Value Engineering

1. Progress Billing Definition
A construction project typically involves many different trades in order to
reach completion. Therefore, it can be just as daunting a task to submit for
payment to a client along the way. The Owner of a construction project
relies on the project architect, lender and sometimes a third party
inspection company to make certain that payment is applied for correctly
and within reason. Once the progress billing definition is truly understood
you will smoothly pass through the steps of preparing and submitting
everything needed to complete a construction project.
Start With a Good Schedule of Values
A schedule of values is a list with the dollar amount assigned to each area of
work that will be completed on a construction project. A construction
project is broken out by each scope of work and typically separated
according to the Construction Specifications Institute Divisions (CSI).
Therefore, it is best to separate a project’s Schedule of Values into basic CSI
divisions. Examples of these divisions are General Conditions, Sitework,
Utilities, Concrete, Steel, etc. Once the areas of the scope of work are
defined, then a corresponding value is assigned to each one so that a
percentage complete can be established for each item as progress is made
on the project. In the United States the industry standard format for a billing
schedule of values is per AIA form G703. Progress billing accounting issues
are common, so it is essential that a good schedule of values is established
early.
Establish the Rate of Construction Retainage
A construction contract will typically require that “Retainage” be withheld
from each application for payment in order to provide the Owner or lender

2. protection from the Contractor not completing the entire project. 5% or
10% may be withheld from each payment to the Contractor, and the funds
held in reserve until the project punch list is completed at the end of the
project. Therefore, each progress billing must take this retainage amount
into account on each line item of the schedule of values and ultimately on
the bottom line of the application.
Establish the Frequency of Progress Payments
A progress billing is exactly that, a billing that progresses towards
completion a percentage at a time. Therefore, it is necessary to establish the
frequency that each application shall be submitted. Often times, a progress
billing will be submitted to an Owner or Lender once per month but
complicated projects may require more frequency. A progress billing must
specify the current period percentage of completion and the cumulative
total and this must be done for both the individual items and the total.
Establish the Percentage of Completion
Vendors will submit their invoices for payment to a contractor for the
amount of work that they have completed over the period. A contractor
must confirm that the work has actually been completed according to this
percentage and then include the corresponding amount within the progress
billing to the Owner or Lender. This process is performed for each scope of
work and then all completed items percentages are totaled.
Submit it Right and Get PAID
Progress billings are often rejected by an Owner or Lender because of
incorrect completion percentages, incorrect math, or applications that are
submitted tardy. In order to achieve profitable progress billing revenue
recognition, effective processing is important. Be sure to review vendor

3. invoices and percentage completions with field supervision to avoid
over/under billings. Also, be certain to double check math calculations or
use construction software to avoid rejected payment applications due to
math mistakes. Finally, submit your progress billing forms on time! This is an
easy way to get credit with an Owner or Lender because it gives them ample
time to review the application.
Progress Billing Sample
UNCONDITIONAL FINAL WAIVER AND RELEASE OF LIENS AND CLAIMS
OWNER: Business X, LLC.
PROJECT NAME: PRIORITY MANAGEMENT
For and in exchange of the sum of $ , the sufficiency of
which is hereby acknowledged, the undersigned Contractor, subcontractor,
consultant, materialmen or laborer (hereinafter the “Undersigned”)
warrants and represents as follows:
(1) The Undersigned has been employed by Business X, LLC. to furnish labor,
materials, or services in connection with the construction of improvements
on or to the above referenced project.
(2) The Undersigned has performed all labor, materials, or services required
under its Contract, Subcontract or Purchase Order in full compliance with all
terms and conditions thereof, and all applicable plans and specifications.
(3) Any and all contractors, subcontractors, laborers, suppliers and
materialmen that have provided labor, material, or other services to the
Undersigned for use or incorporation into the construction of the
improvements to the Project have been paid in full for all amounts due and

4. owing to them on the Project, or shall be promptly paid in full from the
proceeds of the payment referenced above and there are no outstanding
claims of any character arising out of or related to the Undersigned’s
activities on or improvements to the Project. If this Waiver is signed by the
Prime Contractor, attached hereto as Exhibit A is a complete list of all
subcontractors and suppliers retained by such party as of the date of this
Waiver.
(4) The Undersigned waives and releases any and all liens, lien rights, claims
of liens, and any other claims for payment for labor, material or equipment
of any type or description that it may have against the Owner, the Owner’s
Project Manager, the Owner’s Engineering Consultant, the Architect for the
Project, the Prime Contractor (if this Waiver is signed by a subcontractor or
supplier) and/or any person with a legal or equitable interest in Project,
arising out of or in any fashion related to, any labor, materials or services
furnished by, through or under the Undersigned on, or used in connection
with, the Project, without exception.
(5) This Final Waiver and Release constitutes a representation by the Person
signing this document, for and on behalf of the Undersigned, that the
payment referenced above constitutes full and complete payment for all
work performed and costs or expense incurred (including, but not limited to,
costs for supervision, field office overhead, home office overhead, interest
on capital, profit and general conditions cost) by, through or under the
Undersigned relative to the work of improvements at the Project, including
all retainage. More specifically, the Undersigned hereby waives, quitclaims,
and releases any claim of damages due to delay, hindrance, interference,
acceleration, inefficiencies or extra work, or any other claims of any kind it
may have against the Prime Contractor (if this Waiver is signed by a

5. subcontractor or supplier), the Owner, the Owner’s Project Manager, the
Owner’s Engineering Consultant, the Architect for the Project, and/or any
other person or entity with legal or equitable interest in the Project.
IN WITNESS WHEROF, the person signing this document, acting for or on
behalf of the Undersigned and all of its employees, subcontractors, laborers,
suppliers and materialmen, executes this document this day
of , 20 .
By:
Title:
This instrument was executed and acknowledged before me on this day
of , 20 , by , on behalf of said
entity.
Notary Public
(Notary Seal)
My Commission Expires:

6. subcontractor or supplier), the Owner, the Owner’s Project Manager, the
Owner’s Engineering Consultant, the Architect for the Project, and/or any
other person or entity with legal or equitable interest in the Project.
IN WITNESS WHEROF, the person signing this document, acting for or on
behalf of the Undersigned and all of its employees, subcontractors, laborers,
suppliers and materialmen, executes this document this day
of , 20 .
By:
Title:
This instrument was executed and acknowledged before me on this day
of , 20 , by , on behalf of said
entity.
Notary Public
(Notary Seal)
My Commission Expires: