109.07 Final Inspection, Acceptance, and Final Payment

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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 projects. 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.

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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 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.
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 approvals.
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 (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

   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

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. Provide the contractor with the following checklist:
    • Prevailing Wage Compliance
    • Documentation Guide - Minimum Documentation Requirements for Pay Item Approvals and Material Acceptance
    • Materials Source Guide
    • Materials Quality Assurance Procedures Manual
    • Buy America Requirements - Pay Items and Materials that Require Step Certification
13. 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?

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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. 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.
7. 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.

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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 should 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., 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 2020 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 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 after each estimate as a minimum or on a weekly basis.
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 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. 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.

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.

Construction Pay Estimate Approval Process

Pay estimates shall be processed as described below and placed into MDOT's ProjectWise folder structure.

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.

Pay Estimate Approval Stamp Example

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MDOT Transportation Service Center (TSC) Construction Engineer

All construction pay estimates require approval by the TSC construction engineer no later than 48 hours after pay estimate generation. This approval 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 approve the final pay estimate.

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MDOT Consultant Engineer Performing Full Construction Engineering)

All construction pay estimates require approval by the consultant project engineer no later than 48 hours after pay estimate generation. The MDOT TSC construction engineer/assistant construction engineer/project engineer assigned to the project shall approve the pay estimate.

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LAP Project Considerations

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 shall be processed as described in Final Estimates.

A copy of the approved pay estimate must be forwarded to the Designated Representative (DR).

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Local Agencies (Staff Project Engineer or Consultant Engineer)

All construction pay estimates require approval by the full-time employee of the local agency no later than 48 hours after pay estimate generation. All consultant oversight projects must also be approved by the consultant project engineer in addition to the approval of the local agency full time employee in responsible charge of the project. The pay estimate must reside in the appropriate ProjectWise folder.

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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 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 Inspection, Acceptance, and Final Payment

Acceptance of Work

Within seven days of receiving the contractor’s written notification that work is completed, a final inspection of the project will be performed by the engineer. The purpose of this inspection is to develop a list of specific items that may have defects to be remedied.

Timely preparation of the list is important. The list should be in final form and sent to the contractor’s representative within seven days of the final inspection. The items on the list should be specific to the location and the nature of any defects. 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 items to be addressed for final acceptance. 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. An item that was omitted from the original list, or defects caused by contractor’s operations after preparation of the list, must not be paid for as extra work.

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Form 1120 Submittal Process

When Form 1120 is approved by the TSC manager, the engineer must change the state on Form 1120 as shown in figure below from ProjectWise under 106 of the “Closeout Package” subfolder. When the state is changed, Contract Services Division will enter the acceptance date into the Department’s internal database.

Form 1120

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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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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 01 shows an example of the Final Estimate Submittal Form 1105A must be submitted with the final estimate package.

Processing Final Estimates
1	The Final Estimate Submittal Form 1105A 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 remainder 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 process the final payment once the Contractor returns their Contractor's Affidavit package.

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 by MDOT.
• Final estimate MUST be generated 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 01 - Final Estimate Submittal Form 1105A Change State

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Post Final Estimate Process

Post Final Estimate may be generated when any of the following occurs on a project.

• Category changes
• Overpayment and underpayment
• Warranty issues
• Monetary adjustments and extras to the contract
• Extension of Time
• Claims
• During project reviews if any materials were not correctly associated, approved, and any other changes related to documentation.
• If at any time a post final estimate is run, the Engineer will change the state for this document as shown in Figure 02 below from ProjectWise under 106 of the “Closeout Package” subfolder. Also, a notification email must be sent to MDOT-Estimates@Michigan.gov. The notification email must include a statement that everything on form 1120 and form 1105 is still correct. If the information on forms 1120 and 1105A is no longer correct, revised forms must be completed and resubmitted.
• To open a closed project in FieldManager, go to the Documentation page under the General tab, check “No” for Contract Closed, and the contract will be open. See screen shot below Figure 03. When the warning screen comes up, just click “OK.”

Figure 02 - Change State process

Figure 03 - Review Contract Documentation

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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 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: As-Built Plans Mark-Up Standards and As-Built Plans, ProjectWise Submittal Procedures for Jobs Let by E-Proposal.

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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

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

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