What is a schedule of values in construction?

A schedule of values (SOV) is a line-item breakdown of the total contract price showing what portion of the price is attributable to each phase or component of the work (e.g., demo: $12,000, framing: $45,000, electrical rough: $18,000, ...). It's submitted at project start and used as the basis for every subsequent progress billing. Each pay application references the SOV line items and invoices for the percentage complete on each line.

What's the difference between AIA G702 and G703?

G702 is the 'Application and Certificate for Payment' — the cover sheet showing this pay period's total bill, prior billings, current amount due, retainage, and the architect's certification. G703 is the 'Continuation Sheet' — the detailed line-by-line SOV showing scheduled value, work completed this period, work completed previously, percent complete, and retainage for each line. Together they're the industry-standard pay app on most commercial and institutional work.

How much retainage is typical in construction?

In 2026, typical retainage is 10% of each progress payment on private commercial work, 5% on most federal contracts (Miller Act standard), and 5%–10% on state/local public work depending on the state. Several states cap retainage at 5% statutorily on public work (e.g., California, Washington) or eliminate it after 50% completion. Retainage is released at substantial completion or final acceptance, often 30–60 days after.

Can I charge a deposit on a construction contract?

Depends on the state and the project type. For residential home-improvement contracts, many states cap deposits — California caps at 10% of contract price or $1,000 (whichever is less); New York caps at 33.3% under the Home Improvement Law; Maryland limits to 33.3%; Massachusetts limits to one-third plus special-order materials. Commercial contracts are governed by contract law only — any deposit amount the parties agree to is enforceable. Check your state's contractor licensing law before setting deposit terms on residential jobs.

What's the difference between progress billing and lump-sum billing?

Lump-sum (aka fixed-price) billing charges a single total for the completed work, usually with a deposit at signing and the balance at completion. Progress billing invoices monthly (sometimes semi-monthly) based on percentage of work completed to date, minus retainage. Progress billing is standard on commercial projects above ~$100k; lump-sum is typical on residential remodels and small commercial. The reason to progress-bill: you finance the customer for only 30 days of work at a time, not the whole project.

What is pay-when-paid vs pay-if-paid in a subcontract?

Both are clauses that tie the GC's obligation to pay the sub to the owner's payment to the GC. 'Pay when paid' is usually interpreted by courts as a timing mechanism — it sets when payment is due, but the GC still ultimately owes the sub even if the owner never pays. 'Pay if paid' is a true condition precedent — the GC owes the sub nothing if the owner never pays. Several states (California, New York, North Carolina, Wisconsin) have held pay-if-paid clauses unenforceable as against public policy. Read your subcontracts carefully and know your state's rule.

What is the Prompt Payment Act?

The federal Prompt Payment Act (31 USC §3901 et seq) requires federal agencies to pay prime contractors within 14 days of receiving a proper invoice, with interest accruing after. Most states have their own 'Little Prompt Payment Acts' for public work, and about 35 states have prompt payment laws that also apply to private construction. Typical private-work state rules: owner must pay GC within 30 days of invoice; GC must pay sub within 7–10 days of receiving payment from owner. Interest penalties (typically 1%–1.5%/month) accrue on late payments.

How do I handle a change order in progress billing?

Change orders must be written, signed by both parties before the additional work is performed, and either add a new line to your schedule of values or modify an existing line's scheduled value. Never do extra work on verbal instructions and invoice for it later — 95% of payment disputes on small commercial jobs involve unsigned change orders. When in doubt, stop the clock: issue a written Change Order Request (COR), get signature, then proceed.

Construction Progress Billing (Schedule of Values, Retainage, and Getting Paid in 2026)

Contractors don't usually fail because jobs are unprofitable. They fail because of cash flow — specifically, because they finance their customers' construction projects out of working capital, get paid 30 to 90 days late, and run out of cash before the next deposit comes in. The remedy isn't charging more; it's billing differently.

Progress billing is the discipline of invoicing as you work, not just when you finish. Done right, it means you hold less than 30 days of labor and material cost in the air at any given time. Done poorly, you're financing the project yourself and paying interest on the working capital you tied up.

Here's how progress billing actually works in 2026, the documents and terms you'll see, and how to translate the commercial standard into a cleaner cash flow cycle on smaller jobs.

