Based on the standard provisions, if the subcontractor was obliged by the subcontract to submit an application and did so within the prescribed timelines then the application becomes the Default Payment Notice ie the amount to be paid. If, for valid reasons, you intend to pay less than the application then you would need to issue a valid Pay Less Notice to the subcontractor.
The answer is yes, the contractor can issue a Pay Less Notice.
The answer is yes, the contractor can issue a Pay Less Notice.