Section 4: Prompt Payment - Federally Funded Contracts


Pay the contractors no earlier than ten calendar days or later than 30 calendar days following the month which work was completed and accepted. Contractors must also pay any retainage on a subcontractor’s work within ten calendar days after satisfactory completion of all the subcontractor’s work. Completed subcontractor work includes vegetative establishment, test, maintenance, performance, and other similar periods that are the responsibility of the subcontractor. Satisfactory completion is accomplished when:

  • the subcontractor has fulfilled the contract requirements of both the department and the subcontract for the subcontracted work, including the submission of all information required by the specifications and the department and
  • the work done by the subcontractor has been inspected and approved by the department and the final quantities of the subcontractor’s work have been determined and agreed upon.

The inspection and approval work performed by a subcontractor does not eliminate the contractor's responsibilities for all the work as defined in the contract. These requirements apply to all tiers of subcontractors.

For projects let beginning with the April 2006 letting, obtain a completed Form 2177, Prompt Payment Certification, from the prime contractor within ten days of their receipt of payment from the department for work performed during the previous month. The prime contractor must submit a certification form monthly during the project and the month following final acceptance of the contract. Initiate the following actions for receipt and review of the required certification form:

  • Verify the form is received by the due date and any payments withheld are based on a dispute and file the form. (For the purposes of the Prompt Payment Certification form, a dispute is a disagreement between the contractor and first-tier subcontractor or supplier regarding payment as it relates to a contractual issue. In the normal course of business, billing errors occur. Routine billing errors submitted by a subcontractor or supplier will not be considered a dispute until elevated by the contractor, subcontractor, or supplier.)
  • If payment is withheld without a stated dispute or the prime contractor fails to provide the monthly or final certifications, take necessary actions. To begin with, contact the prime contractor to remind them of their contractual obligation. Escalated actions may include suspension of work, withholding all or a portion of an estimate, withholding project acceptance, default for breach of contract, or other actions deemed appropriate.

Contractor Complaints

Process contractor complaints as outlined in Contractor Complaints.

Subcontractor Complaints

For prompt payment complaints, require subcontractors to submit all complaints in writing. The complaint should identify specifics regarding the subcontract language, items of work in question, and the subcontractor’s attempts to obtain payment from the prime contractor. Notify the complaining subcontractor a complaint will not be accepted until the subcontractor provides satisfactory written evidence they have contacted the prime contractor and their payment bond surety in an attempt to resolve the issue (see sample letter). If a complaint is accepted, follow the procedures outlined below.

  1. Verify the work in question has been approved by the department.
    • If the work or materials in question have not been approved by the department, notify the prime contractor and subcontractor that no prompt payment issue exists. (No further department action necessary related to prompt payment.)
    • If the work was approved, determine if payment was made by the department. If payment was not made, make payment to the prime contractor and notify the parties involved of the resolution. (No further department action necessary related to prompt payment.)
  2. If the department paid for the work or materials, determine if a dispute exists by referring to prompt payment certifications and other supporting information. Supporting information to aid in the determination of a dispute or resolution of a dispute may include subcontractor or supplier agreements, invoices, subcontract or supplier agreement revisions (change orders), cancelled checks, identification of billing errors, etc.
    • If a dispute is determined to exist, advise the subcontractor that they may file against the payment bond surety. Forward the subcontractor’s letter of complaint to the prime contractor with a letter advising them of their responsibility to work with the subcontractor to resolve the dispute. Provide copies of the letter to the prime contractor to both the subcontractor and the payment bond surety. (No further department action necessary related to prompt payment.)
    • If it is determined that a dispute does not exist, forward the subcontractor’s letter of complaint to the prime contractor with a copy to the payment bond surety. Request payment or justification for non-payment. Set a response deadline.

      i.)If the prime contractor makes payment or provides documentation that substantiates the dispute, forward the response to the subcontractor and advise them payment was made or a dispute exists. Send a copy of the subcontractor notice to the payment bond surety. In instances of a dispute, advise that it is the responsibility of the parties involved to resolve the issue. (No further department action necessary related to prompt payment.)

      ii.) If the prime contractor has not made payment and does not provide justification of a dispute within the timeframe specified, initiate the appropriate administrative action. Possible administrative actions include: suspension of work, withholding all or a portion of an estimate, withholding project acceptance, default for breach of contract, or other actions deemed appropriate.

Second tier subcontractor complaints should be forwarded to and addressed by the prime contractor, with a copy of the prime contractor’s notice sent to the payment bond surety.

Ensure that notices associated with prompt payment are received by the prime contractor and subcontractor prior to the 20th calendar day from the date of the subcontractor’s written notice of complaint.

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