109.07 Final Inspection, Acceptance, and Final Payment

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FINAL INSPECTION, ACCEPTANCE, AND FINAL PAYMENT

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Local Agency Force Account Projects

The Michigan Department of Transportation (MDOT) is charged with overseeing local agency construction projects to ensure compliance with federal funding requirements. There are four distinct types of local agency projects involving federal funding that involve MDOT staff oversight. These project types with their letting process are noted below.

  1. MDOT Letting Process a. Local Agency Projects for Road, Bridge, and/or Enhancement Work
  2. Local Agency Letting Process a. Local Agency Projects for Enhancement Work
  3. Non Letting Process a. Economic Development Direct Grant Projects
  4. Non Letting Process a. Local Agency Force Account Construction Projects (Direct Force)


Oversight requirements for local agency construction projects 1a through 3a are defined in Bureau of Highway Instructional Memorandum (BOH IM) 2009-06. This BOH IM provides a supplement to those requirements for projects in the 4a category, Local Agency Force Account Construction Projects.

Non-Letting Process, Local Agency Force Account Construction Projects (Direct Force) The oversight requirements for projects in this category are described in Appendix III - Oversight, Inspection, and Materials Acceptance Requirements for Federally Funded Local Agency Transportation Projects of the Updated Guidance for Construction of Federally Funded Local Agency Projects by Non-Competitive Bid Contract (Force Account), August 2015 document.

The final inspection requirements for local agency force account projects note that the completed 1120 form, Final Inspection/Acceptance and Certification Report, is to be placed into the project files. The project files are maintained by the local agency and the local agency must maintain the original 1120 form for auditing purposes. The distribution of this form will be as follows and will not follow the distribution shown on the form:


Original Form:

  • Local Agency Project Files


Copies:

  • Region Construction Engineer (RCE)
  • Local Agency Program – Staff Engineer
  • Transportation Service Center (TSC) Construction Engineer
  • Designated Representative at TSC (per BOHIM 2009-06)
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Acceptance of Work

When the project is substantially completed, a post construction inspection of the project should be performed by the Engineer and senior technician. The purpose of this inspection is to develop a checklist of work items remaining to be completed.

Timing of the preparation of the checklist is important. A list composed of more than 50 items usually indicates the project is not near enough completed to warrant preparation of a checklist. However, the list should be in final form and delivered to the Contractor’s representative in time for the items listed to be completed before the project completion date. The items on the checklist should be specific as to location and the nature of the uncompleted work. The Contractor’s representative should have a clear understanding of the items shown on the list.

The intent of this procedure is to give the Contractor a specific list of work items that will not be added to as the project progresses to completion. If extra work is necessary for which the Contractor will be reimbursed, an appropriate work order will be prepared describing the work to be done and the nature and amount of reimbursement to be made. Such items should then be added to the checklist prepared at the time of the post construction inspection. An item that was obviously omitted from the original checklist, or work made necessary by the Contractor’s operations after preparation of the checklist, should not be paid for as extra work.

When the items on the checklist have been completed to the satisfaction of the Engineer, the Region office should be contacted to make arrangements for a final inspection and acceptance of the project. On local government projects, local agencies should be contacted for final inspection and acceptance. Final MDOT acceptance will be made by use of Form 1120 initiated by the Transportation Service Center (TSC).

FHWA Interaction in MDOT Project.
MDOT Project Completion Flow Chart.
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Pay Estimate and Inactive Project Notification

The Federal Highway Administration (FHWA) considers inactive projects as one of their top priorities. A project in the inactive state can potentially delay federal funding that could be utilized on other MDOT projects. Rebecca Jones, in the Financial Operations Division, is to be notified via e-mail at JonesR6@michigan.gov when all construction work is complete and accepted, but the next pay estimate or the final pay estimate will not be or has not been generated for more than nine (9) months from the most recent pay estimate. This notification is also to be provided when the only remaining work is watering and cultivating. The notification must include the following information:

  • Current Project Status
  • Remaining funds that are to be paid to the contractor
  • Estimated date of payment
  • Reason for delay in payment and/or work operations
  • Specific action or plan for continuation of work and/or future payments (generalities or vague statements will not be accepted)

This applies to state and local Federal-aid projects. Please share this information with local agencies and consultants within your area.

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Final Estimates

The following procedure for processing final estimates will expedite the finalizing of projects and final payment to the Contractor for completed work. Figure 109-2 shows an example of the Final Estimate Submittal form 1105 to be submitted with the final estimate package. Note that history sheets are not required on projects where funding is the same for all pay items, i.e. all one funding category.


Processing Final Estimates
1

The Final Estimate Submittal form 1105 must be included as part of the “Final Estimate Package”. When the items on the checklist have been completed, the Engineer will sign certifying that final quantities for payment in this estimate have been properly completed, reviewed and checked for accuracy in accordance with current published instructions.

2

The Engineer will submit the Final Estimate Submittal form 1105 to the Contractor Payments Unit. A copy of the Final Estimate Submittal form 1105 is to be sent to the Region office.

3

The Contractor Payments Unit will review and generate the final project voucher summary. The Contractor Payments Unit will then sign the estimate and send it to the Treasury Department for final payment to the Contractor. A copy of the final estimate will be sent to the Engineer and to the Region office.

