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Questionnaire Regarding Subcontractor Prompt
Payment Provision
Prepared by . . . .
Cal J. Gendreau, NDDOTGene Wortham, ITDJulie Trunk, FHWA
AASHTO Subcommittee on Construction / Contract Administration Task Force
Agenda States responding Results of survey Findings
US84/285 South Tesuque Interchange New Mexico
State Transportation Agencies (STAs) Responding - 35
DistrictOfColumbia
PuertoRico
Results of SurveyResults of Survey
1) Do the highway
construction projects
in your state contain a
prompt payment
provision for
subcontractor work? 2
33
Number of STAs
YesNo
. . . . If your state has a prompt payment
provision, what is the specified time in
which the prime contractor must pay
the subcontractor?
1
4
1
6
2
6
13
30
20
15
14
10
7
No Response
Number of STAs
Days
2) Does your state’s prompt payment
contract provision contain a
mechanism for enforcement to be used
in the event a prime contractor
withholds money from a subcontractor
without good cause?
7
28
Number of STAs
YesNo
. . . If your state’s prompt payment
provision does contain a mechanism
for enforcement, what is it?
8
17
13
2
Accumulated Interest*
Withholding Payment
Other
N/A
Number of STAs* 1-1/2% /mo. (MN) m2% /mo. (IL)
. . . . Other
“Suspension, reduction or revocation of the contractor’s prequalification rating, the Agency paying the subcontractor
directly from the prime’s retainage” (VT)
“Subcontractor may recover funds through other provisions in the
law – mechanics lien act or public construction bond act” (IL)
“Restrict bidding privileges” (IA)
“Price adjustments” (SD)“Contractor is required to deposit disputed amount
into interest bearing escrow amount” (NV)
3) Has your state defined”good cause?”
296Yes
No
. . . . If yes, is this definition part of
your contract documents?
Number of STAs
1310
83Yes
NoN/ANo Response
Number of STAs
. . . . What is your definition of “good cause”?
“Either not receiving form e-129 back from a subcontractor or documentation in writing that is
accepted by the engineer that supports their reason” (WY)
“Missing information or other reasons” (UT)
4) Does your state’s prompt payment provision
require prior approval be received by the prime
contractor from the owner to withhold
payment from a subcontractor for good
cause?
3
27
5Yes
No
N/A
Number of STAs
5) Does your state’s
prompt payment contract
provision require that the
prime contractor have a
dispute resolution
process in place in the
event there are disputes
with subcontractor?
5
1
31
YesNoN/A
Number of STAs
. . . . If your State’s
prompt payment
contract provision
does have a dispute
resolution process for
primes and
subcontractors, what
is it?
1
2 2
Mediation
Arbitration
CourtProceedingOther
0
Number of STAs
6) If there is a
conflict between the
prompt payment
provision and the
subcontract which
one takes
precedence?
28
1
3 3
Number of STAs
PromptPaymentProvision Subcontract
Other
No Response
. . . . Other
“Depends on the conflict. If the subcontract states retainage will be withheld the subcontract will take
precedence other than that the prompt payment takes precedence” (WY)
“Prime/Subcontractor Issue” (MN)
“Prompt payment provision is statutory requirement” (NV)
7) How does a dispute between a
prime contractor and a subcontractor
affect the prompt payment special
provision?
No Response
1
Other
7
Prompt payment is still in effect, the prime contractor
must still make timely payment to the subcontractor.
9 Prime contractor can withhold money pending outcome of the dispute.
18*
. . . . If your state has become involved
in a prompt payment dispute, was the
prime contractor withholding payment
from the subcontractor after the work
had been accepted by the owner?