The Core Concept

Every construction project has a contract price — say, $300,000 for a commercial tenant improvement. Instead of invoicing the full $300,000 at completion, progress billing invoices in installments matched to work completed:

| Pay Period | Work Completed (%) | Amount Billed (Gross) | Retainage Held (10%) | Net Due | |---|---|---|---|---| | Month 1 | 25% | $75,000 | $7,500 | $67,500 | | Month 2 | 50% (cumulative) | $75,000 (this period) | $7,500 | $67,500 | | Month 3 | 75% (cumulative) | $75,000 | $7,500 | $67,500 | | Month 4 (Substantial completion) | 100% | $75,000 | $7,500 | $67,500 | | Retainage release (30–60 days post-completion) | — | — | ($30,000) | $30,000 |

By billing monthly, you collect 90% of each phase's value within 30 days of doing the work, rather than waiting 4 months for the whole contract to clear. Retainage (the 10% held back) is released after substantial completion.

That's it conceptually. The execution involves specific paperwork.

The Schedule of Values (SOV)

Before you submit your first pay app, you submit a schedule of values — a line-item breakdown of the contract price. For a commercial tenant improvement at $300,000, an SOV might look like:

| Line | Description | Scheduled Value | |---|---|---| | 01 | General conditions | $24,000 | | 02 | Demolition | $14,000 | | 03 | Framing | $38,000 | | 04 | Drywall | $22,000 | | 05 | MEP rough-in | $55,000 | | 06 | MEP trim | $25,000 | | 07 | Flooring | $28,000 | | 08 | Paint + finishes | $18,000 | | 09 | Cabinets + millwork | $32,000 | | 10 | Close-out + commissioning | $12,000 | | 11 | Overhead + profit | $32,000 | | | Total | $300,000 |

The SOV is the reference document for every subsequent pay app. Line 03 (framing) starts at 0% complete; each month the contractor reports % complete on that line, and the architect/owner approves or disputes.

Front-Loading the SOV

An industry-accepted trick: front-load the early lines. General conditions, demolition, and framing are usually billed early in the project, so inflating those line values vs. the more back-loaded lines (close-out, commissioning) means you collect more cash in the first 60 days.

Owners and architects know this happens. Aggressive front-loading (e.g., claiming 40% of contract value for demo + general conditions on a remodel where those trades are really 15%) will be disputed and rejected. Modest front-loading — adjusting values by 10%–15% within what you can justify on a cost basis — is standard practice and accepted.

The ethical floor: every line should still reflect the reasonable allocated cost + margin for that scope. Moving $10k of profit margin from line 10 to line 02 is fine; moving $60k of work is fraud.

The Pay Application (AIA G702/G703)

On commercial work, the pay app is typically the AIA Document G702 (cover) + G703 (continuation sheet) — the industry standard. Even non-AIA contracts often use the same format.

G702 — Application and Certificate for Payment shows:

Original contract sum
Net change by change orders
Contract sum to date (original + net changes)
Total completed and stored to date
Retainage (typically calculated on two bases: retainage on completed work, retainage on stored materials)
Total earned less retainage
Less previous certificates for payment
Current payment due
Architect's certificate and signature

G703 — Continuation Sheet is the line-by-line detail tied to the SOV. For each line:

Scheduled value
Work completed from previous applications
Work completed this period
Materials presently stored
Total completed and stored to date (the key number)
Percent complete (verified by architect)
Balance to finish
Retainage

The architect (or owner's representative) verifies the percent complete on each line during a job-site visit, initials or signs, and either approves the app or sends it back with required corrections.

Retainage: Cash You Earned But Don't Hold Yet

Retainage (or "retention" in some contracts) is a holdback — typically 5% to 10% of each progress payment that the owner keeps until the job is complete and all punch-list items cleared. The theory: it's the owner's leverage to make sure you come back and fix anything wrong at the end.

2026 retainage norms:

Federal public work (Miller Act): typically 5%
State/local public work: varies, commonly 5%–10%, with several states capping at 5% statutorily or eliminating retainage after 50% completion (California, Washington, Illinois have notable rules)
Private commercial: 10% is standard in most markets
Residential: varies wildly; often zero on small residential remodels, 10% on larger custom-home contracts

Retainage Reduction at 50%

Many contracts and statutes provide that once the project reaches 50% complete with satisfactory performance, retainage stops accruing on further progress payments — so you get paid 100% of the remaining pay apps (with the prior retainage still held until final completion). This is worth asking for in contract negotiation if your state law doesn't already provide it.

Releasing Retainage on Subs

If your subcontract holds 10% retainage on your subs, and the owner releases retainage to you, typical practice is to release sub retainage within 7–30 days of your receiving it from the owner. Many states require release within a specified window; late release can trigger prompt payment penalties.

