Questionnaire Regarding Subcontractor Prompt

Payment Provision

Prepared by . . . .

Cal J. Gendreau, NDDOTGene Wortham, ITDJulie Trunk, FHWA

AASHTO Subcommittee on Construction / Contract Administration Task Force

Agenda States responding Results of survey Findings

US84/285 South Tesuque Interchange New Mexico

State Transportation Agencies (STAs) Responding - 35

DistrictOfColumbia

PuertoRico

Results of SurveyResults of Survey

1) Do the highway

construction projects

in your state contain a

prompt payment

provision for

subcontractor work? 2

33

Number of STAs

YesNo

. . . . If your state has a prompt payment

provision, what is the specified time in

which the prime contractor must pay

the subcontractor?

1

4

1

6

2

6

13

30

20

15

14

10

7

No Response

Number of STAs

Days

2) Does your state’s prompt payment

contract provision contain a

mechanism for enforcement to be used

in the event a prime contractor

withholds money from a subcontractor

without good cause?

7

28

Number of STAs

YesNo

. . . If your state’s prompt payment

provision does contain a mechanism

for enforcement, what is it?

8

17

13

2

Accumulated Interest*

Withholding Payment

Other

N/A

Number of STAs* 1-1/2% /mo. (MN) m2% /mo. (IL)

. . . . Other

“Suspension, reduction or revocation of the contractor’s prequalification rating, the Agency paying the subcontractor

directly from the prime’s retainage” (VT)

“Subcontractor may recover funds through other provisions in the

law – mechanics lien act or public construction bond act” (IL)

“Restrict bidding privileges” (IA)

“Price adjustments” (SD)“Contractor is required to deposit disputed amount

into interest bearing escrow amount” (NV)

3) Has your state defined”good cause?”

296Yes

No

. . . . If yes, is this definition part of

your contract documents?

Number of STAs

1310

83Yes

NoN/ANo Response

Number of STAs

. . . . What is your definition of “good cause”?

“Either not receiving form e-129 back from a subcontractor or documentation in writing that is

accepted by the engineer that supports their reason” (WY)

“Missing information or other reasons” (UT)

4) Does your state’s prompt payment provision

require prior approval be received by the prime

contractor from the owner to withhold

payment from a subcontractor for good

cause?

3

27

5Yes

No

N/A

Number of STAs

5) Does your state’s

prompt payment contract

provision require that the

prime contractor have a

dispute resolution

process in place in the

event there are disputes

with subcontractor?

5

1

31

YesNoN/A

Number of STAs

. . . . If your State’s

prompt payment

contract provision

does have a dispute

resolution process for

primes and

subcontractors, what

is it?

1

2 2

Mediation

Arbitration

CourtProceedingOther

0

Number of STAs

6) If there is a

conflict between the

prompt payment

provision and the

subcontract which

one takes

precedence?

28

1

3 3

Number of STAs

PromptPaymentProvision Subcontract

Other

No Response

. . . . Other

“Depends on the conflict. If the subcontract states retainage will be withheld the subcontract will take

precedence other than that the prompt payment takes precedence” (WY)

“Prime/Subcontractor Issue” (MN)

“Prompt payment provision is statutory requirement” (NV)

7) How does a dispute between a

prime contractor and a subcontractor

affect the prompt payment special

provision?

No Response

1

Other

7

Prompt payment is still in effect, the prime contractor

must still make timely payment to the subcontractor.

9 Prime contractor can withhold money pending outcome of the dispute.

18*

. . . . If your state has become involved

in a prompt payment dispute, was the

prime contractor withholding payment

from the subcontractor after the work

had been accepted by the owner?

