A schedule of values in construction is a line-item breakdown of the total contract price that assigns a dollar amount to each portion of the work, and it becomes the measuring stick for every progress payment the owner releases. The contractor builds it before the first invoice goes out, the architect reviews and approves it, and from then on each monthly payment application reports what percentage of each line item is complete. Get the schedule right at the start and billing runs smoothly. Get it wrong and every draw turns into an argument.
What Goes on the Schedule
Under the AIA A201 General Conditions, the contractor submits the schedule to the architect before filing the first payment application, supported by enough backup data for the architect to verify the figures. Each entry describes a distinct scope of work and carries a dollar figure that covers labor, materials, equipment, and the contractor’s share of overhead and profit for that scope. Typical entries include sitework, concrete, structural steel, mechanical, electrical, and finishes. The line-item totals must add up to the full contract sum exactly.
General conditions costs get their own entries near the top: mobilization, builder’s risk insurance, permit fees, temporary facilities. Mobilization alone typically runs 1% to 5% of the contract value depending on project complexity and location. These sit early in the schedule because the contractor incurs them before any physical construction begins.
Numbering With CSI MasterFormat
Most schedules follow the Construction Specifications Institute’s MasterFormat system, which sorts construction information into 50 divisions. Division 03 is concrete, Division 09 is finishes, Division 26 is electrical, and so on. A six-digit code narrows the scope: 09 91 23 falls under Division 09 (Finishes), Section 91 (Painting), Subsection 23 (Interior Painting). Matching your line items to this numbering lets the architect cross-reference each entry against the project specifications quickly.
The AIA Forms That Carry It Through Billing
AIA Document G703, the Continuation Sheet, is the standard form for presenting schedule-of-values data in a format that works for every monthly billing cycle. It pairs with AIA Document G702, the Application and Certificate for Payment, which is what the contractor signs to request payment and what the architect signs to certify it.1AIA Contract Documents. G703-1992 Continuation Sheet The 1992 editions remain the standard for stipulated-sum and guaranteed-maximum-price contracts; AIA released separate 2021 editions for cost-of-the-work projects.
The G703 lists each line item with its number, description, and scheduled value, then tracks work completed in prior periods, work completed during the current period, materials stored on site, total completed and stored to date, retainage, and the balance remaining to finish.2AIA Contract Documents. Instructions: G703-1992, Continuation Sheet Totals from the G703 roll up to the G702, where the architect certifies the amount due.3AIA Contract Documents. Instructions: G702-1992, Application and Certificate for Payment
Front-Loaded or Balanced
Contractors choose between two basic approaches when distributing overhead and profit across the line items. The balanced method spreads them proportionally, so a line item representing 8% of direct construction cost carries roughly 8% of the overhead and profit. Progress payments then track the real value of work in place at any given moment.
Front-loading does the opposite. It concentrates overhead and profit into early-phase items like mobilization, demolition, or foundation work, producing larger payments up front and smaller ones later. Some front-loading reflects reality because startup costs genuinely are heavy. Aggressive front-loading, though, creates problems. If the contractor defaults mid-project after collecting inflated early payments, there may not be enough money left in the contract to hire a replacement and finish the job. Sureties have argued they should be relieved of bonding obligations when owners overpaid a defaulting contractor. Front-loaded schedules also distort the cost basis when it comes time to price change orders.
Architects who spot excessive front-loading will reject the schedule and require reallocation before approving it. Modest front-loading is defensible. Anything that looks like financing cash flow with the owner’s money will get flagged.
Getting the Schedule Approved
The contractor submits the draft schedule to the architect before the first payment application. Under AIA A201, the architect can object and require revisions, supported by data substantiating each figure. The architect checks whether line-item values make sense against current market rates, whether overhead and profit are distributed reasonably, and whether the breakdown is detailed enough to track progress meaningfully.
Expect at least one round of comments. The architect flags inflated line items, overly broad categories that lump dissimilar work together, and front-loading beyond a reasonable allocation. The contractor adjusts the G703 and resubmits. This back-and-forth usually takes a few weeks. Federal projects can impose tighter deadlines, and some agencies will not issue the notice to proceed until the schedule is approved.4Department of Veterans Affairs. VA261-12-R-1506-004 – Schedule of Values No payment applications move forward until the architect formally accepts the schedule.
How Monthly Progress Payments Work
Once the schedule is approved, each monthly payment application starts on the G703. The contractor enters the percentage of work completed for each line item during the current billing period, and the summary totals transfer to G702 for the architect’s certification.
The math is straightforward. If a structural concrete line item carries a scheduled value of $200,000 and half the work is in place, the application shows $100,000 for that item. Figures are cumulative: each month reflects total work completed to date, and the difference between this month’s cumulative total and last month’s cumulative total is the amount being billed. The architect compares the reported percentages against field observations before certifying payment. Discrepancies lead to adjustments.
