How to read a commercial pay application without getting lost

A property manager in west El Paso once called us in the middle of a tenant build-out that was not ours. The general contractor had sent over a second pay application asking for another large payment, and on paper the project was reportedly 60 percent complete. She walked the suite. Framing was up, but there was no drywall, no ceiling grid, no flooring, and no fixtures. The paper said 60 percent. The building said 25.

That gap is exactly what the pay application is supposed to expose, and exactly what most owners never check. If you own, manage, or develop commercial property in the Borderplex, you will eventually approve draws on the standard AIA forms. Here is how to read them so the paper and the building tell the same story.

The two documents you are actually looking at

A commercial draw almost always arrives as two linked forms from the American Institute of Architects, usually the G702 and the G703.

• The G702 is the one-page cover sheet, formally the Application and Certificate for Payment. It is the summary: contract sum, work completed to date, retainage held, what has already been paid, and the net amount due this period.
• The G703 is the continuation sheet behind it, the schedule of values. This is where the real information lives. It breaks the whole contract into line items and shows how much of each one is finished.

The G702 is just the bottom of the G703 carried forward. If you only ever read the cover sheet, you are reading a conclusion without checking the math. Spend your time on the G703.

Start with the schedule of values

The schedule of values is the contract sliced into pieces: sitework, foundations, structural steel, masonry, roofing, mechanical, electrical, plumbing, finishes, and so on. Each line has a dollar value, and all the lines add up to the contract sum.

You should have seen and approved this schedule before the first draw. A few things to watch for when you first review it:

• Front-loading. Some contractors load extra value into early line items like mobilization and sitework so they collect cash faster than they spend it. A mobilization line that runs well above a few percent of the contract deserves a question.
• Lump everything-else lines. A single giant line called "general conditions" or "finishes" with no breakdown is hard to verify. Ask for it to be itemized.
• Math that ties out. The columns should total to the exact contract amount, change orders included.

Once the schedule is sound, every future draw is just an update to the percent-complete column.

Percent complete is where you do your real work

Each line on the G703 shows work completed in prior periods, work completed this period, and a percentage. This is the single most important thing to verify, and you verify it by walking the job, not by trusting the form.

Take the property manager above. The drywall line said zero. The framing line said 90 percent. The roofing said complete. Then a "finishes" line was sitting at 50 percent with nothing installed. You catch that by standing in the room with the G703 in your hand and matching line by line.

A practical rule: if a line claims it is complete, you should be able to point at the finished work. If you cannot, the percentage is wrong, and the draw is asking you to pay for work that does not exist yet.

Stored materials, and why they are legitimate

You will see a column for materials presently stored. This trips up owners because it asks you to pay for things that are not installed.

In the Borderplex, paying for stored materials is normal and often smart. Long-lead items like rooftop HVAC units, electrical switchgear, and storefront glazing can take months to arrive, and supply timelines have stayed unpredictable into 2026. A contractor who orders early protects your schedule, but they have to pay the supplier before installation. Stored materials let them recover that cost.

Before you pay for stored materials, ask for three things:

1. A stored-materials affidavit or bill of sale showing the items are paid for and belong to the project.
2. Proof they are insured and protected, on site under cover or in a bonded warehouse, not sitting in the dust and sun.
3. Photos. In El Paso summers over 100 degrees and monsoon storms from roughly July through September, materials left exposed in a lay-down yard can be damaged before they are ever installed.

When that material gets installed later, it moves out of the stored column and into work completed. It should never be paid for twice.

The retainage line

Retainage is the percentage of each payment you hold back until the job is substantially complete. On most Texas and New Mexico commercial projects, that runs 5 to 10 percent.

On the G702, retainage shows as a deduction. The form calculates total work completed plus stored materials, then subtracts retainage, then subtracts prior payments, to arrive at the current amount due. Two things to confirm every single draw:

• The retainage rate matches your contract. If your contract says 10 percent, the form should withhold 10 percent, not 5.
• Retainage is calculated on the full completed value, including stored materials, unless your contract says otherwise.

Retainage is your leverage. It is the money that gets a contractor to come back and finish the punch list instead of chasing the next job. Texas law also gives property owners and lenders specific retainage rules tied to lien protection, so do not waive or release it casually. If a contractor pushes to reduce retainage mid-project, treat that as a conversation, not a rubber stamp.

The arithmetic on the G702, in order

Once the G703 is verified, the cover sheet is simple arithmetic. Read it top to bottom:

1. Original contract sum, plus or minus approved change orders, equals the current contract sum.
2. Total completed and stored to date, pulled from the G703.
3. Minus retainage.
4. Minus previous payments.
5. Equals the current payment due.

If those five lines flow cleanly and the completed-to-date figure matches what you saw in the field, the number at the bottom is one you can pay.

One more step before you sign: lien waivers

A clean pay application is not complete without lien waivers. Before you release this draw, you should receive conditional lien waivers for the current payment and unconditional waivers for the prior payment, from the general contractor and the major subcontractors.

In Texas, subcontractors and suppliers who go unpaid can file mechanic's liens against your property even if you paid the general contractor in full. Matching waivers to draws is how an owner makes sure the money is actually reaching the people doing the work. No waivers, no check.

What good looks like

A pay application you can trust does three things. The percent complete on the schedule of values matches the building. Retainage is held at the contracted rate. Stored materials are documented and insured. When those three line up and the waivers are clean, you sign with confidence instead of hope.

The pay application is not paperwork to push through. It is the one monthly checkpoint where the building and the paper are supposed to agree. An owner who reads it line by line catches the 60-percent-on-paper, 25-percent-in-the-field gap before it becomes a problem.

If you have a commercial project under way in El Paso or Las Cruces and a draw in front of you that does not feel right, send it over. We will read the G702 and G703 against your contract and the actual field conditions and give you an honest read on whether the number adds up, on your project or a future one.