7

20

5

Yes

No

N/A

Number of STAs

. . . . Other/Comment*

“Prime/Subcontractor Issue” (MN)

“State withholds the money in dispute from

prime” (WY)

“Prime can only withhold for reasonable

cause” (IL)

“Contractor is required to deposit disputed amount into interest bearing escrow amount” (NV)

*A contractor may withhold no more than 150% of disputed amount. If contractor violates this, the

subcontractor shall be paid by the contractor a penalty of 2% per month of the monthly payment amount

payment due. (CA)

8) Has your state

ever become

involved in a dispute

between a prime

contractor and a

subcontractor

involving prompt

payment issues?

Yes

29

No

6Number of STAs

9) Does your state allow 100% progress payments (i.e. no retainage) to contractors?

YES

. . . . If no retainage required, is consent of the surety required?

NO

N/A

YES 2

5

16

Number of STAs

YES

NO

19

16

Number of STAs

10) Does your state

require that

subcontractors

furnish separate

performance bonds to

the prime contractor?

1 1

33

Yes

No

NoResponse

Number of STAs

11) Does your state

withhold retainage from

the prime contractor?

22

13

Yes

No

Number of STAs

“We have new specification that the

contractor will pay the retainage to the subcontractor once the work has been

accepted by the Department” ( FL)

Withhold retainage “on state funded projects

only” (NC)

Retainage is 5% or $50,000 maximum. This amount may be

reduced upon request, with satisfactory performance and surety

approval. (NV) question #9

. . . . Comments

12) Does your state

have requirements

for incremental

payment, and full

payment upon

completion of work

for subcontractor

work?

25

10

Yes

No

Number of STAs

. . . . CommentsOklahoma

Requires contractor to release retainage to subcontractors upon acceptance of their work, not completion

MarylandThe subcontractor must request full payment upon completion of work

. . . . Where are the requirements for full payment upon subcontractor’s completion of work outlined?

Other

2

State Statute

10

Construction Contract Provision

17

Not Applicable

3

No Response

2

. . . . Comment

Located in prompt payment

specifications (WY)

13) Does your state allow prime

contractors to withhold retainage

from a subcontractor?

8

27Yes

No

Number of STAs

. . . . Comments

“Only if in the subcontract agreement” (WY)

“ Effective 8-1-05 by law we (are not) allowed to hold retainage from

the prime and the prime (is not) allowed to withhold retainage from

the subcontractor.” (TN)

14) If applicable,

does your state limit

the amount of

retainage a prime

contractor can

withhold from a

subcontractor?

13

16

5

1

Yes

No

NotApplicableNoResponse

Number of STAs

. . . . If your state does limit the

amount of retainage a prime can

withhold from a subcontractor, where

is that limit outlined?

Not Applicable

3

Other

0

State Statute

7Construction Contract Provision

8

. . . . If your state does limit the amount of retainage a prime can withhold a subcontractor, what is the limit of that retainage?

Other

4

Less than prime

contractor

1Same as

prime contractor

7

More than prime

contractor

0Not Applicable

5

. . . . Others / Comments. . .

Cannot withhold retainage from the prime contractor (TN)

3% (NC)

10% max (AK)

5% in Special Provisions (ND)

“A prime is not allowed to hold retainage from a subcontractor”

(VT)10 % max (NV)

“No retainage on the prime contractor”

(SD)

Prime cannot withhold retainage from subcontractor (TN)

15) Does your state

make final acceptance

of subcontract work

when the subcontract

work is complete?

24

1

Yes*

No

NoResponse

Number of STAs

10

* Would consider only upon written request by subcontractor (OK)

. . . . If your state does make final

acceptance of the completed

subcontractor work is the prime

contractor then relieved of further

responsibility for that work?

6

8

3Yes

No

NoResponse

Number of STAs

. . . . Comments to “No”

If damaged by completion of remainder of contract. (OK)

This depends on whether or not the prime has asked for final acceptance. Regardless whether or not prime has asked for final acceptance we pay for work complete and if this is all the work a subcontractor has to do the contractor is required to make full

payment including retainage. ( WY)

INDOT has a contract with the prime. To accept the subcontractor’s work as it is completed, we would need a separate contract with the subcontractor

and we are not interest in having that and we accept a contract as a whole not in small parts. (IN)

11

12

Yes

No

NotSure

Number of STAs

. . . . Would your state consider making

final acceptance of subcontract work

when that work is complete?

