What is AIA Billing and AIA Payment Applications?
In this knowledgebase article, we will explain the details of AIA billing, AIA Payment Applications, and AIA Forms G702 and AIA Form G703. This article is a supplement to our help pages related to purchasing and activating the AIA Billing feature as well as using the AIA Billing feature in Total Office Manager.
AIA billing is a standardized method of construction billing using a percentage of completed contract method (IE: Progress Billing). The purpose of AIA billing was to standardize the job related paperwork sent to architects and others by contractors.
The AIA billing system was developed by the American Institute of Architects (AIA) in 1992. Using these documents, the Contractor can apply for payment due and the Architect can certify that the payment is due. Typically, AIA billing consists of two forms.
This article shows you how to manually perform AIA billing using AIA forms. Specifically we will show you how to complete form G-702 (Contractors Application for Payment) and form G-703 (Continuation Sheet). This article is required reading if you plan to use Total Office Manager to print your AIA related forms. A thorough understanding of AIA billing is needed to understand how Total Office Manager automates the tasks involved in AIA billing.
AIA Form G-702 – Contractors Application for Payment
This is a summary of the information being submitted on the Continuation Sheet and requires the Contractor to show the status of the construction contract to date; including the Original Contract Sum, Net Change by Change Orders, Contract Sum to Date, Total Completed and Stored to Date, the amount of Retainage, if any, on Completed Work, Stored Material, and Total Retainage to date, the Total Earned Less Retainage, the Total of Previous Certificates for Payment, Current Payment Due, Balance to Finish including Retainage, and a summary of Current and Previous Change Orders – indicating if the Change Orders were an Addition to or a Deduction from the Original Contract Amount. This document must be signed by the Contractor and notarized prior to submission.
AIA Form Fields
General Info Tab
- To Owner: The name and contact information of the person paying you (signs the checks). This is usually the Owner of the building.
- From Contractor: Typically this is you; the Contractor that is doing the work.
- Project: A short name or number given to identify the project. This may be found in the Subcontractor agreement.
- Via Architect: The name and contact information of the Architect that is in charge of this job.
- Application No: When you number your applications, number the first one “1” and count up from there. If you have to revise a Payment Application, do not increase the number; just add a letter designation behind the original number. For example, if you are revising Payment Application number 5, make it 5-R1 to reflect that it is a first revision of number 5.
- Period To: The As of Date. This is the last day of the period cycle for which you are billing.
- Contract Date: The date of your original Subcontract Agreement.
- Project #: The Subcontract numbers from Subcontract Agreement (example: “4279-30”)
- Distribution To: These selections indicate who the payment submission will be copied to (who else will receive a copy).
- Contract For: This field is not always found on the official AIA G702 form. This is a brief description of the scope of work.
Summary of Work
Line 1, Original Contract Sum: The price the General Contractor (GC) agreed to pay you for the scope of work you agreed to perform. This includes all accepted alternates. This number should NEVER change from your first Payment Application to your last.
Line 2, Net Change by Change Orders: The sum of all of the Change Orders that have been priced and formally approved by the GC.
Line 3, Contract Sum to Date: Add the numbers on Lines 1 and 2. This is your official contract sum as of the date of this Payment Application.
Line 4, Total Completed and Stored to Date: This number comes from the left side of Column G on G703. The box is the fourth from the left, bottom row.
Line 5, Retainage (three lines): Retention (aka: hold-back) is an amount of money held back for a certain period of time. The amount is usually a percentage of the total. The rate is usually 10%. This money sits in reserve to protect the buyer. Your contract should set the terms of retention including the percentage and when the hold-back will be paid. If it doesn’t, you should insist that no retention be withheld. If the GC failed to put retention in your contract, then do not allow him to use it. If you happen to be providing a Performance Bond, retention is not justified. The bond serves the same purpose as the retention.
Line 5a, _% of Completed Work: Typically it is 10%. Your contract may allow you to reduce the retention to 5% near substantial completion.
In the blank next to the dollar sign, you need to write down the dollar value of retention that applies to your completed work. To arrive at that number, go to the G703 form and add together the values from the bottoms of Columns D and E. Multiple by 0.1 if the retention is 10% or by 0.05 if the retention is 5%.
