much of the project they have finished, how much they’ve spent, and how much is left to spend. Every time the contractor submits a payment application, they will fill out a new continuation sheet. And the process continues…
The American Institute of Architects (AIA) publishes one of the most commonly used continuation sheets, the AIA G703 Continuation Sheet. It goes with the G702: Application and Certification of Payment.
Continuation sheet: What’s in it?
On any project, a continuation sheet is a useful document to support your pay app. The more details you offer, the more likely the GC will pay your app in a timely fashion. Each line item task is listed in the first column along with all the corresponding information.
Here’s a breakdown of each section typically included in a continuation sheet.
Schedule of values
Every contractor and sub should be using a schedule of values to keep track of project costs. A schedule of values (SOV) breaks down the scope of work into component parts with their corresponding values. Therefore, when listing line-item tasks on a continuation sheet, the pricing should match the initial SOV prepared and submitted to the project owner or GC. This guarantees that the price is the same billable amount agreed upon in the contract.
Work completed is where the applicant shows how much labor and materials they provided. This section contains two categories: (1) work claimed in previous payment applications, and (2) the work being claimed in the current pay period. Work completed is the total sum of previous payment applications, not including stored materials. Also, work claimed for this period can either be entered as a direct cost amount or calculated by the percentage of completion.
Materials presently stored
The value of materials here applies to those you have purchased already, but have not yet been incorporated into the project (hence, they’re being stored). They are included in the pay app because they were purchased ahead of time and storing them on the job site.
Total completed & stored to date
The total completed and stored to date is the amount that represents the entire billable costs thus far. This includes the past payment applications, the current work being billed, and the materials that are presently stored onsite.
The percentage completed is a handy figure to keep track of progress and potential for overruns. The percentage can be calculated by accounting software, but the math is simple. It’s the “total completed and stored to date” figure divided by the scheduled value.
Balance to finish
The balance to finish is a useful number, not only to confirm pay apps but also to keep track of individual work progress. Balance to finish provides the percentage of completion of each particular task. Ultimately, it represents the remaining value of the work or materials based on the scope of work.
Retainage is the percentage of the amount due for labor or materials that’s been withheld until the final completion of the project. This percentage should be assigned to all tasks and materials stored.
Continuation sheets provide accuracy and detail, two things that hold great importance to those in charge of approving payments. Facilitating the approval process any way you can helps speed up payments. Providing a detailed continuation sheet with a pay app is a win-win.
- Common Pay Application Templates- AIA & ConsensusDocs
- What is a Work in Progress Schedule?
- What is the Percentage of Completion Project Accounting?