0

“Don’t want to do piece meal acceptance of projects.”

“We chose not (to)”

“Legal considerations.”

“Our contracts are with the prime contractor, the subs work is just a part of the project. We do not

accept any work until the entire project is completed.”

“The prime is responsible for all the work on the contract until the contract as been finally

accepted by the Department.”

. . . . If not, why not?

. . . . If not, why not?

“(STA) has contract with the prime. To accept the subcontractor’s work as it is completed, we would need a separate contract with the subcontractor and we are not interested in having that and we accept a contract

as a whole not in small parts.”

“Would require us to interfere in the prime/sub relationship, to interpret sub documents and to give the sub quasi-

contractor status relative to the state.”

16) Has your state defined”satisfactory performance?”

123

11Yes

No

NoResponse

. . . . If yes, is this definition part of your contract documents?

Number of STAs

6

3

8Yes

No

N/A

Number of STAs

. . . . Definitions “A subcontractor’s work is satisfactorily completed when

all of the tasks called for in the subcontract have been accomplished, paid for, and documented in accordance

with the contract.” (SD)

“Completion of the Project occurs when the Contractor has competed all work required by the Contract and has

satisfactorily executed and delivered to the Engineer all documents, certificates and proofs of compliance required

by the Contract.” (NH)

“Satisfactorily completed in full means that the work has been inspected by the Department and is

accepted as complete according to the Standard Specifications. Also, all required certifications must be in the field office and accepted before such work

is deemed satisfactorily completed in full.” (TN)

. . . . Definitions

“1) the subcontractor’s work is completed in accordance with the plans and specifications., 2) All required paperwork, including material certifications, payrolls, etc, has been received and reviewed by the Engineer; 3) The subcontractor does not have past due balanced with suppliers for work associated with the project; and 4) And the Engineer has determined the final quantities for the subcontractor’s portion of the work.” (AK)

“(1) Department finds the work completed in accordance with the plans, specifications, (2) any

required paperwork, including material certifications and payrolls, etc. have be received

and approved and (3) Department has determined the final quantities on the subcontractors portion of

the work.” (OK)

. . . . Definitions

“A subcontractor’s work is satisfactorily completed when all of the tasks called for in the subcontract have been accomplished, documented in accordance with the contract and paid for on a pay estimate. To be satisfactorily complete a subcontractor must provide all necessary final documentation required in the contract. Final documentation may include, but is not limited to: certified payrolls, materials certification, haul road releases, pit receipts of payment, pit releases, night watchman reports, warrantees, operating manuals, product literature, and verification of final quantities, and the DBE certification (SFN 14268.)”(ND)

“Satisfactory performance not defined in the prime/sub relationship” (WA)

. . . . Is this definition for ”satisfactory

performance” used to determine when

a subcontractors work can be

accepted by the state?

73

4Yes

No

NoResponse

Number of STAs

17) Does your state

have any procedures

in place to assist a

prime contractor in

recovering

overpayments to

subcontractors? 1

33

Yes

No

NoResponse

Number of STAs

0

. . . . If your state does have

procedures to assist a prime to

recover overpayments to

subcontractors, where are the

procedures outlined?

Not

Applicable

6Other

0

State Statute

0Construction Contract Provision

0

18) Does your state

have any procedures

in place to assist a

prime contractor

who must recall a

subcontractor to

correct unacceptable

work after retainage

has been released??

2 1

31

Yes

No

N/A

NoResponse

Number of STAs

0

FindingsFindings

Nearly all State Transportation Agencies (33 out of 35) responding to

this survey indicate they have prompt payment provisions for subcontractor work on

highway construction contracts.

The survey results are self explanatory and identify some

of the similarities and differences in a State

Transportation Agencies’ prompt payment

requirements.

ThankYou