Every construction project is unique, including the payment terms and documents you need to provide to receive payment. A number of construction projects will require subcontractors to use a payment application. The American Institute of Architects (AIA) produces one of the most widely used pay apps, also known as the AIA G702-1992. This is a guide to each section of the AIA G702 Application and Certificate for Payment.
What is a construction payment application?
A payment application, also known as an “application for payment” or “pay app,” is a document (or collection of documents) sent on a construction project to summarize work. It is similar to an invoice, but requires a bit more information.
In construction, invoices are usually simple, straightforward bills from vendors. Payment applications operate a bit differently. There’s a reason they are called applications. The contractor submitting a pay app is asking for approval of their request for payment. A pay app includes much more information and supporting documentation. The pay application generally serves as an invoice; once the architect or other party certifies it, they will submit payment.
Some documents commonly submitted with pay applications are:
- Schedule of values
- Continuation sheets
- Daily reports
- Photo documentation
- Vendor invoices
- Lien waivers
- Certified payrolls
Follow the language in the contract, and provide as much detail as possible. Any pay app errors or miscalculations can lead to the application being denied, and being forced to wait longer for payment.
AIA’s standardized contract documents
The American Institute of Architects is a professional organization comprised of over 90,000 licensed architects and other industry professionals. The AIA is mainly focused on education and advocacy for better practices in the construction industry. One main service that the institute provides are the standard AIA Contract Documents that they offer.
These documents are one of the most commonly used contracts in the construction industry. They cover all types of delivery methods and additional contract documents that may be needed on a construction project, and work with one another to set up the AIA progress billing process. They are drafted to be not only legal but fair and flexible for both parties to the contract.
Three of the most commonly used AIA contract documents are typically paired together. These are the G701 Change Order form, the G702 Application & Certificate for Payment, and the G703 Continuation Sheet form. This article will focus on how to properly fill out the AIA G702 form.
Video: How to fill out the AIA G702
AIA G702-1992 Application and Certificate for Payment
At first glance, the AIA G702-1992 seems relatively simple. It’s a one-page form with some contact information and 9 payment fields.
The first pay application you submit is always the easiest because nothing has changed yet. However, as the project progresses, the calculations can become increasingly difficult. It requires more than just a simple “This is how much you owe me.” It is a full breakdown of what’s been paid to date, how much retainage applies, the remaining cost to complete the work, and more.
Here will break down each section, what information is being requested, and how to fill them out.
AIA G702 Part I: Project Information
This section involves filling out all of the “header” information at the top of the AIA G702 pay application. This is where the subcontractor will provide all of the basic information about the project.
This includes the name and address of the owner, the party requesting payment, the architect (if applicable), and the project itself.
The last sections in the header refer to the pay application and the contract itself. This includes the application number (in other words, which application is this? The first? second? ninth?), and the “period to date.” This date is the last date of the billing period that the application covers.
“Contract for” asks for a brief description of the labor or materials you are providing, along with the date the contract was signed and the project number (if there is one).
AIA G702 Part II: Contractor’s Application For Payment
This section is the real meat and potatoes of the AIA G702, where all the charges and deductions are calculated. And accuracy is key! Errors can cause the architect or owner to “redline” your application, or reject it. They will return it for you to adjust it. This can delay payment and create cash flow issues, so pay attention to detail.
Line 1. Original contract price
This field is simple because it will never change pay app to pay app. The original contract price is exactly as it sounds, the original contract price. This should be the amount specified in your contract. It shouldn’t include any disputed claims, change orders, or any other amounts.
Line 2. Net change by change orders
A change order is an agreement to add or deduct work, made between you and the party that hired you. It happens on almost every project since construction rarely goes exactly as planned. Sometimes work is both added and deducted in the same period. If you’re using standard AIA documents on your project, see our guide to the AIA G701 Change Order form.
Line 2 could be positive or negative. A positive number means that you added more work than the original contract required. A negative number means that you deducted, or reduced, the amount of work from the contract.
You will calculate this number by filling out the “Change Order Summary” table at the bottom, left-hand side of the form. We’ll explain this section more a bit further down.
Line 3. Contract sum to date
The “contract sum to date” is the original contract price (from line 1) combined with the net change by change orders from line 2. To get this figure, add line 2 to line 1 (if line 2 is a negative number, adding it to line 1 will reduce the total amount).
The result is the total amount to be paid over the course of the project, as of today.
Line 4. Total completed and stored to date
This is where the Continuation Sheet comes in handy; you’ll need to complete it in order to get the total for line 4.
A Continuation Sheet is similar to (and works with) a Schedule of Values. The schedule of values is an agreement showing all of the work to be completed during the project, and the associated cost for each line item.
