Construction projects each operate differently, and the documents and payment processes are no exception. However, every project generally requires some sort of payment application. Sometimes it can be as simple as a handwritten invoice. Other times, the general contractor or project owner will require an application with several pages of supporting documentation. ConsensusDocs provides one of the more widely used payment applications. This is a guide to each section of the ConsensusDocs 710 Subcontractor’s Application for Payment.
What is a construction payment application?
A payment application, also known as a “pay app” or “application for payment” is a bundle of documents sent on a construction project summarizing the work that has been performed and requesting approval for payment.
Pay applications are generally a bit more complicated than a simple invoice. When submitting a pay app, the contractor is providing several different documents to support their requests for payment. The owner or architect will need to review and approve the pay app in order for payment to be released.
Some common examples of supporting documents included in a pay application are:
- Schedule of values
- Continuation sheets
- Daily construction reports
- Vendor invoices
- Photo documentation
- Lien waivers
- Certified payrolls (if working on a prevailing wage job)
Accuracy and details are crucial for a construction pay application. Any errors or miscalculations can cause the owner to redline the application and send it back for revisions, causing further delays in an industry already notorious for slow-paying .
The ConsensusDocs Coalition is a group of over 40 different organizations within the construction and design industry that aims to develop and promote standard form construction documents. Their mission is to assure that its documents serve the best interests of the construction project and the construction industry as a whole.
Their contract and pay application documents are commonly used in the construction industry. With over 100 different standardized contract documents available, they cover a wide array of delivery methods and contract types. They are drafted to fairly allocate risk and responsibilities among all project participants.
Some in the industry perceive the construction contracts from ConsensusDocs as fairer alternatives to the American Institute of Architects (AIA) documents. The AIA was originally created to “serve as the voice of the architect profession,” whereas ConsensusDocs was a coalition of multiple groups. The “DOCS” in ConsensusDocs originally stood for “designers, owners, contractors (including subs), and sureties.”
ConsensusDocs 710 Subcontractor Application for Payment
The ConsensusDocs 710 pay application form is the pay application for subcontractors working under a lump sum contract. A lump sum contract has a set price for the entire project, though it’s often paid in installments, or progress payments. The subcontractor submits each pay app to the “Constructor,” which is what ConsensusDocs uses to define the “builder, general contractor, design-builder, or construction manager.”
The ConsensusDocs 710 is a rather straightforward document that has a lot of implications. It’s important to be sure that all the information provided is as accurate as possible. As stated above, this isn’t a simple invoice. This requires a fair amount of documentation and accounting to be valid and acceptable.
Not only that, but it also requires tracking approved change orders, retention, and materials stored on site. The first pay app is always the easiest one, but they become progressively more complex as the project goes on.
Who needs to use the ConsensusDocs 710?
The construction contract should define the payment process, including the type of payment application to use. If a ConsensusDocs application is required, it should say so in the contract. This particular payment application, the ConsensusDocs 710, is for second-tier subcontractors, who submit them to the Constructor (e.g. General Contractor). The Constructor also prepares a pay application for submission to the property owner, but they use a different pay application form.
ConsensusDocs produces a wide variety of documents, each written for a specific relationship. The 700-series of documents apply to the relationship between the subcontractor and the GC or Constructor.
ConsensusDocs 710 Part I: Project Information
This first section of the payment application is simply some basic information about the applicant and the pay app itself. This includes the name of both the party submitting the pay app and the party receiving it. Along with that, the applicant should provide the project name or number, identify which pay app it is (i.e., first, second, etc.) and the applicable billing period dates.
ConsensusDocs 710 Part II: Statement of Contract Account
This section is where all the important numbers come into play, be sure to take your time filling out this portion of the pay app. Accuracy is crucial. Any miscalculations can cause denials and denials cause delays. Cash flow is a huge problem on construction projects, don’t delay payments even further by making simple mistakes.
1. Original contract amount
An “original contract amount” should never change from pay app to pay app. This value should match the contract sum itself. This is your baseline; no other amounts should be included here.