7
20
5
Yes
No
N/A
Number of STAs
. . . . Other/Comment*
“Prime/Subcontractor Issue” (MN)
“State withholds the money in dispute from
prime” (WY)
“Prime can only withhold for reasonable
cause” (IL)
“Contractor is required to deposit disputed amount into interest bearing escrow amount” (NV)
*A contractor may withhold no more than 150% of disputed amount. If contractor violates this, the
subcontractor shall be paid by the contractor a penalty of 2% per month of the monthly payment amount
payment due. (CA)
8) Has your state
ever become
involved in a dispute
between a prime
contractor and a
subcontractor
involving prompt
payment issues?
Yes
29
No
6Number of STAs
9) Does your state allow 100% progress payments (i.e. no retainage) to contractors?
YES
. . . . If no retainage required, is consent of the surety required?
NO
N/A
YES 2
5
16
Number of STAs
YES
NO
19
16
Number of STAs
10) Does your state
require that
subcontractors
furnish separate
performance bonds to
the prime contractor?
1 1
33
Yes
No
NoResponse
Number of STAs
11) Does your state
withhold retainage from
the prime contractor?
22
13
Yes
No
Number of STAs
“We have new specification that the
contractor will pay the retainage to the subcontractor once the work has been
accepted by the Department” ( FL)
Withhold retainage “on state funded projects
only” (NC)
Retainage is 5% or $50,000 maximum. This amount may be
reduced upon request, with satisfactory performance and surety
approval. (NV) question #9
. . . . Comments
12) Does your state
have requirements
for incremental
payment, and full
payment upon
completion of work
for subcontractor
work?
25
10
Yes
No
Number of STAs
. . . . CommentsOklahoma
Requires contractor to release retainage to subcontractors upon acceptance of their work, not completion
MarylandThe subcontractor must request full payment upon completion of work
. . . . Where are the requirements for full payment upon subcontractor’s completion of work outlined?
Other
2
State Statute
10
Construction Contract Provision
17
Not Applicable
3
No Response
2
. . . . Comment
Located in prompt payment
specifications (WY)
13) Does your state allow prime
contractors to withhold retainage
from a subcontractor?
8
27Yes
No
Number of STAs
. . . . Comments
“Only if in the subcontract agreement” (WY)
“ Effective 8-1-05 by law we (are not) allowed to hold retainage from
the prime and the prime (is not) allowed to withhold retainage from
the subcontractor.” (TN)
14) If applicable,
does your state limit
the amount of
retainage a prime
contractor can
withhold from a
subcontractor?
13
16
5
1
Yes
No
NotApplicableNoResponse
Number of STAs
. . . . If your state does limit the
amount of retainage a prime can
withhold from a subcontractor, where
is that limit outlined?
Not Applicable
3
Other
0
State Statute
7Construction Contract Provision
8
. . . . If your state does limit the amount of retainage a prime can withhold a subcontractor, what is the limit of that retainage?
Other
4
Less than prime
contractor
1Same as
prime contractor
7
More than prime
contractor
0Not Applicable
5
. . . . Others / Comments. . .
Cannot withhold retainage from the prime contractor (TN)
3% (NC)
10% max (AK)
5% in Special Provisions (ND)
“A prime is not allowed to hold retainage from a subcontractor”
(VT)10 % max (NV)
“No retainage on the prime contractor”
(SD)
Prime cannot withhold retainage from subcontractor (TN)
15) Does your state
make final acceptance
of subcontract work
when the subcontract
work is complete?
24
1
Yes*
No
NoResponse
Number of STAs
10
* Would consider only upon written request by subcontractor (OK)
. . . . If your state does make final
acceptance of the completed
subcontractor work is the prime
contractor then relieved of further
responsibility for that work?
6
8
3Yes
No
NoResponse
Number of STAs
. . . . Comments to “No”
If damaged by completion of remainder of contract. (OK)
This depends on whether or not the prime has asked for final acceptance. Regardless whether or not prime has asked for final acceptance we pay for work complete and if this is all the work a subcontractor has to do the contractor is required to make full
payment including retainage. ( WY)
INDOT has a contract with the prime. To accept the subcontractor’s work as it is completed, we would need a separate contract with the subcontractor
and we are not interest in having that and we accept a contract as a whole not in small parts. (IN)
11
12
Yes
No
NotSure
Number of STAs
. . . . Would your state consider making
final acceptance of subcontract work
when that work is complete?