The following conditions must be met at the time of submitting a final estimate:

  • Extension of time authorized (if needed) to date of last work completed.
  • Acceptance report submitted, Form 1120. Project must have been accepted and certified (required on non-exempt federal projects on the NHS) by MDOT.
  • Authorizations on file. The Engineer must have on file the approved copy of any change, extra or adjustment authorization to the contract.
  • All final estimates are to be processed for zero ($0) dollars. All contract modifications and progress pay estimates are to be fully processed and approved before generating the final pay estimate. Final pay estimates for zero dollars will help to ensure contractor prompt payment and efficient completion of forms such as Form 2124A and Form 1386, Post Certification of Subcontract Compliance.


Figure 109-2 - Final Estimate Submittal Form
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Local Government Projects

The local agency Project Engineer must sign the Final Estimate Submittal form 1105 certifying that the final estimate included in this estimate has been properly completed, reviewed and checked for accuracy in accordance with current published instructions, and must submit the Final Estimate Submittal form 1105 with the final estimate. The Engineer or TSC manager must also sign the Final Estimate Submittal form 1105. A copy of this is to be sent to the Region office.

When the Region receives a copy of the Final Inspection/Acceptance and Certification Report form 1120, the project certification should be completed and appropriate distribution should be made by the Region office. Certification is not required on local government projects unless they are non-exempt and on the NHS.

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Final Marked Plans

Marked plans showing "as constructed" changes should be submitted to the Lansing Design Support Area upon completion of a project. This information is then transferred to the tracings for permanent record and future reference. A log job project does not include project plans other than details included in the proposal. Therefore on a log job, the engineer should send the appropriate project proposal sheets with “as-built” changes in lieu of marked plans. Instructions for the process are available at: http://www.michigan.gov/documents/mdot/As_Built_Plans_Mark-Up_Standards_295498_7.pdf and http://www.michigan.gov/documents/mdot/As_Built_Plans_ProjectWise_Submittal_Procedures_for_Jobs_Let_by_E-Proposal_295500_7.pdf

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Horizontal Control

Changes in alignment, bearings, PCS, PI’s, PT’s, curve data, government corner witnesses, witnesses to alignment monuments, right-of-way monuments and boxes and right-of-way fence should be shown on plan sheets.

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Vertical Control

Changes in vertical curves, benchmarks, grade changes, structural grade changes and changes in elevation and/or percent grade of ditch flow line should be shown on profile and plan where applicable.

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Drainage and Topography

Changes in location, elevation, length and size of culverts, sewers, edge drain, manholes and catch basins should be shown on plan and profile. Include stationing, offset from centerline, flow line elevations, types, sizes, lengths and quantities. Other topography changes, including guardrail, slopes, drives (location and width), utility changes such as gas, telephone, power, water main, lighting, etc., should also be shown.

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Earthwork and Surfacing

It is not necessary to show minor changes in earthwork, subbase or surfacing on plan or profile sheets if such changes are broken down by balances on the quantity sheets. When borrow is Contractor-furnished, actual earthwork balances are not important. Use the station-to-station breakdown as was used for plan quantities. Undercuts likewise need not be shown, as most reconstruction projects require a new soils investigation.

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Design/Construction Package Evaluation

Specific design recommendations or recommendations dealing with problems encountered during construction should be noted on Design/Construction Package Evaluation, Form 285-2. These recommendations will be considered by a design/construction recommendation committee and shared with all appropriate parties.

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Documents Necessary for Final Payment

After review by the Region, forms and documents necessary for payment of the final estimate should be submitted as shown below.

Documents to the Contract Payment Unit
1

Cover Letter/Checklist.

2

Final Construction Estimate Biweekly/Weekly Report (original).

3

Form FHWA-47 (original + one copy).


Documents to the Construction and Technology Construction Engineer
1

Balancing contract modification (original).

2

Acceptance report (copy) on all projects.

3

Original of Contractor’s evaluation report.


Documents to the Design Support Area
1

Marked plans (document transmittal with a cover letter).

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Review of Prompt Payment Complaints

Effective with the September 2, 2011, letting, a revised Special Provision for Prompt Payment, 03SP109(A) or 12SP109(A), will be placed in all federal and state funded contracts that utilize the Michigan Department of Transportation’s (MDOT’s) letting process. The prompt payment provision is a requirement of Title 49 of the Code of Federal Regulations (CFR) 26.29. These provisions apply to all prime contractors, subcontractors, and suppliers at all tiers. Attached are the special provisions contractors must follow to ensure prompt payment and the documentation required from subcontractors and suppliers before submitting a prompt payment claim.

When all of the pay item work has been completed, meets the definition of satisfactory completion, and the delivery/project engineer has released payment for the work, the prime contractor, subcontractors, and suppliers at all tiers must follow the progress payment schedule below:

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Satisfactory Completion

Satisfactory completion is defined for purposes of the Special Provision for Prompt Payment as:

1. Upon preliminary review, the delivery/project engineer finds the work completed in accordance with the contract, plans, and specifications.
2. Required paperwork, for progress and partial payments, including materials certifications, certified payrolls, etc., has been received and reviewed by the delivery/project engineer.

The determination of whether work meets the standards of satisfactory completion is the responsibility of the delivery/project engineer and not the prime contractor or subcontractors.