Line 5b, _% of Stored Materials: Repeat the process used for Line 5a except use the value from the bottom of Column F on form G703. Usually, the retention for completed work and stored materials is the same. Write down whichever rate is contracted next to Box 5b. In the blank next to the dollar sign, write down the retention for your stored materials.
Line 5, Total Retainage: Add together the totals from Lines 5a and 5b. This value should match the total of Column I of your G703.
Line 6, Total Earned Less Retainage: What you’ve earned, as far as approved Change Orders are concerned, is on Line 4. What the client is allowed to retain is on Line 5. Subtract the Total Retainage from your earned revenue and enter the difference on Line 6.
Line 7, Less Previous Certificates for Payment: This is line 6 from your last Payment Application (the last one you sent). Confusion is caused by GCs and Owners who take so long to pay that you are submitting your next Payment Application before the previous one gets paid.
Many people write down payments received to date on Line 7 and ignore pay requests being processed. Don’t do that! This Payment Application doesn’t care whether you’ve been paid. It only cares whether you’ve earned additional payment(s).
Go back to your immediately preceding Payment Application and write down the value from Line 6 Total Earned Less Retainage on that application. Remember, only the very last Payment Application is considered.
Line 8, Current Payment Due: Take your Line 7 value and subtract it from your Line 6 value. Write down the difference on Line 8.
This represents the value you should be paid for worked earned during this pay period and any change in retainage during the pay period.
Line 9, Balance to Finish Including Retainage: Take the contract sum to date from Line 3 and subtract the Total Earned Less Retainage from Line 6. This tells the GC that he is contracted to pay you an additional amount after paying this application.
This is another confusing line because it acts as if all Change Orders have been formally processed and that all previous Payment Applications have been paid in full.
Frequently, clients and GCs only pay part of your application. The AIA form never reflects partial payment of an application. It wasn’t designed to. Keep track of what’s been paid vs. what’s been earned and invoiced (applied for).
The table at the bottom of page one is fairly straight forward. You will need to separate the Change Orders that add money to your contract from those that subtract money from your contract. The Net Changes by Change Order should be exactly equal to the value you entered on Line 2.
AIA Form G-703® – Continuation Sheet
This form is sometimes referred to as Page 2 of the Application and Certificate for Payment (G702 form). It breaks down the contract sum into phases or segments of the work in accordance to a Schedule of Values required by the General Conditions of the contract. This form serves as both the Contractor’s application for current payment due and the Architect’s certification that payment is due to the Contractor. Its use can expedite payment and reduce the possibility of errors.
If the application is properly completed and acceptable to the Architect, the Architect’s signature certifies to the Owner that a payment in the amount indicated is due to the Contractor. This form allows the Architect to certify an amount different than the amount applied for, with any necessary explanations provided by the Architect.
In looking at our plain paper version of the AIA G-703; Continuation Sheet, you can see that Columns A, B, and C, should be completed by identifying the various portions of the Project. Any Scheduled Values should be consistent with the Schedule of Values submitted to the Architect at the beginning of the project. This breakdown should be used consistently throughout the project, using multiple pages when necessary.
Each Field Explained
- Column A – The line numbers could match the specifications section number in your specifications sheet. Otherwise, you may wish to number each line item as 10, 20, 30, etc. This field is usually never a part number.
- Column B – The Description of Work field is a brief description of the phase or portion of work. Examples might include Earth Work, Pavers, Brick Work, or etc. If your scope of work is large, you may wish to match this up to major activities from your Estimate. Note: Change Orders are usually added as separate line items as they are approved.
- Column C – The Scheduled Value field is the total amount of money that you were scheduled to receive for this phase of work. For example, your contract might specify that you will receive $100,000 for Pouring and Finishing First Floor Slab.
- Column D – The Total of Work Completed from the Previous Applications amounts in Column D & E. This is the total dollar amount you requested for this line item through your last Payment Application. That includes materials that you previously listed as Stored Materials but have now put in place (IE: Installed). Column D does not include work completed for this period nor does it include newly stored material.
- Column E – The value of Work completed at the time of the current application.
