1. Questionnaire Regarding Subcontractor Prompt Payment Provision Prepared by.... Cal J. Gendreau, NDDOT Gene Wortham, ITD Julie Trunk, FHWA AASHTO Subcommittee on Construction / Contract Administration Task Force

2. Agenda States responding Results of survey Findings US84/285 South Tesuque Interchange New Mexico

3. State Transportation Agencies (STAs) Responding - 35 District Of Columbia Puerto Rico

4. Results of Survey

5. 1) Do the highway construction projects in your state contain a prompt payment provision for subcontractor work?

6. .... If your state has a prompt payment provision, what is the specified time in which the prime contractor must pay the subcontractor? Number of STAs Days

7. 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?

8. ... If your state’s prompt payment provision does contain a mechanism for enforcement, what is it? Number of STAs * 1-1/2% /mo. (MN) m2% /mo. (IL)

9. .... 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)

10. 3) Has your state defined”good cause?”.... If yes, is this definition part of your contract documents? Number of STAs

11. .... 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)

12. 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? Number of STAs

13. 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? Number of STAs

14. .... If your State’s prompt payment contract provision does have a dispute resolution process for primes and subcontractors, what is it? 0 Number of STAs

15. 6) If there is a conflict between the prompt payment provision and the subcontract which one takes precedence?

16. .... 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)

17. 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*

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? Number of STAs

19. .... 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)

20. 8) Has your state ever become involved in a dispute between a prime contractor and a subcontractor involving prompt payment issues? Yes 29 No 6 Number of STAs

21. 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 YES2 5 16 Number of STAs YES NO 19 16 Number of STAs

22. 10) Does your state require that subcontractors furnish separate performance bonds to the prime contractor? Number of STAs

23. 11) Does your state withhold retainage from the prime contractor? Number of STAs

24. “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

25. 12) Does your state have requirements for incremental payment, and full payment upon completion of work for subcontractor work? Number of STAs

26. .... Comments  Oklahoma Requires contractor to release retainage to subcontractors upon acceptance of their work, not completion  Maryland The subcontractor must request full payment upon completion of work

27. .... 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

28. .... Comment Located in prompt payment specifications (WY)

29. 13) Does your state allow prime contractors to withhold retainage from a subcontractor? Number of STAs

30. .... 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)

31. 14) If applicable, does your state limit the amount of retainage a prime contractor can withhold from a subcontractor? Number of STAs

32. .... 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 7 Construction Contract Provision 8

33. .... 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 1 Same as prime contractor 7 More than prime contractor 0 Not Applicable 5

34. .... 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)

35. 15) Does your state make final acceptance of subcontract work when the subcontract work is complete? Number of STAs 10 * Would consider only upon written request by subcontractor (OK)

36. .... If your state does make final acceptance of the completed subcontractor work is the prime contractor then relieved of further responsibility for that work? Number of STAs

37. .... 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)

38. Number of STAs.... Would your state consider making final acceptance of subcontract work when that work is complete? 0

39. “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?

40. “(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.”

41. 16) Has your state defined”satisfactory performance?”.... If yes, is this definition part of your contract documents? Number of STAs

42. .... 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)

43. .... 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)

44. .... 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)

45. .... Is this definition for ”satisfactory performance” used to determine when a subcontractors work can be accepted by the state? Number of STAs

46. 17) Does your state have any procedures in place to assist a prime contractor in recovering overpayments to subcontractors? Number of STAs 0

47. .... If your state does have procedures to assist a prime to recover overpayments to subcontractors, where are the procedures outlined? Not Applicable 6 Other 0 State Statute 0 Construction Contract Provision 0

48. 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?? Number of STAs 0

49. Findings

50. 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.

51. The survey results are self explanatory and identify some of the similarities and differences in a State Transportation Agencies’ prompt payment requirements.

52. Thank You