Release of payment from the Department for any work is confirmation that the Department has determined the work to have met the standards of satisfactory completion as defined above. In order to protect the rights and responsibilities of all parties, the delivery/project engineer should not release payment for any work not meeting the satisfactory completion criteria.

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Progress Payments

For the first payment, or for a one-time payment, the prime contractor is required to pay each subcontractor and/or supplier for the work associated with their subcontract no later than 10 calendar days from the date the prime contractor receives payment from the Department and a duly executed Sworn Statement (as defined in the Special Provision for Prompt Payment) from the subcontractor and/or supplier.

For the second and subsequent payments, the prime contractor is required to pay each subcontractor and/or supplier for the work associated with their subcontract no later than 10 calendar days from the date the prime contractor receives a current Sworn Statement and Waivers of Lien from the subcontractor and the subcontractor’s lower-tier subcontractors and suppliers verifying the prior payment has been received. If the Sworn Statement and Waivers of Lien are not received, the payment must be made no later than 30 calendar days from the prime contractor’s receipt of payment from the Department for said work. The contractor may request the delivery/project engineer to rescind payment for the work and pursue a remedy under the Less Than Full Payment Based on Issues Other Than Satisfactory Completion and the Non Payment Claims sections.

Proof of payment documentation, using the Department’s current Form 2124A, is also required from the prime contractor to the delivery/project engineer, prior to release of the second and subsequent estimates. Form 2124A will be completed by the contractor using the Monthly Employment Reporting System (MERS) Database which was previously created for American Recovery and Reinvestment Act reporting. Instructions for use of MERS will be provided to the contractors separately.

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Non-Payment Based on Satisfactory Completion Issues

Prime contractor concerns about the satisfactory completion of subcontractor or lower-tier subcontractor work items must be brought to the attention of the delivery/project engineer as soon as the concern is discovered. If the work met the requirements of satisfactory completion and the prime contractor has been paid for that work, the delivery/project engineer must determine whether the prime contractor has demonstrated a valid reason for withholding payment from the subcontractor or supplier or the subcontractor has demonstrated a valid reason for withholding payment from the lower-tier subcontractor or supplier. If the prime contractor or subcontractor has done so, the delivery/project engineer will process a negative estimate pulling back the amount involved in the complaint. If payment has not been made, the delivery/project engineer will not include those items of work on an estimate until the issue has been resolved.

Withholding of payment for satisfactory completion issues can only be done by the delivery/project engineer and not the prime contractor or subcontractors.

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Less Than Full Payment Based on Issues Other Than Satisfactory Completion

Any delay or postponement of payment from the time frames specified herein, or partial payment from the prime contractor to a subcontractor or supplier, or from a subcontractor to a lower-tier subcontractor or supplier, may only occur upon receipt of written approval from the delivery/project engineer. There may be circumstances where a prime contractor or subcontractor has a valid reason to withhold payment from a subcontractor or lower-tier subcontractor or supplier. Examples of such circumstances include but are not limited to:

  • A demonstrated failure of the subcontractor to pay or verify payment to its lower-tier subcontractors or suppliers.
  • A demonstrated breach of the subcontract by the subcontractor such as abandonment of the work.
  • Unacceptably tardy progress in the work resulting in delays to the project which may subject or have subjected the prime contractor to liquidated damages.
  • Failure or refusal to correct defective work.
  • Failure or refusal to provide required submittals such as materials certifications, certified payrolls, etc.
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Non-Payment Claims

For prompt payment claims for issues other than satisfactory completion, the following process applies:

Notifications of failure to meet prompt payment provisions can be referred by the prime contractor, subcontractor, lower-tier subcontractor or supplier to the alleged offending party and must be made in writing and sent certified mail, with a copy to the delivery/project engineer and the prime contractor. All notifications should be mailed within 30 calendar days of the date the payment was to be received. The alleged offending party must respond in writing to the claimant, with a copy to the delivery/project engineer, prime contractor, and the Engineer of Construction and Technology, within 10 calendar days of receipt of the notification of failure to meet prompt payment provisions. If the alleged violator responds with a valid reason for withholding payment, it is expected that a full explanation be provided with specific reasons in response to the accusation of non payment. Upon receipt of the written notice and response, the delivery/project engineer must verify in writing whether grounds exist for the prompt payment complaint.

If the alleged offender provides satisfactory written evidence that one or more of the circumstances including, but not limited to, those listed above exists, the parties to the claimant should employ dispute resolution procedures as provided in the Special Provision for Prompt Payment to resolve the prompt payment issue. At this point, and pending completion of the dispute resolution process, there is no basis for any negative action against the alleged offending party. Failure on the part of the alleged offending party to respond to a notification from a claimant shall be considered by the Department as an admission of the violation and may result in sanctions.

The parties must attempt to agree on whether to mediate/arbitrate and agree on a mediator/arbitrator within 10 calendar days after a written complaint is verified by the delivery/project engineer. The details and time frames for completing the dispute resolution process can be found in the Special Provision for Prompt Payment in subsection 109.10.F. (Note: Disadvantaged Business Enterprise (DBE) prompt pay contracting issues may have additional dispute resolution procedures). Upon receiving the outcomes of the dispute resolution, the delivery/project engineer will release the disputed payment being held by the department as outlined by the mediator or arbitrator.

