A payment application is more detailed than a single total on an invoice. It connects the amount requested to a contract, billing period, schedule of values, cumulative work, eligible stored materials, approved change orders, retainage, previous certificates, and supporting records.
Some projects use industry forms such as an AIA application and continuation sheet; others use owner, lender, public-agency, or contractor formats. Use the form and certification required by the signed agreement. This guide explains the arithmetic and control points without reproducing a proprietary form.
Payment application calculation
How is a construction payment application calculated?
This example reconciles earned value, retainage, previous certified payments, the current request, and the remaining contract balance.
| Step | Calculation | Result |
|---|---|---|
| Earned before retainage | $140,000 work + $15,000 stored materials | $155,000 |
| Retainage | $155,000 × 5% | $7,750 |
| Earned less retainage | $155,000 − $7,750 | $147,250 |
| Previous payments | Prior certified total | $102,000 |
| Current request | $147,250 − $102,000 | $45,250 |
| Balance including retainage | $325,000 − $147,250 | $177,750 |
What is included in a payment application package?
The summary identifies the project, contractor, owner, contract, application number, period ending date, and contract figures. A continuation sheet or equivalent schedule shows each work item, scheduled value, prior completed work, current completed work, stored materials, total earned, retainage, and remaining balance.
The package may also require approved change-order logs, subcontractor statements, payroll or compliance records, supplier invoices, stored-material evidence, inspection results, photographs, lien waivers, sworn statements, insurance evidence, or certification. Required attachments depend on the project and should be listed before the billing deadline.
- Application identity, billing period, and parties
- Adjusted contract sum and schedule of values
- Earned work, stored materials, and retainage
- Prior payments, current request, balance, and attachments
Worked payment application example
Assume the adjusted contract sum is $325,000. Work completed and approved to date totals $140,000, and eligible stored materials total $15,000, so total earned before retainage is $155,000. At a confirmed 5% retainage rate, $7,750 is withheld and total earned less retainage is $147,250.
Previous certified payments total $102,000. The current payment request is therefore $45,250: $147,250 minus $102,000. The balance to finish including retainage is $177,750: $325,000 minus $147,250. The example assumes all work and materials are eligible and excludes disputed values and separate deductions.
- Earned before retainage: $140,000 + $15,000 = $155,000
- Retainage: $155,000 × 5% = $7,750
- Current request: $147,250 − $102,000 = $45,250
- Balance including retainage: $325,000 − $147,250 = $177,750
How should the schedule of values be updated?
Start from the last accepted schedule and prior application. Enter the current period's work and material values on the correct lines, then verify that prior completed values have not changed without an approved correction. The sum of scheduled values must reconcile to the adjusted contract sum, including the treatment of approved change orders.
Percent complete should follow from supported dollars or measured quantities rather than replace them. Avoid front-loading early activities, shifting value between lines to hide an overbilling, or including unapproved changes in the contract total. Explain rounding and retainage differences before submission.
- Begin with accepted prior-period values
- Record current work on the correct schedule lines
- Reconcile scheduled values to the adjusted contract
- Keep pending and approved changes separate
What happens after submission?
The designated reviewer checks progress, quantities, contract compliance, changes, retainage, prior payments, and required attachments. The reviewer may certify the full request, approve a different amount with reasons, or return an incomplete package. Record the approved amount rather than assuming the submitted total will be paid.
When payment arrives, match it to the application and any accompanying invoice. Preserve the submitted version, reviewer notes, certification, deduction notice, waiver, and transaction. Use the certified cumulative figures as the starting point for the next application so the project history remains traceable.
- Reviewer verifies work, math, and documentation
- Approved amount may differ from the submitted request
- Payment is matched to the certified record
- Next application starts from controlled cumulative values
Official sources
These references support the regulatory information in this guide. Check the current page before making a decision.
- AIA Contract Documents: How to Complete the G702 Payment ApplicationExplains how a contractor records contract value, changes, completed work, retainage, previous certificates, and current payment due.
- Federal Acquisition Regulation 32.103: Construction Progress PaymentsProvides the federal basis for progress-payment requests tied to estimates of completed construction work.
Frequently asked questions
Questions about what is a payment application?
Is a payment application an invoice?
It is a request for payment, but many projects also require a separate invoice for accounts payable. Follow the contract and payer's documented process.
What is a schedule of values?
It allocates the contract sum across work items and provides the line-by-line basis for reporting prior, current, stored, earned, retained, and remaining values.
Can an unapproved change order be included?
Only if the contract expressly permits the treatment. Otherwise, keep pending changes outside the approved contract sum and identify them separately.