0
“Don’t want to do piece meal acceptance of projects.”
“We chose not (to)”
“Legal considerations.”
“Our contracts are with the prime contractor, the subs work is just a part of the project. We do not
accept any work until the entire project is completed.”
“The prime is responsible for all the work on the contract until the contract as been finally
accepted by the Department.”
. . . . If not, why not?
. . . . If not, why not?
“(STA) has contract with the prime. To accept the subcontractor’s work as it is completed, we would need a separate contract with the subcontractor and we are not interested in having that and we accept a contract
as a whole not in small parts.”
“Would require us to interfere in the prime/sub relationship, to interpret sub documents and to give the sub quasi-
contractor status relative to the state.”
16) Has your state defined”satisfactory performance?”
123
11Yes
No
NoResponse
. . . . If yes, is this definition part of your contract documents?
Number of STAs
6
3
8Yes
No
N/A
Number of STAs
. . . . Definitions “A subcontractor’s work is satisfactorily completed when
all of the tasks called for in the subcontract have been accomplished, paid for, and documented in accordance
with the contract.” (SD)
“Completion of the Project occurs when the Contractor has competed all work required by the Contract and has
satisfactorily executed and delivered to the Engineer all documents, certificates and proofs of compliance required
by the Contract.” (NH)
“Satisfactorily completed in full means that the work has been inspected by the Department and is
accepted as complete according to the Standard Specifications. Also, all required certifications must be in the field office and accepted before such work
is deemed satisfactorily completed in full.” (TN)
. . . . Definitions
“1) the subcontractor’s work is completed in accordance with the plans and specifications., 2) All required paperwork, including material certifications, payrolls, etc, has been received and reviewed by the Engineer; 3) The subcontractor does not have past due balanced with suppliers for work associated with the project; and 4) And the Engineer has determined the final quantities for the subcontractor’s portion of the work.” (AK)
“(1) Department finds the work completed in accordance with the plans, specifications, (2) any
required paperwork, including material certifications and payrolls, etc. have be received
and approved and (3) Department has determined the final quantities on the subcontractors portion of
the work.” (OK)
. . . . Definitions
“A subcontractor’s work is satisfactorily completed when all of the tasks called for in the subcontract have been accomplished, documented in accordance with the contract and paid for on a pay estimate. To be satisfactorily complete a subcontractor must provide all necessary final documentation required in the contract. Final documentation may include, but is not limited to: certified payrolls, materials certification, haul road releases, pit receipts of payment, pit releases, night watchman reports, warrantees, operating manuals, product literature, and verification of final quantities, and the DBE certification (SFN 14268.)”(ND)
“Satisfactory performance not defined in the prime/sub relationship” (WA)
. . . . Is this definition for ”satisfactory
performance” used to determine when
a subcontractors work can be
accepted by the state?
73
4Yes
No
NoResponse
Number of STAs
17) Does your state
have any procedures
in place to assist a
prime contractor in
recovering
overpayments to
subcontractors? 1
33
Yes
No
NoResponse
Number of STAs
0
. . . . If your state does have
procedures to assist a prime to
recover overpayments to
subcontractors, where are the
procedures outlined?
Not
Applicable
6Other
0
State Statute
0Construction Contract Provision
0
18) Does your state
have any procedures
in place to assist a
prime contractor
who must recall a
subcontractor to
correct unacceptable
work after retainage
has been released??
2 1
31
Yes
No
N/A
NoResponse
Number of STAs
0
FindingsFindings
Nearly all State Transportation Agencies (33 out of 35) responding to
this survey indicate they have prompt payment provisions for subcontractor work on
highway construction contracts.
The survey results are self explanatory and identify some
of the similarities and differences in a State
Transportation Agencies’ prompt payment
requirements.
ThankYou