20.1 The Schedule of Values & the Application and Certificate for Payment

The Schedule of Values (AIA Document G703)

During the Construction Phase, the disbursement of capital from the owner to the contractor is governed by progress payments. To ensure that disbursements accurately track the physical reality of work in place, AIA Document A201™–2017 (General Conditions of the Contract for Construction) establishes a rigorous administrative framework anchored by the Schedule of Values (SOV).

Under AIA A201 Section 9.2, the general contractor is contractually mandated to submit a Schedule of Values to the architect prior to submitting the very first application for payment:

"Where the Contract is based on a stipulated sum or Guaranteed Maximum Price, the Contractor shall submit a schedule of values to the Architect before the first Application for Payment, allocating the entire Contract Sum to the various portions of the Work. The schedule of values shall be prepared in the form, and supported by the data to substantiate its accuracy, required by the Architect."

Structure and Role of AIA Document G703

The standard industry instrument for the Schedule of Values is AIA Document G703™ (Continuation Sheet), which serves as the itemized companion to AIA Document G702™ (Application and Certificate for Payment). The G703 organizes the total contract value into discrete line items arranged by the Construction Specifications Institute (CSI) MasterFormat® divisions (e.g., Division 03 Concrete, Division 05 Metals, Division 09 Finishes, Division 26 Electrical).

Key columns on AIA Document G703 include:

• Column A: Item Number
• Column B: Description of Work
• Column C: Scheduled Value (the allocated contract amount for that line item)
• Column D: Work Completed from Previous Applications (not including current period)
• Column E: Work Completed This Period
• Column F: Materials Presently Stored (not in Work Completed)
• Column G: Total Completed and Stored to Date (Columns D + E + F)
• Column H: % Complete (Column G ÷ Column C)
• Column I: Balance to Finish (Column C − Column G)
• Column J: Retainage (if variable rate applies)

Once reviewed and approved by the architect, the Schedule of Values serves as the contractual mathematical baseline for evaluating all subsequent monthly payment applications. The architect evaluates the contractor's claimed percentages of completion against the physical work observed during site visits.

The Risk of Front-Loading (Unbalanced Bidding)

A primary responsibility of the architect during the initial review of the SOV is detecting and preventing front-loading (also termed an unbalanced schedule of values). Front-loading occurs when a contractor artificially inflates the scheduled values of early construction activities (such as mobilization, site clearing, mass excavation, subgrade utilities, and foundations) while depressing the values of trades executed near the end of the project (such as drywall, architectural woodwork, painting, flooring, and mechanical testing, adjusting, and balancing).

┌────────────────────────────────────────────────────────────────────────┐
│                     THE DANGER OF FRONT-LOADING                        │
├────────────────────────────────────────────────────────────────────────┤
│ NORMAL ALLOCATION:                                                     │
│ • Mobilization & Earthwork: Real Cost = $200,000 ──► SOV = $200,000    │
│ • Interior Finishes:        Real Cost = $800,000 ──► SOV = $800,000    │
│                                                                        │
│ FRONT-LOADED ALLOCATION:                                               │
│ • Mobilization & Earthwork: Real Cost = $200,000 ──► SOV = $500,000 ◄──┤ (Overpaid by $300k)
│ • Interior Finishes:        Real Cost = $800,000 ──► SOV = $500,000 ◄──┤ (Underfunded by $300k)
│                                                                        │
│ RISK EXPOSURE: If the contractor defaults or abandons the project at   │
│ month 8, the remaining unpaid contract balance ($500,000) is wholly    │
│ insufficient to pay a completion contractor to finish the $800,000 in  │
│ remaining finish trades!                                               │
└────────────────────────────────────────────────────────────────────────┘

Contractors front-load to generate an interest-free working capital loan from the owner to fund other jobs or corporate overhead. However, if the contractor experiences financial distress, default, or bankruptcy mid-project, the owner is left with an underfunded contract where the remaining balance is grossly insufficient to hire a replacement contractor to complete the remaining work. Under Section 9.2, the architect has the legal authority and duty to demand line-item substantiation—such as executed subcontractor agreements, purchase orders, and supplier bids—and must reject any unbalanced SOV before certifying the first payment application.

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AIA Document G702: Application and Certificate for Payment

AIA Document G702™ is the summary instrument executed monthly by the contractor and the architect. It presents a high-level, nine-line financial accounting of the project from contract inception through the current billing date.

┌────────────────────────────────────────────────────────────────────────┐
│                  AIA DOCUMENT G702: 9-LINE SUMMARY                     │
├──────┬──────────────────────────────────────────┬──────────────────────┤
│ LINE │ CONTRACT ACCOUNTING ITEM                 │ MATHEMATICAL BASIS   │
├──────┼──────────────────────────────────────────┼──────────────────────┤
│  1   │ Original Contract Sum                    │ Baseline Agreement   │
│  2   │ Net Change by Change Orders              │ Executed COs Only    │
│  3   │ Contract Sum to Date                     │ Line 1 ± Line 2      │
│  4   │ Total Completed & Stored to Date         │ G703 Column G Total  │
│  5   │ Retainage (Total Withheld)               │ Line 5a + Line 5b    │
│  6   │ Total Earned Less Retainage              │ Line 4 − Line 5      │
│  7   │ Less Previous Certificates for Payment   │ Line 6 of Prior App  │
│  8   │ Current Payment Due                      │ Line 6 − Line 7      │
│  9   │ Balance to Finish, Including Retainage   │ Line 3 − Line 6      │
└──────┴──────────────────────────────────────────┴──────────────────────┘

Detailed Analysis of the 9 Lines

1. Line 1: Original Contract Sum: The base contract amount established in the Owner-Contractor Agreement (e.g., AIA A101™).
2. Line 2: Net Change by Change Orders: The cumulative algebraic sum of all fully executed Change Orders (AIA Document G701™). Critical Rule: Only fully executed Change Orders signed by owner, contractor, and architect may be included on Line 2. Pending Change Orders, unpriced Construction Change Directives (CCDs), and unadjudicated claims cannot be incorporated into the Contract Sum.
3. Line 3: Contract Sum to Date: The adjusted total contract value (Line 1 plus or minus Line 2).
4. Line 4: Total Completed and Stored to Date: The total dollar value of all permanent work installed to date plus approved materials stored on or off site. This figure corresponds directly to the bottom-line total of Column G on AIA Document G703.
5. Line 5: Retainage: The cumulative amount of retainage withheld. Line 5 is typically divided into Line 5a (retainage on completed work) and Line 5b (retainage on stored materials).
6. Line 6: Total Earned Less Retainage: The total value earned by the contractor to date minus retainage (Line 4 minus Line 5).
7. Line 7: Less Previous Certificates for Payment: The total amount previously certified by the architect for payment (Line 6 from the immediately preceding certified G702).
8. Line 8: Current Payment Due: The net dollar amount payable to the contractor for the current billing cycle (Line 6 minus Line 7).
9. Line 9: Balance to Finish, Including Retainage: The remaining funds obligated by the owner under the contract (Line 3 minus Line 6). This number represents the owner's remaining financial liability to achieve Final Completion.

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