How to return a pay application: notice, timing, and what to write

The short answer: returning a pay application is a written notice, sent inside the review window the contract sets, that names the exact reference, the figure the document prints and the figure the document requires. The unmodified 2017 edition of AIA A201 gives the architect seven days from receipt to either issue a Certificate for Payment for the amount applied for, or notify the contractor in writing of the reasons for withholding certification. ConsensusDocs agreements carry their own written notice pattern with their own count of days, and projects run on earlier editions and on edited ones. The contract in front of you governs, so read its payment article before relying on either. Certify a lesser amount when the disputed money is isolated to identified lines and the rest of the arithmetic holds. Return the packet for correction when the document does not tie or a page is missing. Both carry the same facts per finding: the reference, the stated figure, the expected figure, the difference, and the identity or the prior application the expectation came from. Date the notice and keep the record.

This page is the procedure. For what breaks in an inbound packet and how each failure is identified, read the seven reasons pay applications get rejected and the receiver’s review checklist. What follows starts at the moment you have a finding and have to put it in writing.

The review window starts at receipt

Notice on a pay application is timed, and the count runs from receipt, not from the day you get to it. The unmodified 2017 edition of AIA A201 gives the architect seven days from receipt of the Application for Payment to do one of two things: issue a Certificate for Payment for the amount applied for, or notify the contractor in writing of the reasons for withholding certification. ConsensusDocs agreements set out their own written notice requirement, with their own number of days and their own trigger. Many subcontracts add a separate window between the general contractor and the subcontractor, running from the general contractor’s receipt rather than the owner’s.

Those are common patterns and none of them is your contract. Projects run on earlier editions of A201 and on editions the parties amended, so the governing document is the one on your desk: find its payment article and write down the number of days, the event that starts the count and the delivery method it names. Many states also have prompt payment statutes that set deadlines on top of the contract, and their terms differ. Verify anything you are unsure of against the contract itself, your state statute or your attorney. A seven day window makes review a same-week activity, so triage the packet the day it arrives.

The same-day return: a packet you cannot review at all

Some packets are not a math dispute. They are the paperwork failures, and they take a different response from an arithmetic finding. The continuation sheet arrives without its last page, so the column totals Line 4 has to equal are not in the file. The certification block is unsigned, or unnotarized where the contract requires it. The conditional waiver is not attached, and which waiver type belongs with which payment is set by the contract and in some places by statute, so check yours. The application number or the period ending date does not match the period billed. None of it can be settled by arithmetic, because the figures needed to run it are absent, which is why is the application complete and signed is the first check on the review list rather than the last.

Send those back the same day, naming the missing item: “Application 5 arrived as pages 1 and 2 of a 3 page continuation sheet. Page 3 carries the column totals. Please send it.” That costs the subcontractor a day. Finding it a week later costs a payment cycle. Whether an incomplete application counts as received for the review window is a contract question, so record the date the incomplete packet arrived and the date the missing piece did.

Certify a lesser amount, or send the packet back

On AIA-style contracts the certifier is not limited to yes or no: a Certificate for Payment may be issued for an amount different from the amount applied for, with written notice of the reasons for the difference. That is the instrument when the disputed money sits on identified lines and everything around them computes, because the undisputed part of the work is paid on schedule and the argument narrows to one item. Send the whole packet back instead when the arithmetic cannot be relied on. If the sum of Column G does not equal Line 4, no certified amount can be defended, because Line 4 drives Line 5, Line 6 and the payment on Line 8. The same applies when Column D does not match the prior application, or a page is missing. Finding which cell is wrong before you write is a separate procedure with its own checks, or type the columns into the free G702/G703 checker and let it name the row.

One application, three amounts

A $600,000 subcontract at application 5, no change orders, retainage at the 10% this contract sets, on completed work and on stored material. Rates and bases move with the contract and in some places with the statute, and the math on the retainage lines covers both. Five lines. This is what arrived.

The header letters above are the ones AIA prints: the percent complete column carries no letter, H is the balance to finish, and I, which this contract does not use, is per-line retainage. One row does not hold. Item 4 carries 40,000 in Column D and 26,000 in Column E, which is 66,000, and Column G prints 60,000. Nothing else disagrees with itself: Column C sums to the 600,000 contract, Column G sums to the 378,000 the certificate carries as Line 4, and the percent and balance columns are computed off the printed Column G, so item 4 reads 60,000 ÷ 120,000 = 50% with 120,000 − 60,000 = 60,000 to finish. The same 6,000 surfaces twice on the continuation sheet, because the D, E and F totals add to 384,000 against a Column G total of 378,000, and one gap appearing in two places points at a single cell rather than two errors.

The certificate, run three ways: as applied for, with item 4 corrected, and with item 4 corrected and the stored material line excluded.

