109.07 Final Inspection, Acceptance, and Final Payment

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FINAL INSPECTION, ACCEPTANCE, AND FINAL PAYMENT

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. 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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LAP Project Considerations

The local agency must notify the DR when the project is ready for a final field inspection. The DR must attend the final field inspection or arrange to inspect the project with the local agency at a different time.

The local agency will prepare the Final Inspection/Acceptance form (MDOT Form 1120). The form must be signed by the following in order to recommend acceptance of the project:

• Engineer in the ‘MDOT or Local Agency Consultant Engineer’ signature block
• LRC in the ‘Local Agency Authorized’ signature block
• MRC in the ‘construction/project engineer for MDOT’ signature block
• TSC Manager (or designated alternate/backup) in the ‘TSC Manager’ signature block

After TSC Manager signature, the DR will return to the LPA for appropriate distribution and filing in the appropriate PW file. Refer to MDOT’s Construction Manual 109.07, Acceptance of Work.

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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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LAP 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.

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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 change the state on form 1105A as shown in Figure 1 below from ProjectWise under 106 of the “Closeout Package” subfolder. Only the state on form 1105A must be changed, the reminder of the Final Estimate Package documents simply need to be placed into the appropriate ProjectWise folder. When the state is changed CSD will be notified and begin the financial final process.
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.

• Final estimate MUST be generated in FieldManager only after Final Project Review is completed and all deficiencies are resolved.

• 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 109-1 - Change to Form 1105A

Figure 109-2 - Final Estimate Submittal Form

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LAP Project Considerations

The Final Estimate Packages must be processed as described above, with the following exceptions: LAP project Final Estimate Packages are prepared by the local agency and submitted to the DR. The Final Estimate

Submittal Form (MDOT Form 1105/1105A) is signed by:

• Engineer in the ‘Project Engineer’ signature block
• LRC next to the ‘Project Engineer’ signature block
• MRC in the ‘Construction Engineer (MDOT)’ signature block

The DR will change the state on form 1105A to next which will notify CSD that the Final Estimate Package is ready for processing.

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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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LAP Project Considerations

Local agencies are responsible for maintaining their own project record drawings (as-built drawings).

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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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LAP Project Considerations

This process is not required for LAP projects, however, local agencies are encouraged to review project challenges prior to design of future LAP projects.

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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).

Documents to the Design Support Area
1	Marked plans (document transmittal with a cover letter).

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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 section 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

 //mdotwiki.state.mi.us/images_construction/0/0d/Documentation_Guide_Final_Draft_02-25-19.pdf

 Materials Source Guide

 https://www.michigan.gov/mdot/0,4616,7-151-9622_11044_11367_68095---,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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LAP Project Considerations

All construction pay estimates require an original signature/e-signature by the LRC within 48 hours after the pay estimate generation in FieldManager. If the project has a consultant performing the construction engineering, the Engineer must also sign within the 48 hour period. The pay estimate must then be filed in the appropriate ProjectWise folder. The final estimate shall be processed as described in Final Estimates.

A PDF copy of the signed pay estimate must be forwarded to the DR.

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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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