Pay Application, Lien Waiver, and a Late Delay Notice
You hold a $340,000 plumbing subcontract on a commercial project. Terms: 10 percent retainage, monthly pay applications on the 25th, payment within 30 days, a lien waiver required with each application, and written notice of any delay claim within 7 days of the start of the delay. To date you have billed $95,000 gross and been paid the net amount. For this application, work in place totals $210,000 (cumulative), stored materials on site are $15,000, and one owner-directed change order for $18,000 has been fully executed. Separately, the general contractor's failure to dry in the roof delayed your rough-in by 21 days. Your field supervision costs $3,200 per week. You gave written notice on day 12.
1. Compute the amount due on this pay application. Show each step.
Read the worked answer
Gross earned to date:
- Work in place (cumulative): $210,000
- Stored materials: $15,000
- Executed change order: $18,000
- Total earned: $243,000
Retainage at 10 percent: $243,000 x 0.10 = $24,300
Net earned: $243,000 - $24,300 = $218,700
Less previous payments: prior gross $95,000 less 10 percent retainage ($9,500) = $85,500 previously paid.
Amount due this application: $218,700 - $85,500 = $133,200
Checks before you submit: confirm the $18,000 change order is fully executed and not merely "pending," confirm retainage applies to the change order per the subcontract (it usually does unless negotiated otherwise), and make sure the stored materials are on site, insured, and covered by a bill of sale if the contract requires one. Carrying a change order the GC has not signed is how a pay app gets rejected and the whole application slips a month.
2. The pay package includes a waiver to sign. What do you sign and what do you refuse, and why does it matter here?
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Sign a conditional waiver and release - conditional on actual receipt of the $133,200. That waiver becomes effective only when the money clears, and it releases only the work and materials covered by this application through the stated date.
Refuse to sign:
- An unconditional waiver for a progress or final payment you have not received. It extinguishes your lien rights on signing, before the check clears.
- Any waiver that recites a figure larger than the amount actually being paid, or that waives retainage.
- Any language releasing pending change orders, delay claims, or disputed backcharges not paid in this application - specifically the $6,200 core-drilling item, and the delay claim.
Why it matters here: you have a live 21-day delay claim and a disputed extra on the table. A broad unconditional waiver signed to keep the payment moving is the single most common way contractors lose both. If the GC insists, respond in writing, sign the conditional form, and state that the waiver is limited to the amounts shown and expressly excludes the delay claim and the disputed change order.
3. Evaluate the delay claim: is it recoverable, and how much would you present?
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Notice is the threshold question. The subcontract requires written notice within 7 days of the start of the delay. Notice went out on day 12 - five days late. That is a real problem: the GC will argue the claim is waived, and many contracts and courts will enforce that. Your position depends on whether the GC had actual knowledge of the delay (it caused it, so it did) and whether it acted in a way that waived strict notice - schedule updates showing the impact, meeting minutes, daily reports. Assemble that record before arguing.
A "no-damage-for-delay" clause may also limit you to a time extension with no money. Read the subcontract before promising the owner or your CFO anything.
Quantum, if the claim survives:
- 21 days = 3 weeks.
- Field supervision: 3 weeks x $3,200 = $9,600.
- Add documented extended general conditions - temporary facilities, equipment standby, insurance and bond for the extended period.
- Home office overhead needs a recognized method (for example Eichleay) and the records to support it; do not pad it.
- Profit on delay is normally not recoverable unless the contract says so.
Practical move: request the time extension in writing immediately and separately from the money, so at minimum you protect against liquidated damages, then negotiate the $9,600 plus documented costs with the notice issue disclosed rather than hidden.