The first column passes every identity that runs down the certificate: Line 5 = 5a + 5b, Line 6 = Line 4 − Line 5, Line 8 = Line 6 − Line 7, Line 9 = Line 3 − Line 6. Line 7 of 252,000 is application 4’s Line 6, being 280,000 of completed work at that point less 28,000 of retainage. What the first column fails is the check that runs across the certificate rather than down it. The form prints the retainage rate beside 5a and 5b, so the bases come back out: 36,600 at 10% is 366,000 of completed work, 1,800 at 10% is 18,000 of stored material, and those two add to 384,000 against a printed Line 4 of 378,000. That is the same 6,000 a third time, reached without opening the continuation sheet, and it reads that way because the subcontractor computed retainage from the figures they had and then mistyped Column G.

Correcting item 4 takes Column G on that row to 66,000, the percent complete to 55% and the balance to finish to 54,000, and Line 4 to 384,000. Retainage does not move, because 5a is charged on cumulative completed work of 280,000 + 86,000 = 366,000 and 5b on the 18,000 in Column F, and neither figure was wrong. Line 6 rises by the full 6,000 and so does the payment: 93,600 against the 87,600 applied for. A correction request is not a reduction. It goes where the identity goes, and here it goes in the subcontractor’s favor.

The third column is a partial certification. Item 5 carries 18,000 of material in Column F and the packet holds no invoice, no delivery ticket and no evidence of storage or insurance, which is the stored materials check failing. That is not an arithmetic finding: the row computes, 0 + 0 + 18,000 = 18,000, and every total accepts it. What backup the contract requires before stored material is payable is set by the contract, so check yours. With that line excluded, Line 4 becomes 366,000, 5b goes to zero and Line 8 becomes 77,400, which is 16,200 below the corrected 93,600 rather than 18,000, because 1,800 of retainage was already held against the material.

What a correction request contains

Eight fields. Four of them are the finding itself, and the one most notices leave out is the seventh.

• Project and contract. Name and contract number, so the notice files itself against the job.
• Application number, period ending date, date received. The packet the notice attaches to, and the date the count started.
• The reference. Item number and column on the continuation sheet, or the G702 line. Quote the printed column header, not a bare letter: on AIA’s own G703 the percent complete column carries no letter, Column H is the balance to finish and Column I is retainage, while many vendor forms letter the percent column H and shift every letter after it. The box-by-box reference covers what each one holds.
• The stated figure. What the document prints, transcribed exactly, including a figure you are certain is a keying error.
• The expected figure. What the identity, the prior application or your own records require.
• The difference. In dollars, and where it lands on the certificate.
• The basis. The identity, the prior application or the missing document behind the expectation. Without it the subcontractor has your conclusion and not your reasoning, and the resubmission is a guess.
• The request and the date. What you want back and by when, naming every column that recomputes from the cell you flagged, so the corrected page arrives whole and on a deadline.

Filled in against the application above:

Send it as one message covering every finding on the packet. A notice that names item 4 today and item 5 next week has spent two review cycles on one application.

What a vague rejection costs

Compare the two. “The numbers do not tie, please review and resubmit” against “Item 4, Rough carpentry: Column G reads 60,000. Column D is 40,000 and Column E is 26,000, so Column G is 66,000 and Line 4 is 384,000, an increase of 6,000.”

The first moves the work of finding the error onto the person who did not find it the first time, and it comes back one of two ways: the same packet unchanged, with a note saying the subcontractor checked and it looks right, or a differently wrong packet, with figures that moved on lines nobody disputed and every check to run again. The second notice can be acted on without a search, and verified on return, because you already know the figures the corrected page has to print.

Price it in cycles. Most subcontracts bill monthly, so a rejection that does not name a cell costs about thirty days of payment on the undisputed work as well as the disputed work. That is the argument for certifying a lesser amount where the dispute is isolated: money nobody disagrees about does not wait behind money that is in question.

What to keep

Notice timing is contractual, so the file has to prove it. Keep four things per application: the date the packet was received and by whom, a copy of the packet exactly as it arrived, the notice itself with its date and the delivery method the contract names, and the certificate as issued. A notice sent outside the named method is one you may have to argue about later.

The certificate as issued matters beyond any argument. Line 7 on the next application, less previous certificates for payment, has to repeat the Line 6 that was certified, and when a lesser amount was certified the submitted application and the issued certificate are two documents carrying two different Line 6 figures. File both. Column D has the same dependency line by line: it has to equal what the corrected sheet carried in D plus E, not what the sheet as first submitted carried.

PayAppCheck produces the findings half of that record. Upload the packet and each failed identity comes back as a reference, a stated figure, an expected figure and a difference, which is the finding already in the shape a notice needs. Keeping the file, judging whether the stored material is payable and knowing when your deadline falls stay with you.

Questions people ask

PayAppCheck is software, not a law or accounting firm. Not legal, accounting or tax advice. Verify lien, notarization, and retainage requirements against your contract, your state statute, and your accountant.