If the parties cannot agree on mediating/arbitrating the dispute, or upon a mediator/arbitrator within the prescribed timeframes in the special provision, the complaining party shall initiate whatever dispute resolution is specified in the parties’ agreement, or as available under Michigan law within 30 calendar days of the complaint being verified by the delivery/project engineer. The delivery/project engineer is not expected to make judgment on the dispute between the parties. Release of any monies held by the Department shall only occur upon resolution of the dispute by the parties.

The delivery/project engineer should scan and e-mail copies of documents related to non payment claims made by Disadvantaged Business Enterprises to MDOT’s Office of Business Development (OBD) at MDOT-DBE@michigan.gov. Agencies who do not have scanning capability should fax documents to OBD’s administrator at 517-335-6859.   Failure to Resolve a Prompt Payment Violation within the Prescribed Time Frames

When the delivery/project engineer verifies that a prompt payment violation occurred and has not been resolved within the prescribed time frames, the following procedure is to be followed:

A contract modification is to be initiated for a negative adjustment in the amount of the violation and processed on the next available estimate after approval. Specific pay item codes, units of measurement, and pay item description information for the adjustment can be found in Construction Advisory 2011-04, titled Prompt Pay, indexed under “Authorizations.” Upon full resolution of the violation, a positive adjustment contract modification is to be processed to restore the money from the negative adjustment previously processed. Payment then can be made upon approval of the contract modification.

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Timely Progress Payments to Contractors

MDOT has always provided a clear message to construction offices regarding the expectations for timely contractor payments. This has been discussed in a number of recent venues including the previous two annual MDOT Statewide Construction Alignment Conferences as well as region wide construction business team meetings. The industry has recently provided several examples of concern regarding our payment and construction administration practices. While MDOT Executive Leadership believes that these cases are isolated and not a reflection of our overall success, they do believe there are a few messages that warrant field engagement in order to ensure continued efficient construction contract administration.

Michigan and its contracting industry are still experiencing tough economic times; therefore, it is imperative that we keep contract payments flowing to contractors for satisfactorily completed work. MDOT field staff need to be pro-active in resolving project level disputes on quantities/claims and timely in processing pay estimates and contract modifications on all projects. Similar expectations are placed on the administration of local agency construction projects and MDOT needs to have an active role in the oversight of the local agency program.

Industry has been encouraged to follow standard protocol when seeking resolution on unresolved project level issues they feel are not receiving timely attention. If issues are unresolved at the project level, they are expected to first contact the TSC manager. The next and subsequent contacts will be the Region Engineer then the Engineer of Construction Field Services (CFS). Direct contact with executive leadership has been discouraged as this eliminates efficiencies and hinders local relationships.

With the recent changes to the State Administrative Board and State Transportation Commission processes for approving project level changes, it is important to establish a sound internal quality assurance plan through the regions and CFS. MDOT is also expanding our performance measures to track the progress of a number of our contract administration activities such as overdue finals, contractor claims, timely progress payments, and contract modification processing.

This BOH IM provides guidance that field staff is to follow regarding timely progress payments on all construction projects. There are a couple of embedded checklists that should be discussed with the contractor at the pre-construction meeting, as well as provided to them through the pre-construction meeting notes document.

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Progress Payment Topics to be discussed at the Pre-Construction Meeting

The following topics are to be discussed at the pre-construction meeting. All decisions and outcomes are to be placed into the meeting notes to provide a clear direction on progress payments.

1. The contractor must be aware of and diligent in promptly submitting material documentation and supporting documentation per the specifications and special provisions in the contract. If they have any questions on submittal requirements they should immediately contact the engineer. This includes items such as material source lists, load tickets, form 1386, form 2124A (electronic submittal), Buy America certification, certified payrolls, testing certifications, etc.

2. The contractor should have a quality assurance check on documentation submittals to ensure that the submittals are in the correct format with identifying project information, dates, and signature(s).

3. The contractor should request daily measurements in the presence of the engineer’s representative and/or provide a daily copy of measured quantities to the engineer’s representative so discrepancies can be identified promptly.

4. The contractor should discuss any timely progress payment issues at the pre-construction meeting and present any issues at subsequent progress meetings. Contractors should not assume the issue is known or being dealt with, they need to bring it to the engineer’s attention.

5. All subcontractor names and agreement cover sheets should be provided at the pre-construction meeting and promptly thereafter when engaging the services of a subcontractor.

6. Contractors should not perform disputed, unauthorized, or extra work until an agreement on cost is established.

7. Contractors are strongly encouraged to utilize the read only or full contractor version of FieldManager. Read only files will be provided to the contractor and any subcontractors as requested when pay estimates are processed or when specifically requested. This will allow the contractor to review documentation deficiencies and address issues in a timely manner.

8. Contractors must perform acceptable quality work in accordance with the contract documents, as unacceptable work will result in delayed or no payment until the problem is addressed.

