109.04 Progress and Partial Payments
Progress and Partial Payments
Progress Payments to Contractor
Regular Progress Payments should be made to the contractor for work that has been accepted and supported by all required documentation. 23 CFR 635.122 outlines FHWA regulations for payment and 23 CFR 635.123 outlines the regulations for determination and documentation of pay quantities.
This section covers Progress and Partial Payments, for information on Final Payments please see 109.07 Final Inspection, Acceptance, and Final Payment
Payment for Delivered Materials
Materials specifically produced or purchased for the project and stockpiled for use on the project may be paid for on the biweekly/weekly progress estimates under the conditions outlined in subsection 109.04 of the Standard Specifications for Construction and as covered by special provision.
The following guidelines are to be used to determine the partial payment allowable for stockpiled materials. These guidelines are the maximum percent of the original contract unit price that can be paid. The quantity of stockpiled material eligible for Payment of Delivered Material cannot exceed contract quantity. Proof of payment for the stockpiled quantity is required before payment on an estimate is made.
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Steel | ||
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Conc. Pav’t or Base (Reinf. Incidental) Steel Reinforcement |
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Structural Steel Fnished & Fab. |
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Structural Steel Fab. & Erect |
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Special Bearings |
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Sign Trusses |
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Piling (not temp. piling) Metal Bridge Railing Steel Beam Guard Rail Fencing |
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Corr. Metal (Steel) Pipe Culv. |
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Concrete | ||
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Prestressed Conc. Beams - Furnished |
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Prestressed Conc. Watermain |
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Precast Conc. Drainage Struct. Items |
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Conc. Pipe Culverts |
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Miscellaneous | ||
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Drainage Castings Sewer Pipe Water Main Items Expansion Joint Including Components Contraction Joint Including Components |
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Electrical Items |
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Highway Signing Items Bridge-Expansion Joint Device |
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Timely Progress Payments to Contractors
This section provides guidance that field staff should follow regarding timely progress payments on all construction contracts. The checklists below should be discussed with the contractor at the pre-construction meeting, as well as provided to the contractor through the pre-construction meeting minute document.
Progress Payment Topics at the Pre-Construction Meeting
The following topics should 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.
- 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 1302 Subcontracts, Material Source Lists. Testing Certifications, Buy America Certification, Load Tickets, Certified Payrolls, MERS 2124A electronic reporting, Form 1386 Post Certification Of Subcontract Compliance, etc.
- 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 approvals.
- 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.
- 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.
- 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.
- Contractors should not perform disputed, unauthorized, or extra work until an agreement on cost is established.
- For contracts being managed in FieldManager, 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.
- For contracts being managed in AASHTOWare Project, Contractors are strongly encouraged to utilize direct system access. Direct system access to AASHTOWare Project will be provided to the contractor and any subcontractors as requested. This will allow the contractor to review documentation deficiencies and address issues in a timely manner.
- 9. 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.
- There should be discussion on the Frequently Used Special Provision for Prompt Payment (20SP109(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
- i. First (or one time) Payment
- C. Required Form Submittal
- i. Sworn Statements
- ii. Waivers of Lien
- iii. MERS 2124A electronic reporting MDOT, Prime Contractor Bi-Weekly Statement of Subcontractor/Supplier Payments
- A. Progress Payments
- 11. 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 must be agreed upon prior to the commencement of the work. Work performed without a negotiated price agreed upon prior to start of work is deemed force account. Force account procedures including work plan and all necessary approvals must be agreed upon prior to commencing work.
- Provide the contractor with the following checklist:
- Provide the following checklist to the prime contractor for their usage as well as sub-contractors (as appropriate):
- Is my complete subcontract uploaded in ProjectWise?
- Has my subcontract been submitted to MDOT? Check the MDOT contract inquiry screen.
- Are all of my subcontracts current? Check contract inquiry screen.
- Has my current certificate of insurance been submitted?
- Are my Material Source Lists (MSLs) completed and submitted?
- Have all my material certifications been completed and submitted? Check insufficient material report.
- Are my payrolls complete, submitted and certified?
- 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 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 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?
Action Items for Field Staff to Ensure Timely Progress Payments to Contractors
- 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 contract.
- When possible, final field measurements should be measured in the presence of a designated contractor representative to avoid multiple measurements and disagreements.
- Field staff are 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.
- Agreed upon extra work is to be immediately reported on an Inspector’s Daily Report (IDR) /Daily Work Report (DWR) and quantities are to be agreed to when reporting.
- Work items placed in the field must be fully reported on an IDR/DWR. 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.
