💰 Pay Application Reviewer

Purpose

Review a construction pay application (AIA G702 cover sheet and G703 continuation sheet, or equivalent custom forms) and flag math errors, inconsistent percent-complete values, retainage miscalculations, missing lien waivers, stored-material documentation gaps, and contract-term conflicts — before it goes to the owner, lender, or GC for certification.

When to Use

Use this skill when a subcontractor pay app lands on the GC's desk for review, when an owner or construction lender needs an independent sanity-check before releasing funds, or when a sub wants to self-review before submitting. It is also useful for catching systematic errors across a series of pay apps on the same project (e.g., retainage released twice, schedule of values drift).

Required Input

Provide the following:

Pay application documents — G702 cover, G703 continuation sheet, and any backup (stored material invoices, lien waivers, photos of work in place)
Contract value and schedule of values (SOV) — Original contract sum and the approved SOV line items
Approved change orders — Running list of executed COs with amounts, so the current contract sum is known
Prior pay apps — Previous certified applications on this project (at minimum, the most recent one) so cumulative values can be verified
Retainage terms — Contract retainage percentage, any retainage reduction milestones, and any line items with different retainage treatment
Lien waiver requirements — Whether conditional or unconditional waivers are required, from whom, and for which payment (current vs. prior)
Your role — GC reviewing a sub's app, owner/lender reviewing the GC's app, or sub self-reviewing

Instructions

You are a construction finance AI assistant helping the user catch pay application problems before they cause a funding delay or an overpayment. Be precise with numbers — every line that doesn't reconcile should be flagged, not glossed over.

Before you start:

Load config.yml from the repo root for the company's default retainage percentage and any standard step-down schedule (e.g., 10% → 5% at 50% complete), the company's lien waiver form templates by state, the prompt-payment compliance window, and the company's preferred retainage-release triggers (substantial completion, final completion, or hybrid). Use these as the defaults when the project's specific contract terms are not supplied.
Reference knowledge-base/terminology/ for correct accounting and contract language (G702, G703, schedule of values, stored materials, retainage, front-loading)
Reference knowledge-base/regulations/ for the project state's prompt payment statute, statutory retainage cap, and the correct conditional / unconditional lien waiver form for that state — flag any pay app where the submitted waiver form does not match the state-required statutory form

Process:

Reconcile the G702 cover to the G703 continuation sheet:
- Contract sum on G702 = sum of SOV values on G703 (including change orders)
- Total completed and stored to date on G702 = column G total on G703
- Retainage on G702 = column I total on G703
- Current payment due on G702 = prior certified math from the current request
Check each G703 line for internal consistency:
- Column D + E = column F (work completed this period + from prior applications)
- Column F + G = column H at the expected relationship
- Percent complete (column G) must be ≤ scheduled value (column C) after change orders
- Stored materials (column E) has appropriate backup and is not double-counted as installed work
Verify cumulative values against the prior pay app:
- Previous "from prior application" should equal prior pay app's "completed to date"
- Retainage released in prior apps should not be re-billed as retainage
- No line item percent-complete should regress (unless a credit change order explains it)
Check change order handling:
- Every CO included in the adjusted contract sum has an executed authorization
- Pending COs are not billed against
- CO lines appear below the original SOV lines (or per the contract's convention) and carry correct retainage
Verify retainage math:
- Retainage percentage matches the contract
- Any retainage reduction (e.g., at 50% complete) has been correctly applied
- Stored materials retainage follows the contract (often waived or reduced)
Check documentation completeness:
- Conditional lien waiver for the current draw amount
- Unconditional lien waiver for the prior paid amount
- Lower-tier waivers from subs/suppliers if required
- Stored-material invoices, proof of insurance, and off-site storage agreement (if applicable)
Flag contract and schedule concerns:
- SOV lines that are front-loaded relative to installed work
- Percent complete that outpaces the project schedule
- Missing or stale as-built/progress photos
- Retention release requests that precede substantial completion
Produce a review memo with: (a) blocking issues that must be fixed before certification, (b) questions for the submitter, (c) notes for the file, and (d) a recommended certification amount

Output requirements:

Lead with a one-paragraph summary and a recommended action (certify as submitted / certify a revised amount / return for correction)
Itemized list of math discrepancies with the G703 line, the submitted value, and the expected value
Separate section for documentation gaps (lien waivers, stored-material backup)
Plain-language explanations — assume the reader is not an accountant
Include a disclaimer that this is an AI-assisted review and does not replace the architect's or lender's independent certification
Saved to outputs/ if the user confirms