9. There should be discussion on the Frequently Used Special Provision for Prompt Payment (12SP109(A)) including the following information:

a. Progress Payments
i. Start Date
ii. Frequency of Pay Estimates
b. Prime Contractor Payment Time Requirements
i. First (or one time) Payment
1. Payment to sub-contractors within 10 calendar days
ii. Subsequent Payments
1. Payment to sub-contractors within 10 to 30 calendar days
c. Required Form Submittal
i. Sworn Statements
ii. Waivers of Lien
iii. MDOT form 2124A, Prime Contractor Bi-Weekly Statement of Subcontractor/Supplier Payments
iv. MERS Database

10. The contractor and engineer must agree to unit prices or negotiate costs for contract revisions (formerly extra work) upon encountering revised work. The contractor should submit unit costs as promptly as possible and before commencing field operations. Negotiated work costs should be agreed upon prior to the commencement of the work. This will reduce the time a pay item does not have a unit price and will not be able to be placed on a contract modification.

11. Retainage of any kind (formal or informal) between contractors or suppliers at any level is not permitted per MDOT procedures.

12. The use of electronic signatures by contractor staff for contract modification approval is strongly encouraged. Usage by MDOT is dependent on the contractor.

13. Provide the contractor with the following checklist:

 Prevailing Wage Compliance

http://www.michigan.gov/mdot/0,4616,7-151-9622_11044_11367-222170--,00.html

 Documentation Guide - Minimum Acceptance Requirements for Materials Approvals and Documentation

http://www.michigan.gov/documents/mdot/MDOT_DocumentationGuide_328761_7.pdf

 Materials Source Guide

http://www.michigan.gov/mdot/0,4616,7-151-9622_11044_11367-22505--,00.html

 Materials Quality Assurance Procedures Manual

http://www.michigan.gov/mdot/0,4616,7-151-9622_11044_11367-207980--,00.html

 Buy America Requirements - Pay Items and Materials that Require Step Certification

http://www.michigan.gov/documents/mdot/MDOT_BuyAmericaRequirements_387704_7.pdf

 Manuals, Guides, Advisories, and Memos

http://www.michigan.gov/mdot/0,4616,7-151-9622_11044_11367---,00.html


14. Provide the following checklist to the prime contractor for their usage as well as sub-contractors (as appropriate):

 Is my subcontract signed?

 Has my subcontract been submitted to MDOT? Check MDOT contract inquiry screen: http://mdotwas1.mdot.state.mi.us/public/trnsport/

 Are all of my subcontracts current? Check contract inquiry screen.

 Has my current certificate of insurance been submitted?

 Are my testing orders completed, signed and submitted?

 Have all my material certifications been completed and submitted? Check FieldManager insufficient material report.

 Are my certified payrolls completed, signed and submitted?

 Do I have items of work yet to complete?

 Has the prime contractor been paid for my items of work? Check MDOT contract inquiry screen.

 Has a lien been placed on the project by one of my suppliers? Are joint checks required?

 Do I have signed waivers / statements from my last checks?

 Are there pending penalties or disincentives associated with my items of work?

 Is there a pending claim for additional compensation associated with my item(s) of work?

 Have daily force account records been reviewed, signed and submitted?

 Has any extra work and compensation been approved by the owner?

 Have I communicated payment issues to the prime's project manager/foreman/superintendent?

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Action Items for Field Staff to Ensure Timely Progress Payments to Contractors

1. Field staff need to measure quantities placed in a timely manner and confirm placed quantities with contractor personnel. This should occur on a daily basis as practical and possible. Final field measurements should be taken at the end of each day rather than waiting to the end of the project.

2. When possible, final field measurements should be measured in the presence of a designated contractor representative to avoid multiple measurements and disagreements.

3. Field staff is to diligently work to resolve project level claims at the lowest possible level in a timely manner. Time constraints on MDOT actions on claim processing must be adhered to or extensions requested to the contractor. Waiting to resolve claim issues until the end of the project is not acceptable.

4. Agreed upon extra work is to be immediately reported on an Inspector’s Daily Report (IDR) and quantities are to be agreed to when reporting.

5. Work items placed in the field must be fully reported on an IDR. Field staff must report accurate quantities placed, if 500 feet of curb and gutter are placed, 500 feet is to be reported and not a lesser quantity for unofficial retainage, material documentation reduction, or any other reason. Work completed and accepted must be fully reported. Non-accepted work is to be reported to the engineer.

6. Local agencies must process a contract modification and/or pay estimate for claim resolutions as provided by MDOT (region office review or central office review) within seven (7) days of receipt of the claim decision.

7. The contractor or subcontractor should be informed by field staff (or office technician) when material deficiencies or missing documentation will prevent payment for completed work. The contractor is responsible to submit the missing documentation or address the issue promptly in order to ensure payment on the next pay estimate.

8. Consultant oversight record reviews should begin when the contractor submits documentation stating that all work is complete. Project record reviews can begin before punch list work is completed.

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Action Items When Processing Progress Pay Estimates and Contract Modifications

1. Pay estimates are to be processed for reported quantities even if there is a dispute on the final quantity. An example is when the field office states that 50 feet of curb was completed and the contractor states that 60 feet was completed, the field office is to pay the 50 feet of curb and timely resolve the discrepancy in final quantity.

2. Field offices need to ensure that payment is processed in a timely manner when all required documentation is received, reviewed, and approved. Procedures to ensure timely payments are encouraged (e.g. FieldManager reports reviewed by engineer, etc.).

3. Contract modifications are to be processed on a weekly basis or when there is a minimum of $10,000 in items over authorized quantity, whichever occurs first to ensure timely payment for work completed. With electronic approvals, more frequent contract modification processing is suggested. Waiting until the end of the project to process balancing contract modifications for increased quantities is not appropriate.