- Column F – The value of Materials Presently Stored on the Job Site for which you are seeking payment. This is typically refers to the total value of any materials that are currently stored but not installed. Usually, to get paid for stored materials they have to be on site or in a bonded, secure storage facility.
- Column G – The Total of the amounts shown in Columns D, E, & F.
- Percentage Complete – This is calculated by dividing Column G by Column C.
- Column H – This is the difference between Column C and Column G.
- Column I – Normally used only for contracts where Variable Retainage Rates are permitted on a line-item basis. It does not need to be completed for contracts that have a consistent rate of retainage held over the entire contract.
- Note: Change Orders are listed separately, either on their own Continuation Sheet or at the end of the original Schedule of Values.
AIA Forms and Documents
There are a lot of AIA related forms; not just the two that we currently provide in Total Office Manager. While the G702 and G703 are very popular, there are other forms that we will need to support at some point. Here is a list of the other official AIA forms.
Change Order AIA Document. It may be used as written documentation of changes in the work, contract sum or contract time that are mutually agreed to by the Owner and Contractor. The G701 provides space for a complete description of the change and for the signatures of the Owner, Architect and Contractor.
|Application and Certification for Payment. Application and Certificate for Payment. A form with which the Contractor can apply for payment and the Architect can certify payment is due. It requires the Contractor to show the status of the contract sum to date, including the total dollar amount of the work completed and stored to date, the amount of retainage (if any), the total of previous payments, a summary of change orders and the amount of current payment requested.|
Continuation sheet from G702. The G702 breaks the contract sum into portions of the work in accordance with a schedule of values required by the general conditions. It serves as both the Contractor’s application and the Architect’s certification, and its use can expedite payment and reduce the possibility of error.
Abbreviated Standard Form Of Agreement Between Owner & Architect
Guide for amendments to AIA Owner-Architect agreements
A101-STD Form of Agreement Between Owner & Contractor – (Stipulated Sum)
Standard form of agreement between Owner & Contractor for a small project & general conditions of the contract for construction of a small project – with instructions
General Conditions of the Contract for Construction of a Small Project. It is used to allocate proper legal responsibilities among the parties, while providing both a common ground and a means of coordination within the Small Projects family.
Abbreviated Owner-Contractor Agreement Form For Construction Projects of Limited Scope-Stipulated Sum
Standard form of agreement between Owner & Construction Manager where the Construction Manager is also the constructor, where the basis of payment is cost of work plus a fee, and there is no guarantee of cost.
Agreement between Owner and Design-Builder
Agreement between Design-Builder and Contractor (Replaces A491)
Replaced by A141
General Conditions of the Contract for Construction
General conditions of the contract for furniture, furnishings and equipment. Intended for use with A151.
Contractors Qualification Statement 86
Bid Bond (1970)
Performance and Payment Bond
Agreement between Contractor and Subcontractor
Recommended Guide for Bidding Procedures and Contract Awards
Guide for Supplementary Conditions (for use with A201)
Where to Buy Forms
AIA forms and instructions may be purchased from your local AIA chapter office.
G702 and G703 Preparation Training Exercise
Please follow this example to learn how to fill out an actual G702 and G703 form. You will need a G702 and G703 form to do this exercise.
Most Contractors tell us that AIA Payment Applications are frustrating and difficult to fill out. To fill one out correctly, you must ignore change orders that have been approved, but not processed. You must ignore receivables still outstanding from previous applications. Basically, you have to forget about basic accounting principles.
Payment Applications are an important component of cash management. When you screw up your Payment Application, three things might happen, none of which put you in good standing with your GC, and two of which damage your cash position:
- Your Project Manager cuts your request to a value he can understand. You receive a partial payment.
- Your Project Manager informs you that if you don’t get a corrected application in by the deadline, you will have to wait another 30 days for payment. You may not receive any payment.
- Your Project Manager makes the corrections himself and may hold it against you in the future when you need a favor or are looking for work. Like the rest of us, Project Managers like working with people who don’t create headaches.
You really have no choice other than learning how to fill out the AIA form correctly.
We are going to show you how to fill one out correctly. In Part 1, we attack the first page (AIA form G702) and in Part 2 we will work on the second page (AIA form G703).
Before we get started, grab a copy of the form.