Getting Paid Faster: Practical Levers

1. Negotiate the Billing Cycle in the Contract

Default on most commercial contracts is "monthly billing, payment due within 30 days of owner's receipt of approved pay app." You can negotiate:

Semi-monthly billing — invoice on the 15th and the 30th (cuts average receivables in half)
Reduced retainage or no retainage on certain trades — e.g., "no retainage on general conditions" (since those are unrecoverable costs, not work subject to punch-list)
Retainage reduction at 50% completion — as above
Early release of retainage on stored material invoices for long-lead or custom items
Prompt-payment discounts — e.g., 2% discount if owner pays within 10 days of approved app (common on commercial; rarely used but effective)

2. Submit Clean Apps on the First Try

The single biggest cause of slow payment is rejected pay apps. Common reasons:

Missing conditional/unconditional waiver forms from the prior payment (e.g., California CC 8132/8134 or the equivalent in your state)
Missing lien releases from subcontractors
Arithmetic errors in retainage or change order calculations
Percent complete on a line that the architect doesn't agree with
Missing certificate signature (common when the GC or architect is on vacation)

Keep a pay-app checklist. Include every supporting document the owner requires. Treat the app submission like a tax return — it should balance on submission.

3. Use Conditional/Unconditional Waivers Correctly

Waivers are the owner's protection against double payment: a conditional waiver says "I release my lien rights if and when I'm paid"; an unconditional waiver says "I release my lien rights, period, regardless of payment status." The flow is:

Submit pay app + conditional waiver for the current pay app amount
Receive payment
Submit unconditional waiver for the amount received (evidence owner is now released from lien exposure on that $ amount)

Never, ever sign an unconditional waiver before being paid. Owners will sometimes request "unconditional" at the time of the next pay app — the answer is no; send conditional at billing, unconditional after payment clears.

4. Prompt Payment Statutes

If the owner is late, most states' prompt-payment acts require interest to accrue on the late balance, typically at 1%–1.5% per month after a specified grace period (often 30 days for private work, 14–30 days for public). You don't have to ask — interest accrues by statute. Some statutes also require the owner to pay attorney fees if the contractor prevails in suit.

On public work, the Federal Prompt Payment Act (31 USC §3901–3907) is enforced by contract disputes administrative procedures; on private work, state law governs.

Don't be shy about invoicing interest. On a $100k late balance at 1%/month, every 30 days of delay is $1,000 of interest that you're entitled to and that focuses the owner's AP team fast.

Change Orders

Nothing destroys cash flow like undocumented change orders. The right flow:

Customer requests (or field condition requires) scope beyond the contract
You issue a written Change Order Request (COR) — price, schedule impact, signatures required
Customer approves in writing before the work starts
Approved change order is added as a new line to your SOV (or adjusts an existing line)
Billed through the pay application like any other line

What goes wrong: the customer says "just do it, we'll paper it later." You do the work. At the end of the job, the customer disputes the price or refuses to pay at all. Without a signed change order, you're in the weakest possible negotiating position and may be out of pocket for hard cost.

Rule of thumb: any scope change that will cost you more than $500 or take more than a day gets a written, signed COR before the shovel touches dirt. Smaller items can be tracked as allowances if the contract permits.

Translating to Small-Job Cash Flow

You don't need AIA forms to apply progress billing principles on a $15,000 residential remodel. Scale-appropriate patterns:

Deposit at signing: 10%–33% depending on state residential rules
Milestone invoices at specific completion points (demo complete → 25%; rough-ins inspected → 50%; drywall complete → 75%; punch → balance)
Net 7 or Net 15 payment terms on each milestone invoice
Small final hold-back (5% of contract price) released on completion rather than traditional retainage
Written change orders on anything over a pre-agreed threshold

The goal on small jobs isn't AIA paperwork — it's the discipline of not carrying more than two weeks of labor + material cost in the air at any time. That single habit is the difference between a contractor who sleeps at night and one who's always a phone call away from insolvency.

The Short Version

Progress billing isn't bureaucracy — it's risk management. Every day you don't invoice is a day you're financing your customer's project out of your own working capital. Every pay app rejected on a technicality is 30 extra days of float at the bank's expense (or yours, if you're operating on a line of credit).

Build your SOV with reasonable front-loading, invoice on a regular cycle with clean supporting documents, negotiate retainage reduction and prompt-payment terms in the contract, and never do extra work without written authorization.

For day-to-day project math — bid prep, profit margin verification, and live job P&L — ProJobCalc's Pro tier includes the progress-billing and change-order tools built around this exact workflow.