4. Engineers are to ensure that unit costs for contract revisions are incorporated per subsection 109.05 of the 2012 Standard Specifications for Construction. Any related correspondence is to be maintained in the project files.

5. Budgeted pay item quantities for extra work or monetary amounts for force account work are to be immediately processed via a contract modification to allow timely payment for extra work.

6. Prior to processing pay estimates, certified payrolls must be current and checked by project staff to ensure compliance with proper wage rates.

7. Material and supporting documentation must be provided, reviewed and approved. This information must be incorporated into the FieldManager files and placed in the project files.

8. Partial or stockpile payment is for work items that have been reviewed, inspected, and approved for use but are waiting to be incorporated into the project work. Partial payment is not for withholding money to generate action by the contractor for other items of work or material documentation.

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Best Practices for Timely Progress Payments to Contractors

1. Provide the contractor with the insufficient materials report from FieldManager after each estimate as a minimum or on a weekly basis. This is recommended even if the contractor does not use FieldManager or simply receives read only FieldManager files.

2. For lack of payment of work greater than $10,000 when proper documentation has not been provided, the project office will contact the contractor or subcontractor directly to request this information.

3. Provide contractors with read only files several days before the estimate or weekly so they can review what documentation is needed to ensure timely payment.

4. Provide the contractor correspondence regarding final estimate processing and what documentation is necessary when approaching the end of contract work; this has been noted as a Contractor Checklist for Final Estimate Processing. The body of the correspondence would include the following applicable information as a suggestion:

a. The following documentation is required in order for our office to final out project XXXXX-XXXXXXA.
i. Per section 109.07 of the 2012 Standard Specifications for Construction, the contractor needs to submit written notification that all the work is complete.
ii. Submit form 1386, Post Certification of Subcontractor Compliance (form attached).
iii. Submit any extension of contract time requests (form 1100A).
iv. Submit paper copy of form 2124A (final submittal only).
v. Resolve any pending damage claims.
vi. Submit As-Constructed (As-Built) final plans.
vii. Ensure that concrete initiative summaries have been provided.
viii. Ensure that HMA initiative summaries have been provided.
ix. Ensure that all material certification and other specification or special provision documentation requirements have been provided.

5. The project office should have a back-up person for generation of pay estimates to account for illness, vacation, out of the office issues, etc.

6. Project offices should honor requests for weekly pay estimates where weekly payments are consistently greater than $1,000,000 in value. A request to process weekly estimates is to be submitted to the Contract Services Division.

The Bay Region has developed a Contractor Prompt Payment Process – Abbreviated Summary that is available to other regions and TSCs. Although this document is related to the actual Prompt Payment requirements from prime contractors to subcontractors, etc., it is believed this document may help with understanding and processing of timely progress payments to contractors.

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Required Signature on Construction Pay Estimates

Electronic or scanned handwritten signature pay estimates shall be processed as described below and placed into MDOT's ProjectWise files within the construction pay estimate directory. Original handwritten signature pay estimates are to be placed into the project files. All pay estimates shall have an electronic copy in the ProjectWise construction directory no later than 10 calendar days from generation.

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MDOT (Transportation Service Center (TSC) construction engineer)

All construction pay estimates require an original signature/e-signature by the TSC construction engineer no later than 48 hours after pay estimate generation in FieldManager.

This signature may be delegated to the assistant construction engineer if they have been officially assigned to the project. However, if the assistant construction engineer is not a licensed professional engineer, they may not sign the final pay estimate. Additionally, anytime an assistant construction engineer signs an estimate, their signature/e-signature must include “signed for” under the name of the official construction engineer of record for the project. The assistant construction engineer must also print their name under their signature if handwritten.

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MDOT (Consultant engineer performing full construction engineering)

All construction pay estimates require an original signature/e-signature by the consultant project engineer no later than 48 hours after pay estimate generation in FieldManager. Each pay estimate shall be filed according to the following procedure:

  • Consultants shall e-mail an electronic pdf file of the signed and dated pay estimate to the MDOT project manager assigned to the project.
  • The MDOT TSC construction engineer/assistant construction engineer/project engineer assigned to the project shall sign and date the pay estimate and file the pay estimate in the ProjectWise directory.
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Local Agencies (Staff project engineer or consultant engineer)

All construction pay estimates require an original signature/e-signature by the full-time employee of the local agency no later than 48 hours after pay estimate generation in FieldManager. All consultant oversight projects must also contain a signature of the consultant project engineer in addition to the signature of the local agency full time employee in responsible charge of the project. Each pay estimate shall be filed according to the following procedure:

  • Local agency shall e-mail an electronic pdf file of signed and dated pay estimate to the MDOT TSC construction engineer/assistant construction engineer assigned to the project.
  • The MDOT TSC construction engineer/assistant construction engineer assigned to the project shall file the signed and dated pay estimate in the ProjectWise directory.
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Compliance

Construction Field Services will audit a sample of each bi-weekly batch of pay estimates to ensure statewide compliance for electronic filing of pay estimates in ProjectWise, signature time frames, signature verification, and authorized signers. Compliance results will be tracked and reported.

