6.2 Invoices, Draw Requests & Percentage of Completion

6.2 Invoices, Draw Requests & Percentage of Completion

B&F Area B item 6 is prepare invoices/draws: the math of percentage of work completed, the contract and subcontract documents that authorize payment, how to assemble the invoice or draw, and lien laws. Area D will make you post the same numbers to accounts receivable. This section is the administrative act of asking to be paid without overbilling, underbilling, or destroying a subcontractor's lien rights. The 2026 open-book tools are Builder's Guide to Accounting (2001), the Contractors Manual 2025, AIA A201-2017, AIA A401-2017, and Florida Chapter 713 as taught through those references.

Why the draw is not “an invoice for whatever we spent”

A progress payment (draw) is a contract right, not a favor. AIA A201-2017 Article 9 makes the contractor apply for payment based on work in place and, if the contract allows, stored materials. The owner (or architect) certifies. Retainage is a contractually or statutorily withheld slice of those progress payments to secure completion and punch-list work. An HVAC invoice on a service call or a small lump-sum residential changeout may be a simple bill. A draw request on a school chiller plant is a G702 package. Mixing the two formats is how you either get paid late or get accused of billing work that is not in place.

Percentage of completion (POC) is the measurement. Construction accounting's default for long jobs is the cost-to-cost method:

POC = costs incurred to date ÷ current total estimated cost to complete the contract

Earned revenue = POC × contract price (including approved change orders).

The completed-contract method waits until substantial completion to recognize profit. Builder's Guide to Accounting treats completed-contract as a short-job or special-purpose method, not the way a multi-month rooftop program should be billed. The exam will give you costs, estimates, a retainage percent, and prior billings, and it will expect arithmetic — not a speech about “being about halfway done.”

Worked cost-to-cost example. Coastal Air has a $200,000 lump-sum contract to replace four 20-ton packaged units (Class A work if any one system exceeds 25 tons; four separate 20-ton systems can sit inside Class B if each system is truly separate — capacity is in any one system under F.S. 489.105). Original estimated cost was $150,000. To date the job has incurred $72,000 of labor, materials (FIFO-issued condensers and curb adapters), and crane rental. The estimator now believes total cost will be $180,000 because of a steel-curb change. POC = 72,000 / 180,000 = 40%. Earned revenue = 0.40 × 200,000 = $80,000. If the private contract withholds 10% retainage, retainage on work billed to date is $8,000. Net payable to date = 80,000 − 8,000 = $72,000. If prior certified payments were $45,000, this draw's payment is $27,000 ($72,000 − $45,000). Notice that raising the estimated total cost from $150,000 to $180,000 lowered POC and lowered the bill. Using stale estimates to keep billing 48% (72/150) would overclaim $16,000 of revenue before retainage. That is overbilling, and it is a bonding and Chapter 489 financial-responsibility problem, not a rounding error.

A schedule of values is the other measurement. Instead of a single cost-to-cost fraction, the contract breaks the $200,000 into lines — equipment, rigging, piping, start-up, close-out — and the superintendent certifies percent complete on each line. Stored materials, if allowed, sit on their own G703 lines and often require bills of sale, insurance, and photographs. Billing 100% of a condensing unit that is still on the vendor's floor is stored-materials fraud unless the contract and the architect's certificate say otherwise.

How to prepare the invoice or draw

For AIA-style jobs the package is:

• G702, Application and Certificate for Payment — original contract sum, net change orders, contract sum to date, total completed and stored to date, retainage, total earned less retainage, less previous certificates, current payment due, balance to finish including retainage.
• G703, Continuation Sheet — the schedule-of-values math behind those totals.
• Supporting lien waivers in the form the contract requires (progress waiver versus final waiver; conditional versus unconditional).
• Certified payroll on Davis-Bacon or certain public jobs, and equipment serials or commissioning reports when the spec says so.
• On Florida private jobs heading toward final payment, the contractor's final payment affidavit discussed with Chapter 713 below.

The numbers on G702 must tie to the contract documents. AIA A401-2017 is the subcontractor agreement on the 2026 B&F list; a sheet-metal sub's application should map to the same schedule-of-values language the HVAC prime used with the owner. If the prime bills the owner for 80% of duct and has paid the sub 40%, two clocks are wrong: the prime is sitting on the sub's money, and the sub's NTO/lien clock is running. F.S. 713.346 and prompt-pay provisions in the contract and in Florida's public prompt-payment statutes exist so that money certified for a sub actually moves.

A residential or light-commercial HVAC invoice still needs the same honesty at smaller scale: license number on the contract and invoice (F.S. 489.119(5)), change-order backup, sales-tax treatment from section 6.1 (usually no tax on a real-property lump sum), and a description that would survive a DBPR complaint. Do not bill “HVAC complete 50%” on a changeout when the indoor coil is set and the outdoor unit is still on a truck.