Billing for Stored Materials
A separate column on the G703 captures materials purchased and delivered but not yet installed. This matters most for expensive items like structural steel, mechanical equipment, or custom millwork that arrive weeks before they can go into the building.
Materials stored off-site require more documentation: supplier invoices, proof of payment, photographs, insurance covering the stored goods, and a warehouseman’s receipt confirming the materials are held for the project. The contractor certifies that off-site materials are clearly marked, properly protected, and identified as project property. Without that paperwork, the architect can exclude those materials from the payment application.
Retainage
Retainage is the portion of each progress payment the owner withholds as security against incomplete or defective work. Ten percent used to be standard. The trend has moved toward lower caps, with a growing number of states limiting retainage to 5% on public projects and some extending that to private work as well. The contract spells out the applicable rate.
Retainage is calculated on each payment application. If the approved amount for a billing period is $50,000 and retainage is 10%, the contractor receives $45,000 and the owner holds $5,000. These withheld amounts accumulate over the life of the project.
Federal rules are more flexible than many people assume. The contracting officer must authorize full payment of progress payments when satisfactory progress is being achieved, and retainage of up to 10% is permitted only when progress is unsatisfactory. Once the work is substantially complete, the contracting officer must release previously withheld funds except what’s needed to protect the government’s interest.5Acquisition.GOV. Payments under Fixed-Price Construction Contracts
On private projects, retainage release typically follows two milestones. The owner releases a portion of the accumulated retainage at substantial completion, when the building is usable for its intended purpose even though punch-list work remains. The balance comes out at final completion, once corrective work and punch-list items are resolved. Contractors who don’t press for release at substantial completion leave money sitting unnecessarily.
Lien Waivers With Each Draw
Most owners and lenders require lien waivers as part of the progress payment process. A lien waiver is the contractor’s or subcontractor’s statement giving up the right to file a mechanics lien for the amount being paid. Two types appear in every billing cycle.
A conditional waiver goes in with the payment application, before the check arrives, and only takes effect once payment clears. It protects the contractor from waiving lien rights on money never received. An unconditional waiver is submitted after the payment clears the contractor’s account and takes effect immediately upon signing. The typical monthly rhythm: a conditional waiver for the current draw request and an unconditional waiver for the prior month’s payment that has already been received.
Several states mandate specific statutory language for lien waivers, and using the wrong form can invalidate the waiver entirely. If your project spans multiple states or involves subcontractors from different jurisdictions, verify each waiver meets local requirements. An improperly executed waiver can hold up the entire payment chain.
Updating the Schedule for Change Orders
When the scope changes during construction, the schedule has to be updated to reflect approved change orders. Under AIA A201, revisions go through the same submission and review process as the original. The contractor submits the revised schedule with supporting data, and the architect must accept it before it becomes the basis for future billing.
A change order that adds new scope, like an upgraded HVAC system, typically gets its own line item so the cost can be tracked independently. A change order that modifies existing scope may adjust the dollar value of an existing line item. Either way, the revised line items must add up to the new contract sum. Keeping change orders cleanly separated makes reconciling costs much easier if disputes come up later.
Payment Timing Rules
On federal government contracts, the Prompt Payment Act sets firm deadlines. For construction progress payments, interest penalties kick in if the government does not pay within 14 days of receiving a proper payment request, or a longer period specified in the solicitation to allow adequate inspection time. Retained amounts approved for release must be paid within 30 days of final acceptance, or interest accrues on those funds as well.6Office of the Law Revision Counsel. United States Code Title 31 – Section 3903 The interest rate is tied to the Treasury bill rate rather than a fixed percentage.
The federal Prompt Payment Act does not apply to private construction. Private projects are governed by state prompt payment statutes, which vary significantly. Payment deadlines from owner to general contractor typically run 15 to 45 days after receipt of a certified application, and statutory interest rates on late payments range from roughly 8% to 24% depending on the state. If the contract is with a private owner, look up the applicable state law rather than assuming federal rules apply.
What Happens If You Inflate the Percentages
Overstating completion percentages or inflating stored-material values to pull cash out faster is not just an ethical problem. On private projects, intentionally billing for work not performed exposes the contractor to breach-of-contract claims. Owners regularly pursue damages and termination when audits reveal overbilling.
On federal projects, the stakes are higher. The False Claims Act imposes civil penalties on anyone who knowingly submits a false or fraudulent claim for payment to the government. Current penalties range from $14,308 to $28,619 per false claim, plus up to three times the amount the government paid on each fraudulent request, with criminal fines and imprisonment also available. Under the implied false certification theory, simply submitting a payment application carries an implicit statement that the contractor has complied with all material contract requirements. A contractor who bills 80% complete on a line item that is really 50% complete has made a false certification without ever writing a lie.
Architects who catch inflated percentages during the monthly review will reduce the amount certified and may require more detailed backup documentation on every future application. Repeated overbilling erodes trust in a way that makes every subsequent payment application slower and more contentious.