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Final Estimate Review

The Final Estimate Review Procedure applies to MDOT let projects that utilize a non-certified delivery/project engineer. This includes all projects where full consultant construction engineering is used. A non-certified delivery/project engineer is a delivery/project engineer that has not achieved a passing score under MDOT’s project record Certification Review Program, or is not eligible to obtain certification under this program. The non-certified delivery/project engineer is required to adhere to these procedures on every project until they successfully graduate into the department’s Project Record Certification Program. This Final Estimate Review Procedure supersedes the procedures set forth in Section 109 of the MDOT Construction Manual.

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Purpose of the Review

The purpose of the review is to verify that final contract quantities are supported by proper documentation and have been paid in accordance with contract documents and MDOT’s Standard Specifications for Construction. The review provides assurance that the project records are in substantial conformance with the plans and specifications, as well as the department’s policies and procedures. Substantial conformance is defined as having attained a passing evaluation on 80 percent of the contract items sampled and listed on the Final Estimate Review Summary (Form #1147), and in the section of this document titled Individual Pay Item Review.

When actions depart from specifications and established MDOT policies/procedures, the basis for acceptance must be documented by the delivery/project engineer in accordance with BOH IM 2005-09, or as superseded.

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Review Teams

Each Final Estimate Review Team will have a leader, as well as members with knowledge and experience in MDOT construction and materials documentation. The team leader will be responsible for scheduling the review, ensuring that the review is completed in a timely and thorough manner, management of review documentation, and completing final deliverables of the closeout review by compiling the final estimate review report, and signing the Final Estimate Review Summary at the completion of the review. Upon request, consultation or assistance on project related review issues is available with the Construction Contracts Unit, Construction & Technology Division.

MDOT Projects: The region construction engineer will appoint team members. Members may consist of MDOT engineering and/or technical staff from other TSCs, the region, or prequalified consultants. However, staff from the overseeing TSC office shall not be part of the review team.

Local Agency Projects: The region construction engineer will appoint team members. Members may consist of MDOT engineering and/or technical staff from TSC offices not involved in oversight of the project, the region office, or prequalified consultants. Consultants and TSC staff who had involvement in the design or construction of the project shall not be part of the review team.

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Format of the Review

When the delivery/project engineer has determined the final quantities of all pay items and completed required documentation for the project, the region construction engineer shall be advised that the project is ready for a final estimate review. It is important for the delivery/project engineer to complete the project closeout in a timely manner to allow adequate processing time for the entire final estimate review process, and post review submission of the final estimate within 120 calendar days of project completion. If a project closeout is not completed within the department’s established timelines, the delivery/project engineer will be required to provide the region construction engineer with an explanation. This information will also be reported to the MDOT administration monitoring the overdue project finals.

Each individual project involving a non-certified delivery/project engineer must be reviewed separately. The review will cover two major areas:

  1. Construction pay item documentation, including contract related project documentation.
  2. Materials documentation.
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Overall Documentation Review

The Final Estimate Review Team shall review the project records for the following items, at a minimum:

  1. Required administrative documents, per MDOT’s File Manual for Construction Records, which are attached to BOH IM 2008-09.
  2. Contractor Certified Payroll documentation that has been properly reviewed by the delivery/project engineer in accordance with current department policy.
  3. Contract modifications containing overruns, extras, adjustments, and any necessary project contract change to ensure that they contain proper formatting and content, and are consistent with the procedure for processing contract modifications.
  4. Supporting documentation for extensions of time approved with or without liquidated damages, incentives, and/or value engineering change proposals are included in the project files.
  5. Confirmation that the person performing office technician duties for the certified delivery/project engineers on MDOT, local agency, and consultant projects have successfully completed office technician training.
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Pay Item Selection

The selection of pay items to be reviewed shall be based on the following:

  1. Measurement characteristics, including volume, weight, length, area, lump sum, unit, removal, force account, and adjustment items.
  2. A minimum of 10 pay items per project. For projects with less than 100 pay items, 10 percent of the items will be reviewed, with a minimum of 3 items.
  3. If irregularities or deficiencies are found with a pay item, the review must be expanded into similar or related items.
  4. Pay items covering major items of work such as removal, earthwork, hot mix asphalt (HMA), concrete, aggregate surfaces, and structures.
  5. Items containing significant increases/decreases, adjustments, or other funding related changes during construction.
  6. At least one force account pay item, when applicable.
  7. If a pay item is randomly selected for review and it has a final contract value of zero units (or was deleted from the contract) then a different pay item must be randomly selected.

Documentation requirements for most pay items can be found in the Documentation Guide (Minimum Acceptance Requirements for Material Approvals, and Documentation), which is available on MDOT’s Web site at: www.michigan.gov/mdot, Maps & Publications, Manuals, Guides, and Advisories & Memos.

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Individual Pay Item Review

The individual pay item review shall include, at a minimum, the following items:

  1. Pay items measured and paid in accordance with the applicable specifications and special provisions.
  2. Supporting documentation that is properly identified (MDOT control section and job number) and signed.
  3. Documentation that is properly completed on current contract time frame prescribed forms.
  4. Component materials for each pay item properly documented, approved, and accepted.
  5. A sample of the Inspector’s Daily Reports (IDRs) containing each pay item, which demonstrates conformance with MDOT’s policies and procedures.

If irregularities or deficiencies are found, the review should be expanded into similar or related items.