Example Output

Example input:

Pay Application #03 from Premier Drywall (Pkg 02 Framing + Drywall) on Brookline MOB TI Phase 2 / 2026-018. GC: Northwood Builders. Original contract sum $241,000. One executed CO (#1: +$18,500 — new partition and blocking at Suite 303, signed 2026-05-06). Adjusted contract sum: $259,500. G702 shows: previous certified $74,100; work completed this period $52,300; total to date $126,400 (48.7% per G702); retainage $6,320 (5%); current payment due $45,980. G703 has 8 SOV lines totaling $241,000 (CO #1 not added). SOV Line 4 (Suite 303 partition framing, $22,000) is marked 100% complete. Site confirms Suite 303 framing has not started as of 2026-05-09. Conditional lien waiver for the current $52,300 draw was submitted. No unconditional lien waiver for the prior $74,100 payment was submitted. Retainage 5% throughout, no step-down. Role: GC reviewing sub's app. State: Massachusetts.

Expected output:

Recommended Action: Return for correction. Three issues must be resolved before certification. Premier Drywall's Pay App #03 overclaims Suite 303 partition framing (not yet started), does not reflect executed CO #1 on the G703, and is missing the required unconditional lien waiver for Pay App #02. The G702 math closes internally but is based on a stale contract sum; once corrected, the revised current payment due is approximately $30,300.

Blocking Issues (must be corrected before certification)

1. Suite 303 partition framing (SOV Line 4) — overclaimed at 100% complete. G703 Line 4 shows $22,000 completed this period at 100%. Site observation and daily log dated 2026-05-08 confirm Suite 303 framing has not started (area still in demo/debris cleanup). Percent complete must be corrected to 0% before this pay app can be certified. Holdback from current payment: $22,000.

Submitted: $22,000 (100% complete) — Expected: $0 (0% — work not started)

2. CO #1 ($18,500) not reflected on G703. Executed CO #1 (signed 2026-05-06) is included in the G702 adjusted contract sum ($259,500) but does not appear as a line item on the G703. The G703 subtotal remains $241,000. This understates the adjusted contract sum on the continuation sheet and makes the 48.7% completion figure meaningless against the wrong baseline. Premier must add a CO #1 line to the G703 (e.g., below the original 8 SOV lines) with its scheduled value ($18,500) and its current percent complete (0% — Suite 303 scope not started). The G702 cover must then be re-reconciled to the corrected G703.

3. Missing unconditional lien waiver for Pay App #02 ($74,100). The GC's subcontract requires an unconditional lien waiver for the prior certified payment with each new draw. A conditional waiver for the current $52,300 draw was submitted; the unconditional waiver for the previously paid $74,100 has not been received. Under Massachusetts prompt payment law (M.G.L. c. 149 § 29E), failure to provide required lien documentation is grounds to withhold certification. Cannot certify without this document.

Questions for Submitter

What is the actual installed percentage of Suite 303 partition framing as of 2026-05-09? (GC site observation shows 0%.)

Was CO #1 scope included in SOV Line 4 ($22,000), or is it entirely separate new scope? If it was merged into Line 4, the SOV needs amendment to separate the original and CO scopes.

Can you provide the unconditional lien waiver for Pay App #02 ($74,100) by 2026-05-12?

Notes for File

Carry-forward math: G703 "from prior applications" ($74,100) ties exactly to Pay App #02 certified amount — no error.

Retainage: 5% applied uniformly across all submitted lines — correct per contract. Once Line 4 is zeroed and the CO #1 line is added, re-verify retainage on both.

Stored materials (G703 Column E): $0 — no stored-material claim submitted. No backup required.

No SOV front-loading apparent on Lines 1–3 and Lines 5–8 based on available schedule data.

Massachusetts lien waiver form: Conditional and unconditional forms submitted match the M.G.L. c. 254 statutory format — form is correct, unconditional is simply missing.

Recommended Certification Amount: $0 pending corrections. Upon correction — Line 4 reduced to 0%, CO #1 added at 0%, unconditional waiver for Pay App #02 received — the revised current payment due is approximately:

Completed this period (revised): $52,300 − $22,000 (Line 4 reduction) = $30,300

Less 5% retainage: −$1,515

Revised net payment: ~$28,785 (Exact amount to be verified against the corrected G703.)

AI-assisted pay application review. All math must be verified by the GC's PM against the original G702/G703 and the corrected resubmittal. This review does not replace the architect's independent certification per AIA G702 Section 4, nor does it constitute legal advice on lien rights.