A contractor submits Application for Payment #8 requesting $125,000. The contract allows 5% retainage, and $15,000 was previously retained. If this payment request is approved, what amount should the contractor receive?
Correct Answer
B) $118,750
The contractor receives the payment request minus retainage: $125,000 - (5% × $125,000) = $125,000 - $6,250 = $118,750. Previously retained amounts don't affect the current payment calculation.
Why This Is the Correct Answer
The correct answer is A) $118,750 because each payment application is calculated independently. The contractor receives the full payment request amount minus the current retainage percentage applied to that specific payment. The calculation is straightforward: $125,000 - (5% × $125,000) = $125,000 - $6,250 = $118,750. Previously retained amounts are tracked separately and don't reduce the current payment.
Why the Other Options Are Wrong
Option A: $103,750
This incorrectly subtracts both the current retainage ($6,250) and the previously retained amount ($15,000), double-penalizing the contractor by applying past retainage to the current payment.
Option C: $115,000
This incorrectly subtracts a flat $10,000 from the payment request, which doesn't correspond to the 5% retainage calculation and appears to be an arbitrary deduction.
Memory Technique
Think 'Each App Stands Alone' - each Application for Payment is calculated independently, with retainage applied only to that specific payment request amount.
Reference Hint
AIA Document A201 - General Conditions, Section 9.3 Applications for Payment, and Florida Statutes Chapter 713 regarding construction payments and retainage
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