The Continuation Sheet shows an itemized list of work you’ve completed during the period, along with the “scheduled value” or cost. The costs should match those on the Schedule of Values. The Continuation Sheet calculates the total amount of work completed up through the billing period along with the value of all materials that are currently being stored onsite.
When filling out the G702, you can pull the amount for line 4 straight from “Grand Total” on the Continuation Sheet.
Line 5. Retainage
Retainage (or retention) is a percentage of your payment that the GC or owner will hold until the project or job is complete. Your contract should provide detail about the retainage percentage, which typically falls somewhere between 5% and 10 %. Keep in mind that many states require variable retention. This means that retainage is reduced or paid out once a certain percentage of the contract is completed.
In this section, you write the amount of the percentage withheld in lines 5a and 5b. Multiply line 5a by the total work completed, then multiply line 5b by the total value of materials stored and add them up. That number is the full amount of retainage that is withheld through the current application.
Line 6. Total earned less retainage
Take the work completed and materials stored amount (line 4) and subtract the total amount of retainage that was calculated in line 5. This will give you the total billable amount that you’ve earned up until this point.
Line 7. Less previous certificates for payment
On this line, you will subtract previous payments that you have already received. When the architect or property owner approves your pay app, they will issue a certificate of payment. This is essentially the approval of your request, and receipt for payment.
If this is the first pay application on the project, this will be zero. However, if it’s a subsequent application, you will put the amount from line 6 of the previous certificate. Yet another reason why having a document retention strategy is helpful!
Line 8. Current payment due
To get this figure, subtract line 7 from line 6. This line represents how much money you are expecting to bill for in the current period. The total billable amount for the pay app will be the difference between the “total earned less retainage” on line 6 and the “previous certificates for payment” indicated in line 7.
Line 9. Balance to finish, including retainage
This amount is merely the remaining contract price that will still be due once the architect or owner approves the current payment application. Just subtract the total contract sum to date from the “total earned less retention” in line 6. The result is the amount outstanding under the contract.
Change order summary
The results of this section will determine what number to use on line 2 of the payment application. The first line requires all approved change orders prior to the billing cycle that the current application covers. The second line will include any approved change orders occurring during the current billing cycle.
Remember, change orders don’t just add work. They can also be deductive change orders. So be sure to provide all additions and deductions caused by the approved change orders. Once you calculate the net changes, plug this number into line 2.
AIA G702 Part III: Sign & certify
Signature & notarization
After you properly fill out all of the payment information on your AIA G702 pay app, it’s time to sign and send it out. The standard document requires notarization on each pay app. So don’t sign that pay app until you’re in front of a notary public! However, if both parties agree that notarization isn’t necessary, they can amend the contract.
Architect’s Certificate for Payment
The bottom, right-hand section is the Certificate for Payment. The contractor submitting the pay application should leave this section blank.
The architect, project manager, or property owner will fill out this section. After reviewing the pay application, the continuation sheet, and any other documents, they will certify the amount of payment. If there are any discrepancies or disagreements, they will send the contractor a response showing the amount they are willing to certify, along with their reasoning for the change.
How much does the AIA G702 cost?
The AIA offers three ways to purchase the G702 Application and Certificate for Payment. These prices are for the G702 only. The Continuation Sheet (G703) and Change Order (G701) are priced separately.
1. AIA G702 – basic single document
Cost: $9.99 for AIA members, $11.99 for non-AIA members
If you select this option on their website, you will need to fill out some project details (about the owner, architect, and contractor) on a web form before you can actually buy it. After paying, you cannot edit this information; it will be permanent in the final document. This prevents users from downloading blank documents and distributing them. AIA owns the copyright on their documents. They cannot be reproduced.
2. AIA G702 – customizable single document
Cost: $24.99 for AIA members, $29.99 for non-AIA members
- Includes unlimited drafts, but only one finalized PDF per purchase.
- You have 365 days after the purchase date to edit or finalize the document.
- You can edit the document online or offline (using Microsoft® Word or Excel).
3. Annual subscription with unlimited access
Cost: $999.99 per user for AIA members, $1249.99 per user for non-AIA members (with discounts for multiple users)
The subscription includes:
- All AIA documents
- Editable legal language
- Online/offline editing option
- Custom document template
- Variance checker
- Frequently used clause library
- Share and track changes for review
- Unlimited document access and finalizations
Alternatives to the AIA G702
The AIA G702 pay application is common in construction projects. But it is not the only acceptable form in the construction industry. In fact, many projects may “request” AIA forms, but not require that the contractor pay for a new form from the AIA for each payment. As long as the subcontractor includes the same information in the general format, the GC or property owner may still accept it.
Other standardized payment application forms include those from ConsensusDocs. You can even create your own Excel documents that completes the calculations for you. Or you can download our free, customizable Levelset pay application template here.