- 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.
- Consultant oversight record reviews should begin when the contractor submits documentation stating that all work is complete. Project record reviews can begin before work on the list of defects is completed.
Action Items When Processing Progress Pay Estimates and Contract Change Orders
- 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 should pay the 50 feet of curb and timely resolve the discrepancy in final quantity.
- 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., reports reviewed by engineer, etc.).
- Contract modifications (FieldManager) and Change Orders (AASHTOWare Project) 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/change order processing is suggested. Waiting until the end of the project to process balancing change orders for increased quantities is not appropriate.
- Engineers are to ensure that unit costs for contract revisions are incorporated per subsection 109.05 of the 2020 Standard Specifications for Construction. Any related correspondence is to be maintained in the project files.
- Budgeted pay item quantities for extra work or monetary amounts for force account work are to be immediately processed via a contract change orders to allow timely payment for extra work.
- Prior to processing pay estimates, certified payrolls must be current and checked by project staff to ensure compliance with proper wage rates.
- Material and supporting documentation must be provided, reviewed and approved. This information must be incorporated into the project files.
- 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.
Best Practices for Timely Progress Payments to Contractors
- Provide the contractor with the insufficient materials report after each estimate as a minimum or on a weekly basis.
- For lack of payment of work greater than $10,000 when proper documentation has not been provided, the project office will contact the contractor directly to request this information.
- 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. In accordance with section 109.07 of the 2020 Standard Specifications for Construction, the contractor must 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) for each DBE vendor that provided a service (Subcontract OR supplier) on the contract in ProjectWise.
- 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.
- A. The following documentation is required in order for our office to final out project XXXXX-XXXXXXA.
- 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.
- 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.
Pay Estimate and Inactive Project Notification
The Federal Highway Administration (FHWA) considers inactive projects one of their top priorities. A project in the inactive state can potentially delay federal funding that could be utilized on other MDOT projects. The Financial Operations Division, must be notified 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 all state and local Federal-aid projects. Please share this information with local agencies and consultants within your area.
LAP Inactive Project Considerations
LAP Projects are not exempt from pay estimate and inactive project notification. The local agency must keep the DR informed if the LAP project is inactive. MDOT may request the local agency explain inactivity and provide written justification on the Inactive Projects Validation Form (MDOT Form 3191). Upon notification from the LAP Section, the DR will facilitate form completion with the LPA, and submit the completed form back to the LAP Section for further processing.
Construction Pay Estimate Approval Process
Pay estimates must be processed and approved by the required approvers. All approvals must be completed in the MDOT AASHTOWare Project software with the exception of the Field Manger administered contracts as noted below. For AASHTOWare Project managed contracts refer to AASHTOWARE WIKI - Making_Payment_Estimate_Approval_Decisions.
Pay estimates shall be processed as described below and placed into MDOT's ProjectWise folder structure.
Field Manager Pay Estimate Approval Process
The approval process for Construction Pay Estimates should use a digital approval stamp with the approver’s name, date and time embedded. Actual Digital Signatures are not required for Construction Pay Estimate approvals.
After the Estimate has been approved it should be placed into MDOT's ProjectWise folder structure.
All required approvals must be obtained within 48 hours after pay estimate generation. The pay estimate must reside in the appropriate ProjectWise folder.
Required Pay Estimate Approvals
MDOT Construction Engineer approvals may be delegated to the assistant construction engineer if they have been officially assigned to the project. However, the Final Estimate may only be approved by a licensed professional engineer.
LAP Project Considerations
LAP projects must follow the Construction Pay Estimate Approval Process. On FieldManager projects, all construction pay estimates require approval by the Local Public Agency Responsible Charge (LRC) within 48 hours after the pay estimate generation. If the project has a consultant performing the construction engineering, the Engineer must also approve within the 48 hour period. The pay estimate must reside in the appropriate ProjectWise folder. The final estimate must be processed as described in Final Estimates.
A copy of the approved pay estimate must be forwarded to the Designated Representative (DR).
Progress Pay Estimate Processing
In accordance with 109.04. Progress and Partial Payments the Engineer will make progress payments based upon estimates prepared by the Engineer of the work completed every 2 weeks. (or weekly if payments are over $1 million) Engineers must not skip payments or withhold payment for completed work that has been accepted.
Project offices need to consider approval timeframes and generate pay estimates with enough time to allow for approvals to be obtained. Contact Services requires that payment estimates are approved by Tuesday (11:59:59PM) for payment. Any submission after this deadline will be processed the following week.