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Materials Review

For each pay item reviewed, the acceptance of the materials component shall also be examined. If irregularities or deficiencies are found, the review should be expanded into similar or related items.

During the review, ensure that documentation for the following emphasis areas is adequate:

  1. Signed Material Source List forms are included in project files.
  2. The materials were approved in accordance with the MDOT Materials Quality Assurance Procedures Manual and Materials Source Guide.
  3. Sufficient quantity of each material was approved for materials accepted by test for all pay items reviewed.
  4. All materials approved for use under General Certification, Test Data Certification, and Approved Manufacturer/Supplier are in accordance withBOH IM 2002-05, or as superseded.
  5. All required testing was completed at appropriate intervals.
  6. All testing personnel were properly qualified.
  7. Items included on the Qualified Product List are noted on an IDR, including a reference to the product and manufacturer as verified in the field, placement of a label/copy, or tag in the project files.
  8. Materials approved by visual inspection are noted on the appropriate IDRs, and quantities are within the threshold limits in accordance with the Materials Source Guide in effect at the time of letting.
  9. Proper sampling and testing of concrete items, including frequency and results of slump tests, modulus of rupture, atmosphere and concrete temperatures, air content, and yield/evaporation (bridge projects only) tests.
  10. Verification of proper sampling and testing of HMA items, including frequency and results of mix and air temperatures tests, application yield rate data, loose mixture tests, density tests, and all other information required in the MDOT Construction Manual, and clarified in Construction Advisory 2006-07, or as superseded.
  11. Steel and iron certifications for Buy America provisions.

The Materials Review Worksheets (Form #1972) should include reference to specific test documents examined, so that an auditor can easily trace these documents. Also, total quantities tested must be reported.

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Independent Assurance Testing

Independent Assurance Testing (IAT) is required for all federally funded projects on the National Highway System (NHS). IAT is also required for each individual inspector or tester, and their equipment in four areas:

  1. Concrete sampling and testing.
  2. Aggregate sampling and testing.
  3. In-place density testing.
  4. HMA mixture testing.

A listing of current IATs for an individual can be found in the Independent Assurance Testing Database. The Final Estimate Review Team must verify and document that all required IATs were completed.

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Final Estimate Review Report

The Final Estimate Review Report contains the review work papers documenting the findings of the review. The report, developed by the Final Estimate Review Team, should provide sufficient data for the delivery/project engineer, FHWA, region personnel, and external department project auditors to make an assessment of the level of administrative compliance of the documentation. The evaluation of the final estimate review determines whether a timely payment of federal funds will be made.

The following forms, which are available on MDOT’s Web site, shall be used to develop the Final Estimate Review Report:

  1. Contract and Related Document Checklist (Form #1969).
  2. Construction Item/IDR Checklist (Form #1970).
  3. HMA Item Checklist (Form #1971).
  4. Material Review Checklist (Form #1972).
  5. Concrete Item Checklist (Form #1973).

MDOT’s control section and job number should appear on each sheet to properly identify the work papers. Clearly identify the pay item or material reviewed on each form. Fill in the MDOT standard specifications for construction section number for the item, and/or proposal reference page of the special provision for the item detailing the basis of measurement and payment. The special provision modifies the standard specification for the item reviewed. The support documents examined by the Final Estimate Review Team should be listed on the forms. All forms should be signed by the member of the review team who completed that portion of the review.

Verify that pay items documentation is:

  1. Cross-referenced in Field Manager under the documentation tab.
  2. Identified by MDOT project number, date, inspector, and file reference number.
  3. Properly identify indexed and cross-referenced to source documents in the field measurement books.
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Final Estimate Review Summary

The Final Estimate Review Team will complete the Final Estimate Review Summary and meet with the delivery/project engineer to discuss their findings. If deficiencies are found the engineer will be required to address the deficiencies and notify the Final Estimate Review Team when all issues have been addressed. The Final Estimate Review Team will then conduct a follow-up review.

Once all deficiencies noted in the review have been resolved, and the project records are in substantial conformance with current department policies/procedures, the Final Estimate Review Team leader shall sign the Final Estimate Review Summary. The original signed Final Estimate Review Report is then placed in the official project files. On local agency projects, provide the overseeing TSC with a copy for their records. The TSC delivery engineer shall verify that the final estimate review summary has been completed and signed, and that all deficiencies noted on the form have been resolved prior to submitting the final project estimate for payment.

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PAY ESTIMATE AND INACTIVE PROJECT NOTIFICATION” AT THE END OF “ ACCEPTANCE OF WORK

The Federal Highway Administration (FHWA) considers inactive projects as one of their top priorities. A project in the inactive state can potentially delay federal funding that could be utilized on other MDOT projects. Rebecca Jones, in the Financial Operations Division, is to be notified via e-mail at JonesR6@michigan.gov when all construction work is complete and accepted, but the next pay estimate or the final pay estimate will not be or has not been generated for more than nine (9) months from the most recent pay estimate. This notification is also to be provided when the only remaining work is watering and cultivating. The notification must include the following information:

  • Current Project Status
  • Remaining funds that are to be paid to the contractor
  • Estimated date of payment
  • Reason for delay in payment and/or work operations
  • Specific action or plan for continuation of work and/or future payments (generalities or vague statements will not be accepted)

This applies to state and local Federal-aid projects. Please share this information with local agencies and consultants within your area.

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