Applications for payment, or “Pay Apps,” are in essence, pretty simple. At its core, a pay app is a detailed invoice, a document that provides information about the progress of a project pursuant to a contract, and requests corresponding payment.
Generally, the pay app provides an accounting of the work/materials/product furnished through a certain time under the contract and any change orders, along with their price and quantity – and subtracts retainage and the amount previously paid to determine the amount due. Supporting and/or additional information is usually required to be provided as well. While there is no singular universal pay app, and the specific form and supporting documentation may vary contract by contract, there are a handful of standard forms, and the supporting information required is generally fairly similar.
Standard Pay Apps – The First Page / Application Itself
AIA Document G702 and ConsensusDocs 291 and 292 are pretty standard pay applications – and require comparable information. Even if the pay app required on your particular project is not one of these common documents, the information on the app itself, and on the supporting documents, will likely be similar.
The first page of a pay application includes the overview of project status and provides the critical financial information. Accordingly, the following list of general information is what you will likely need on hand to correctly fill out the pay application, and make the process easy and streamlined.
- the name of the project,
- the name of the property owner/contractor/architect;
- the number of that particular pay app;
- the time prior (dates) covered by the particular pay app;
- the original contract amount;
- any change order;
- total value of work completed to date;
- retainage (calculated as a certain percentage of the work performed)
- total amount of prior payments;
- current amount due
- total balance remaining
In addition to the foregoing information – the first page of a standard pay app also includes a space for certification by the direct contractor and architect of labor/materials furnished and amounts due as represented on the pay app.
Supporting Documents / Attached Schedules
Most pay applications are not delivered as standalone documents – they require additional information and supporting documents. Some of the additional information that may be required can be: the schedule of values; list of subs (and work performed); a project schedule; and lien waivers (both from you and down the chain).
The titles of these supporting documents gives a pretty clear picture of the desired content. A schedule of values is an overview of the project on which the pay apps will be based; i.e. the schedule of values sets out the projected cost for individual aspects of the project to the extent required. Often, expenses must be broken down into smaller items not larger than some figure, say $20,000, in order to provide clarity to the expected expenses. For example, instead of $100,000 for site prep – the schedule of values would break that larger item into $20,000 for grading, etc. and assign time values so that progress can be assessed. The list of subs may be required for a couple of reasons: 1) to justify the expense in the pay app, (i.e. work provided by subs during the period and even payroll records may be required to justify the value of the work performed and amount due); and 2) in conjunction with the lien waivers that are also generally required to be provided.
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Lien waivers may be requested during the processing of the pay app prior to payment, at some other time, or provided with the pay app itself depending on the project and contract at issue. Lien waivers are a crucial step in receiving payment, since they provide protection for the property owner (or GC, or whomever) from paying for the same work twice. In fact, providing a signed lien waiver with your pay app without waiting for a request from a higher-tiered party can work to get you paid faster.
Pay apps – like many things in the construction industry – take a relatively simple concept, and add layers of complexity. By familiarizing yourself with the common forms and requirements (including supporting documentation), you can position yourself to make your business more efficient and get paid faster.
You know what else is super-complex in the construction industry? Lien Rights Management. However, our job at zlien is to make complex things simple. Click on the link below to find out a little bit more about how we simplify lien rights management.