AIA G702/G703 Forms Explained: A Walkthrough for GCs and Subs

The AIA G702 Application for Payment and its companion G703 Continuation Sheet are the de facto billing standard for commercial construction. If you are a general contractor, you receive hundreds of these documents per project. If you are a subcontractor, you fill one out every month. If you are in construction AP, you reconcile them line by line before every draw.

The forms are deceptively simple — two pages, a handful of columns, basic arithmetic. The complications arrive from the interactions: stored materials moving from stored to installed, retainage releases on substantial completion, change orders layered into an existing schedule of values, and the closeout reconciliation where every number on every monthly pay app needs to add up to the final contract amount. This post walks through every meaningful field on both forms and calls out the places where money typically gets lost.

The Division of Labor: What G702 Does vs. G703

The G702 is the summary cover page — the application and certification. It has a single set of totals (work completed to date, retainage, previous certificates, current payment due), signed by the contractor and certified by the architect or owner's representative.

The G703 is the line-item detail. Each row represents one line from the project schedule of values. That's where the schedule-of-values discipline shows up: a well-structured SOV on the G703 makes reconciliation straightforward, and a lazy lump-sum SOV makes every month's draw a negotiation.

G703 Line by Line

The G703 has nine columns. Understanding exactly what each one means — and does not mean — is the foundation of reading any pay app.

Two columns generate most of the disputes. Column F (Materials Stored) is where subs bill for materials delivered to the site but not yet installed — legitimate when properly documented, routinely abused when materials aren't actually on site. Column J (Retainage) is where retainage is calculated line by line, but the contract typically allows some lines to be retainage-free (insurance, bonds, permits) while others accrue retainage at the full contract rate.

Stored Materials: The Legitimate Use and the Abuse

Materials stored on site are a real thing. A sub receives $240,000 of electrical switchgear in month four, but it won't be installed until month seven. Most contracts allow the sub to bill for those materials once they're delivered, provided three conditions are met: the materials are on site (or in a bonded warehouse with title transfer), the sub has insurance covering them during storage, and the GC has received documentation (invoice from the vendor, bill of lading, insurance rider).

What goes wrong: materials are billed as 'stored' when they're still at the vendor's warehouse. Materials are billed in full when only a fraction of the order has arrived. Materials are billed as stored in month four and then billed again as installed in month seven without a corresponding reduction in column F. Each of these is an overbilling that a line-item reconciliation catches, but a bottom-line dollar reconciliation does not.

Retainage: How It Actually Flows Through the Forms

Retainage is a percentage of each pay app held back until substantial completion or another contractually defined milestone. It is calculated per pay app on the G703, then summarized on the G702. In a typical 10% retainage structure, a sub billing $100,000 in a given month receives $90,000 in that draw and the remaining $10,000 stays with the GC until release.

What makes retainage tricky is that it is not always a flat 10% for the full project. Common variations: retainage reduces to 5% after the project hits 50% completion; retainage is released earlier on certain line items (permits, bonds, early-install materials); and retainage on change orders may or may not follow the base-contract percentage depending on the specific change order language.

The G702 Summary Math

The G702 summary section walks through the payment calculation in seven numbered lines. Each line is arithmetic, but the definitions matter because disputes almost always trace back to a disagreement about which number belongs on which line.

Change Orders and the G703 Line Structure

Change orders are added as new lines at the bottom of the G703, with their own scheduled values and billing cadence. They do not replace or modify existing lines — they extend the schedule of values. On a long project with dozens of change orders, the G703 grows multiple pages long, and the discipline of keeping change-order lines separate from base-scope lines is what makes the whole pay-app history reconcilable at closeout.

The common failure here is when a sub folds change-order work into existing base lines — billing for change-order scope against the base-line scheduled value. That works for one or two pay apps, but at closeout, the base line bills over 100% complete and the unbilled change-order line stays at zero, and the sub has to re-do the full history to untangle it.

Substantial Completion and Retainage Release

Substantial completion is the contractual milestone at which the work is sufficiently complete for the owner to use or occupy the project for its intended purpose. It is the trigger for most retainage releases. On the pay app, substantial completion manifests as a pay-app cycle where the punch list is documented, a Certificate of Substantial Completion (AIA G704) is issued, and retainage drops from the per-line percentage to a negotiated holdback — usually 150%-200% of the punch-list dollar value rather than a flat percentage.

The retainage release pay app is a high-stakes one. It is where closeout disputes typically surface: lingering punch-list items, backcharges the GC wants to apply, warranty hold-backs, and final change-order reconciliations. Every mid-sized GC's AP team should have a closeout-specific checklist that doesn't just approve the pay app but reconciles it against the entire project history.

Where Pay App Reconciliation Breaks

Automated Extraction of G702/G703

The AIA forms are structured enough that they are good candidates for automated extraction. A well-trained document AI reads the G702 totals, extracts every row of the G703 continuation sheet, reconciles the column arithmetic, and flags mismatches (work completed this period that doesn't equal current - previous, retainage that doesn't match the expected percentage, balance-to-finish that doesn't equal scheduled - completed).

In construction AP, this is where extraction pays for itself. The forms are high-volume, highly structured, and the reconciliation arithmetic is mechanical but tedious. Automating the extraction and arithmetic frees up the AP analyst to focus on the parts that require judgment — stored materials verification, retainage release approval, and change-order tracking.

Bottom Line

The AIA G702 and G703 are simple forms. They survive as the industry standard because they capture exactly the information needed to manage a construction draw, and no more. Mastery of them is not a matter of understanding complex finance — it is a matter of being disciplined about line-item tracking, stored materials documentation, and retainage math across dozens of pay apps on dozens of projects. That discipline is what automation is for.