2. Approved change orders
The key word here is “approved.” All change orders that have been signed and authorized should be added up and the total value of the changes should be provided here. Also, the change order number(s) should be listed here as well. It’s best practice to attach copies of all approved change orders to the pay app.
3. Adjusted contract amount
The adjusted contract amount is the total contract price including all approved change orders. This is simply calculated by adding lines 1 and 2. Keep in mind, change orders can be either positive (additive change order) or negative (deductive change order). Adjust the contract amount accordingly.
4. Value of work completed to date
This line should reflect the total value of work completed through the current pay application. This includes materials as well, but only those that have actually been incorporated into the project. If you’ve purchased materials that you’re storing (i.e. you haven’t used them yet), don’t put those here. Include them in Line 6 instead.
5. Value of approved change orders completed
Here is where the value of the work completed on any change orders. If there aren’t any change orders, this amount will be left at zero. Remember, these are (a) approved change orders, and (b) change orders that have been completed.
6. Value of materials stored on site
Now is when a subcontractor should include the value of materials that are being stored on the job site. Any materials that have been incorporated into the project, should be accounted for in the value of work completed to date section in line 4.
7. Value of completed work and stored materials
Here’s where, in my opinion, the wording gets a bit confusing. The amount to be provided here should be the sum of the completed work and the value of materials stored on site. Thus, add up lines 4 and 6; skipping line 5 as the entire total to date will be provided below.
8. Net total to date
Again, this is an example of poor wording. But nonetheless, net total to date refers to the value of all work performed and materials stored, including the value of change orders completed. This will provide the entire value provided by the contractor through the date of the current pay application.
9. Less amount retained (%)
The rate of retainage withheld, which is typically around 5 to 10%, is calculated here. The percentage should be indicated in the parenthesis and then multiplied by the net total to date value from line 8. This represents the amount of retainage that is being withheld through the current pay period.
10. Total less retainage
The total less retained will be the full value of labor or materials provided to date but taking withheld retainage into account. All that’s needed for this section is subtracting line 9 from line 8.
11. Total previously certified
This amount should be the sum of all previously certified (paid) from previous payment applications. If this is the first pay app being submitted on a project, this will be zero. If not, simply add up the total of all of the previously approved pay apps.
This is where a good document retention policy can save you time. Ideally, you have a document storatge system that gives you easy access to all of the pay application documents on a project, including change orders.
12. Amount due this request
Finally, after filling out the required information, we get to the amount that the subcontractor is actually requesting in the current pay application. Calculate this by subtracting the total previously certified found in line 11 from the total less retainage from line 10.
ConsensusDocs 710 Part III: Sign & Certify
Lastly, once you’ve fully filled out your pay application its time to sign and send it out. The signature block on the ConsensusDOCs 710 form will include a brief certification statement declaring that the information is true and accurate to the best of the contractor’s knowledge. The subcontractor needs to sign this and, if directed by the Constructor, have it notarized. Notarization is not a requirement of any state or federal law; if you don’t want to go through the hassle of having pay apps notarized, ask the Constructor. It’s generally not necessary.
There’s also a section for the subcontractor to provide their Federal tax ID number and state or local license number if applicable.
How much does the ConsensusDocs 710 cost?
ConsensusDocs provides a number of different subscription packages for their various contract forms and documents, ranging from $599 to $1,199 per year. There are over 100 different documents available, and each package offers varying degrees of access. For a full breakdown of these packages, you can visit the ConsensusDocs pricing page.
Alternatives to the ConsensusDocs 710 Application for Payment
The ConsensusDocs 710 pay application is one of the more commonly used standardized documents used in the industry. Whether this document is required to be used on your next project is determined by the owner or project manager. However, there are many alternatives to ConsensusDoc forms.
There are a number of other standardized payment application forms.
- The AIA G702 Application and Certificate for Payment
- Download a free, customizable pay application template from Levelset
- Create your own pay app in Excel with formulas that do the math for you