Form G702 Field Detailed Field Definitions
Line 1: Original Contract Sum. The price the GC agreed to pay you for the scope of work you agreed to perform. This includes all accepted alternates.
- Pull out your contract. Look at it. This number should NEVER change from your first Payment Application to your last.
- Assume your contract was for $105,000.
Line 2: Net Change by Change Orders. Here it is. The line that creates much frustration.
- Add up all of the Change Orders that have been priced and FORMALLY approved by the GC. If the Project Manager is sitting on your Change Order paper work, call him at least a week before your Payment Application is due and URGE HIM to complete the paper work. Being the squeaky wheel is often your only recourse.
- Assume the GC has processed and signed $10,000 in change orders.
Line 3: Contract Sum to Date. This should be easy. Add the numbers on lines 1 and 2. This is your OFFICIAL contract sum at the date of this Payment Application.
- Your contract sum to date is $115,000 ($105,000 plus $10,000)
Line 4: Total Completed and Stored to Date. This value comes from the left side of Column G on form G703. The box is the fourth from the left, bottom row. For now assume that you have completed $500,000 of work and have stored $50,000 of materials in approved storage sites.
- Your Line 4 total would be $25,000.
Line 5: Retainage (three lines). Your contract should set the terms of retention. If it doesn’t, demand that no retention be withheld! If the GC failed to put retention in your contract, do not allow him to use it.
- On a side note, if you happen to be providing a Performance Bond, retention is not justified. The bond serves the same purpose as the retention.
Line 5a: % of Completed Work. In the blank next to Box a, write down the current retention percentage. Typically, it is 10%. Your contract may allow you to reduce the retention to 5% near substantial completion.
- In the blank next to the dollar sign, you need to write down the dollar value of retention that applies to your completed work. To arrive at that number, turn to form G703 and add together the values from the bottoms of Columns D and E. Multiple by 0.1 if the retention is 10% or by 0.05 if the retention is 5%.
- Assuming 10% retention and $25,000 of completed work, write down $2,500.
Line 5b: % of Stored Materials. Repeat the process used for Line 5a except use the value from the bottom of Column F on form G703. Usually, the retention for completed work and stored materials is the same. Write down whichever rate is contracted next to Box b. In the blank next to the dollar sign, write down the retention for your stored materials.
- Assuming 10% retention and $0.00 for Materials Presently Stored, write down $0.00.
Line 5: Total Retainage. Add together the totals from Lines 5a and 5b. This value should match your total of Column I on form G703. For our example, the figure would be $2,500.
Line 6: Total Earned Less Retainage. What you’ve earned, as far as approved Change Orders are concerned, can be found on Line 4. What the client is allowed to retain is on Line 5. Subtract the Total Retainage ($2,500) from your earned revenue ($25,000) and enter the difference ($22,500) on Line 6.
Line 7: Less Previous Certificates for Payment. Remember that it does not matter if you have been paid for your previous applications.
- Go back to your immediately preceding Payment Application (only the last one you sent) and write down the value from Line 6: Total Earned Less Retainage on that application. For the sake of our example, assume that the amount you have submitted to date is $20,000.
Line 8: Current Payment Due. Take your Line 7 value ($18,000) and subtract it from your line 6 value ($22,500). Write down the difference on Line 8 $4,500).
- This represents the value you should be paid for work earned during this pay period AND any change in retainage during the pay period.
Line 9: Balance to Finish Including Retainage. Take the contract sum to date from Line 3 ($105,000) and subtract the Total Earned Less Retainage from Line 6 ($22,500). This tells the GC that he is contracted to pay you an additional $92,500 AFTER paying this application.
- This might be a confusing line because it acts as if all Change Orders have been formally processed and that all previous Payment Applications have been paid in full.
- Frequently, clients and GCs only pay part of your application. The AIA form never reflects partial payment of an application. It wasn’t designed to. Your company must keep track of what’s been paid vs. what’s been earned and invoiced (applied for).
- The table at the bottom of page one is fairly straight forward. You will need to separate the Change Orders that add money to your contract from those that subtract money from your contract. The Net Changes by Change Order should be exactly equal to the value you entered on Line 2.
