Pay apps, SOV and retainage · os.construction

Most commercial contractors get paid through progress billing: once a month, you bill the owner for the share of work completed, line by line, against an agreed schedule of values. This page explains how that works, using Pay App #9 on the Riverside Medical sample job, and how os.construction is designed to assemble it.

The schedule of values

The schedule of values (SOV) breaks the contract sum into billable lines: general conditions, sitework, concrete, steel, mechanical, electrical and so on. Each line has a scheduled value, and the lines add up to the contract sum.

Every month, you report progress on each line: how much was done before, how much this period, and how much material is stored on site. Approved change orders are added as new lines (or adjust existing ones), so the SOV always adds up to the current contract sum.

AIA G702 and G703

Many contracts use the AIA forms, or something modeled on them:

G703, Continuation Sheet: the line-by-line detail. One row per SOV line.
G702, Application and Certificate for Payment: the one-page summary the architect certifies, built from the G703 totals.

The G703 columns:

Col	Meaning
A	Item number
B	Description of work
C	Scheduled value
D	Work completed, from previous application
E	Work completed, this period
F	Materials presently stored (not in D or E)
G	Total completed and stored to date (D + E + F), and % (G ÷ C)
H	Balance to finish (C − G)
I	Retainage

Retainage

Retainage is a percentage of each payment the owner holds back until the job, or a defined part of it, is complete. It protects the owner if work is unfinished or defective. Ten percent is common; many contracts reduce it to five percent at 50% complete, and some states cap it. Retainage is usually released at substantial completion or final completion, once punch list, closeout documents and final lien waivers are in.

You do the same thing downstream: you withhold retainage from your subs per their subcontracts. Tracking both sides, retainage receivable from the owner and retainage payable to subs, is a core part of construction accounting.

Worked example: Pay App #9

Sample data. Riverside Medical’s contract sum is $48.2M plus $1.1M of approved change orders. Pay App #9 bills $2,310,400 of work this period, with 10% retainage:

Line	G702 item	Amount
1	Original contract sum	$48,200,000
2	Net change by change orders	$1,100,000
3	Contract sum to date	$49,300,000
4	Total completed and stored to date	$35,100,000
5	Retainage (10%)	$3,510,000
6	Total earned less retainage	$31,590,000
7	Less previous certificates for payment	$29,510,640
8	Current payment due	$2,079,360
9	Balance to finish, including retainage	$17,710,000

Two illustrative lines, including the new change order line:

Item	Description	C	D	E	G	%	I
23-330	HVAC duct accessories	$412,000	$247,200	$61,800	$309,000	75%	$30,900
CO-14	Fire dampers, L3 (CO #14)	$86,400	$0	$43,200	$43,200	50%	$4,320

Work this period: $2,310,400
Retainage this period: 10% × $2,310,400 = $231,040
Net due this period: $2,310,400 − $231,040 = $2,079,360

The G702 gets to the same number the long way: line 6 ($35,100,000 − $3,510,000 = $31,590,000) minus line 7 (what was certified on Pay Apps #1 to #8) equals line 8.

Lien waivers

Owners and lenders usually require lien waivers with each payment: conditional waivers for the current payment, unconditional waivers for payments already received, from you and often from your subs and suppliers. On Riverside Medical, waivers from Apex Steel and CoreDry are missing for Pay App #9. A missing waiver can hold the whole payment, so it pays to see it early.

How os.construction builds the pay app

In most stacks, the pay app is a spreadsheet rebuilt every month from the PM tool, the accounting system and a stack of emails. In os.construction, every input already lives in the data core:

SOV lines come from the prime contract, with approved change orders already added.
Progress comes from the PM’s percent complete per line, informed by field records.
Stored materials link to the invoices and delivery records that support them.
Retainage follows the contract terms, including reductions.
Previous applications are the actual prior pay app records, so column D is never retyped.
Lien waiver status for you and your subs is checked against the billing period.

The Billing agent can assemble the draft, reconcile approved COs and flag missing waivers. A person reviews and approves before anything goes to the owner. See The six launch agents.