Retainage: public 5% versus private contract

Florida does not cap retainage on private projects. Ten percent, 5%, a step-down after 50% complete, or zero — the contract controls. The qualifier's job is to price the cash lag. Ten percent retainage on a $200,000 job is $20,000 of working capital stuck until final payment. That is why section 6.1's purchasing terms (2/10 net 30 versus the owner's 30-day architect's certificate plus 10% retainage) can bankrupt a busy shop.

Public construction is different. F.S. 255.078 (state public entities) and F.S. 218.735 (local governmental entities) allow retainage not exceeding 5% of each progress payment. Those retainage caps do not apply to construction services of $200,000 or less as identified in the contract, and they yield to contrary federal grantor rules when federal funds are in the job. FDOT contracts under Chapter 337 have their own history of exclusions; do not assume every state-adjacent job is 255.078. The public entity may withhold less than 5%, may reduce retainage on a contractual schedule, and must still honor prompt-pay time limits on payment requests that include retainage. After punch list creation, the local-government statute requires payment of remaining contract balance including retainage, less 150% of estimated punch-list cost, within 20 business days of a proper payment request — a number the 2023 prompt-pay revisions made exam-relevant. A good-faith dispute in writing can still hold the disputed amount.

Public property is not lienable in the Chapter 713 sense. Unpaid HVAC primes and subs on public jobs look to the F.S. 255.05 payment bond, not to a Claim of Lien against the school board's land. Private jobs use Chapter 713. Mixing those remedies on a draw cover letter is a free missed question.

Lien law is what happens when invoices are not paid

Chapter 713 is taught in its own later chapter; Area B still tests the connection to unpaid invoices. If you bill the owner for equipment and do not pay the supply house, the supply house is a lienor not in privity. F.S. 713.06(2)(a) requires that lienor to serve a Notice to Owner before commencing or not later than 45 days after commencing to furnish. Failure is a complete defense to the lien. Laborers are excepted from the NTO prerequisite. Direct contractors in privity with the owner generally do not serve an NTO.

A Claim of Lien is recorded not later than 90 days after final furnishing (F.S. 713.08(5)). A copy must be served on the owner before recording or within 15 days after recording (713.08(4)). Suit to enforce is generally 1 year from recording (713.22), shortened by a Notice of Contest or a summons to show cause. The contractor in privity who wants to sue must serve the contractor's final payment affidavit at least 5 days before suit (713.06(3)(d)), listing unpaid lienors. That affidavit is also what an owner wants before cutting the final check: if you swear everyone is paid and a copper vendor still has an open invoice, you have a false affidavit and a still-live lien risk.

This is why invoice approval in 6.1 and draws in 6.2 are the same administrative system. Joint checks, conditional waivers with the check attached, and paying suppliers from the draw that billed their materials are how a QA keeps Chapter 713 off the owner's title commitment — and off the QA's CILB complaint file. Notice of Commencement (F.S. 713.13) is the owner's recorded starting gun; a smart HVAC purchaser reads it before the first equipment drop so NTO addresses are right.

Underbilling is the opposite trap. Costs in place of $72,000 on a job that has only billed $20,000 means you are financing the owner. Percentage-of-completion accounting will still show earned revenue of $80,000 in the cost-to-cost example; the missing $60,000 before retainage is underbilling, an accounts-receivable and cash-flow problem that sureties treat as a red flag.

Florida HVAC scenario

Palm HVAC, qualified by a certified Class A agent, is the air-conditioning sub on a $1.2 million private medical-office build in Leon County. The subcontract is AIA A401-2017, $280,000, 10% retainage, monthly G702. Month 4: schedule of values shows equipment 100% stored in the contractor's locked warehouse (bills of sale and insurance attached), duct 60%, start-up 0%. POC on a cost-to-cost basis is 52% because pipe and insulation invoices are still in AP hold from a failed three-way match. The project manager bills 70% “to keep cash up.” The copper vendor, unpaid for 50 days, served an NTO on day 20 and is preparing a Claim of Lien. The owner’s title company calls the GC. The GC withholds the HVAC draw as a good-faith dispute and demands joint checks going forward.

The exam answer is not “bill more.” Stored materials were billable only as the contract allowed; inflating percent complete above the schedule of values and above cost-to-cost is overbilling. The unpaid vendor's NTO was timely at day 20 (inside 45). The Claim of Lien, if recorded within 90 days of the vendor's final furnishing, will attach to the private property. Palm's next proper G702 should restate honest completed-and-stored amounts, show 10% retainage, deduct prior certificates, attach waivers that match checks actually issued, and clear the AP exception so the vendor is paid from the draw that already billed that copper. On a public version of the same job, retainage would have been capped at 5% (contract over $200,000), and the vendor would have been looking at the 255.05 bond, not a lien on the school. Same invoices. Different statute. Area B tests both.