The purpose of G703 is to allow GCs to keep a close eye on your billing. As that is their purpose, they will probably ask you to break your payment request into several line items. Sometimes this form is simply referred to as “AIA Payment Application Form G703”.
- If they don’t detailed accounting of payments, use as few breakouts as possible. This is your one opportunity to control your billing. If they request a more detailed breakout, give it to them.
Column A – Item No.: Number your line items however you wish. Most Contractors start with “1” and go from there. Some use the specification section or drawing number that the work applies to. Please number your Column A 1 through 3 (you will have three lines).
Column B – Description of Work: Describe the line item’s type of work or anything else that makes sense to you.
- Assume your first line item is for “Mobilization”. Your second line item is for “Stump Removal”. Your third line is for “Earth Work”. The rest of our example will focus on the Earth Work in line 3. You now have three lines numbered 1 through 3.
Column C – Scheduled Value: Assign a dollar value to each line. The grand total of all lines must equal your current contract sum that shows up on line 3 of Page 1. Double check this before submitting the Payment Application.
- Assume you have scheduled $5,000 for Mobilization (on line 1), $5,000 for Stump Removal (on line 2), and $15,000 for Earth Work (on line 3). Enter that in Column C.
Column D – Work Completed from Previous Applications: This is money for work you have previously billed. Remember that it doesn’t matter if you have been paid for this work. It only matters what has been billed (applied for).
- Assume that on your last application, you applied for (billed) $5,000 for Mobilization (Line 1), $5,000 for Stump Removal (Line 2), and $10,000 for Earth Work (Line 3). Enter these dollar amounts in Column D.
Column E – Work Completed This Period: The dollar amount of new work completed this period. Do not include materials that you installed but have already been paid for under Stored Materials. That figure goes in Column D. All labor, equipment, and mark-up for the placement of these stored materials should be included as Work Completed This Period.
- Let’s assume that we are finished with Mobilization and Stump Removal. Lines 1 and 2 in Column E will be zero. Assume you have completed $5,000 of Earth Work this period. Enter $5,000 on line 3, Column E.
Column F – Materials Presently Stored: Recall that this is the total value of materials currently stored on the job site but not installed.
- Assume you have stored $0 worth of items related to Mobilization (on line 1), $0 for Stump Removal (on line 2), and $0 for Earth Work (on line 3). Enter zeros in Column F.
Column G – Total Completed and Stored to Date. Add together Columns D, E, and F. This value should be the total work and materials to date. Enter that in Column G.
- You should have $5,000 for Mobilization (on line 1), $5,000 for Stump Removal (on line 2), and $15,000 for Earth Work (on line 3).
Column G – % (of scheduled value): This column is commonly referred to as Percent Complete. Divide your Total Completed and Stored to Date by the Scheduled value.
- You should have 100% for all three lines.
Column H – Balance to Finish: Subtract the Total Completed and Stored to Date from the Scheduled Value.
- You should have zero for all three lines.
Column I – Retainage (held): Remember that this column is normally used only for contracts where Variable Retainage Rates are permitted on a line-item basis. If you look back at G702, we are using a consistent rate of retainage; which is 10%.
- Leave Column I blank for all three lines.
- To finish filling out your form, total up each column and enter the value at the bottom of the column on the Grand Total line.
- Check your work against the example below. Do you match the example?
Sample Continuation Sheet (Form G703)
Important Note Regarding Copyrights
All AIA Forms, including G-702 and G-703, are copyrighted by the American Institute of Architects and fall under copyright laws. Copyright laws prohibit software vendors from the exact duplication of the forms themselves – our software provides all the data in a similar format for printing directly onto plain paper or original AIA forms that you purchase and feed into your printer. Total Office Manager has a plain paper version that is different enough to likely avoid copyright violation but it would not be considered “official”. G701, G702, G703 and all other AIA related documents mentioned herein are service marks and or trademarks of The American Institute of Architects. Aptora makes no claims of any kind to these works.
AIA Billing Related Help Topics
How to Purchase and Activate AIA Billing in Total Office Manager
AIA Billing – How to Create AIA Bills (invoices)
Directly Related to AIA Billing
How to Setup and Invoice (Bill) for Job Retention (Retainage)