A pencil requisition is a preliminary payment application circulated for review before the formal application is submitted. Its purpose is to expose disputed quantities, progress percentages and missing backup while the figures can still be corrected.
It is a review step, not a promise that a lender will fund the amount. The contract and lender’s requirements determine the forms, reviewers, deadlines and approval process for your project.
A preliminary review is distinct from final approval. For example, the University of Illinois’ construction-pay-request instructions describe an optional pencil-copy review by the project manager before submission for signature. They also provide for renewed review when schedule-of-values amounts change. This illustrates one owner’s workflow, not a Texas rule or a universal deadline. Source: University of Illinois, Construction Pay Request, page 9.
Where it fits in the payment process
A useful project procedure is to agree on the billing cutoff, assemble the preliminary application, review the evidence, resolve comments, and then submit the formal package through the required approval path. Record who owns each step before the first application.
For the wider owner-to-lender funding sequence, see how construction draws work in Texas. This guide concentrates on the preliminary review and the corrections it produces.
A pencil requisition is not a different AIA form
“Pencil” describes the application’s preliminary status. It does not by itself identify a special form.
AIA identifies G702 as its Application and Certificate for Payment and G703 as its companion Continuation Sheet. Projects can require different editions or another format. Use the documents called for by the actual agreement. AIA’s payment-form guidance.
Our G702 versus G703 guide explains those documents. The example below is an original teaching table, not an AIA form or a substitute for licensed contract documents.
Worked example: correcting a progress claim
Assume a hypothetical $300,000 contract divided into three simplified schedule-of-values lines. The prior application recorded $60,000 of cumulative work. The new preliminary application requests recognition of $110,000 of cumulative work.
All figures and review findings below are invented. For arithmetic only, assume uniform contractual retainage of 10%, no stored materials, no change orders and $54,000 of previous certified payments. The 10% is an assumed contract term, not a statement about Texas statutory retainage.
| Schedule-of-values line | Contract value | Prior cumulative work | Requested cumulative work | Accepted cumulative work after review |
|---|---|---|---|---|
| Mobilization and site setup | $30,000 | $20,000 | $30,000 | $30,000 |
| Mechanical, electrical and plumbing | $90,000 | $10,000 | $30,000 | $18,000 |
| Partitions and finishes | $180,000 | $30,000 | $50,000 | $50,000 |
| Total | $300,000 | $60,000 | $110,000 | $98,000 |
In this scenario, the reviewer finds that the backup supports $18,000 on the MEP line rather than the $30,000 requested. The reviewer records a $12,000 adjustment against that line, attaches the supporting explanation, and sends it to the contractor for reconciliation.
That changes the current payment calculation:
| Calculation | Preliminary request | Corrected example |
|---|---|---|
| Cumulative work | $110,000 | $98,000 |
| Assumed 10% contractual retainage | −$11,000 | −$9,800 |
| Cumulative amount after retainage | $99,000 | $88,200 |
| Previous certified payments | −$54,000 | −$54,000 |
| Current payment amount | $45,000 | $34,200 |
The current request changes by $10,800, not $12,000, because the retainage calculation also changes. This example illustrates why reviewers should recalculate the summary after adjusting a continuation-sheet line rather than subtracting a disputed amount from the final payment box.
If the progress evidence is disputed, document both positions and use the contract’s review procedure. A preliminary review comment does not establish a unilateral right to withhold a payment.
What to review before final submission
Use the same line identifiers across the schedule of values, preliminary application, review comments and corrected package. For each disputed line, record:
- The amount or percentage requested and the amount supported by the review.
- The evidence considered, such as dated photographs, an inspection record or relevant delivery documentation.
- Any contractual or lender condition that still needs to be satisfied.
- The person responsible for resolving the item and the agreed next action.
Separate a missing document from a disagreement about progress. “Invoice required” and “installed quantity disputed” call for different follow-up. Keep the financial treatment explicit rather than hiding either issue inside a revised total.
Keep a correction log
An original review log can be simple:
| Line | Review comment | Requested action | Resolution |
|---|---|---|---|
| MEP | Requested cumulative amount exceeds the support accepted in this example | Reconcile quantities and identify the evidence for the difference | Revise to $18,000, or resolve the disagreement through the agreed process |
| Summary | Continuation-sheet correction changes retainage and current due | Recalculate all linked totals | Confirm corrected current amount of $34,200 under the example’s assumptions |
| Package | Preliminary version is superseded | Identify the final revision and complete required approvals | Keep preliminary comments with the final submission record |
Common questions
Does every lender require a pencil requisition?
Do not assume so. Confirm the lender’s submission requirements and the contract’s preliminary-review procedure. A workflow that is useful on one project may have a different name or approval path on another.
When is it due?
Use the actual project’s deadline. Agree on enough review time before the formal application is due, and identify who resolves comments. A date from another project’s specification is not your deadline.
Can stored materials be included?
Check the contract, lender requirements and supporting evidence. The numerical example excludes them so the progress correction is easy to follow; it does not establish a rule for material funding.
Does an owner-side review replace the lender’s inspection?
No. Define each party’s role separately. Owner-side payment review and a lender’s funding review serve different clients and follow their respective agreements.
Make the preliminary review part of the draw procedure
Epex Consulting provides owner-side draw administration. Bring the contract, lender requirements, schedule of values and latest application so we can discuss the review scope and reporting responsibilities. For a broader backup checklist, see the construction draw inspection checklist.
This is a project-administration example, not legal advice. Questions about payment rights, notices, waivers or a dispute should go to your construction attorney.