Section 3: Subcontracting
The Standard Specifications define a subcontractor as “an individual, partnership, limited liability company, corporation or any combination thereof that the contractor sublets, or proposes to sublet, any portion of a contract, excluding a material supplier, a hauling firm hauling only from a commercial source to the project, truck owner-operator, wholly owned subsidiary, or specialty-type businesses such as security companies and rental companies.”Anchor: #b100009
Subcontractor Approval Procedure
In accordance with Article 8.2, “Subcontracting,” all subcontractors (regardless of the tier) require the Engineer's written approval prior to performing work on a contract. For further guidance, refer to the Subcontracting and Payroll Requirements Table (internal access only).
Obtain a written subcontract request from the prime contractor for each subcontractor. Ensure the request contains the following information.
- Anchor: #BDRBTHFQ
- Description of work to be sublet Anchor: #UQQHJAVI
- Amount and percentage of the total contract Anchor: #KCAEVLKC
- Geographic area in which the subcontracted work is to be done Anchor: #KQNEIKFD
- Subcontractor’s name, address, and telephone number Anchor: #QMJHQWCB
- Subcontractor’s federal identification tax number Anchor: #LLVUFIUG
- Estimated start and completion dates Anchor: #HGGPCTVD
- Disadvantaged Business Enterprise/Small
Business Enterprise/Historically Underutilized Business (DBE/SBE/HUB)
goal credit must be captured, when the subcontractor is classified as
a DBE/SBE/HUB. Reference the following:
- Anchor: #VXWDKFUW
- District Disadvantaged Business Enterprise Coordinator Compliance and Monitoring Guide (for projects let prior to Feb. 2017) Anchor: #ECNDSBUY
- District Disadvantaged Business Enterprise Coordinator Compliance Monitoring Guide (for projects let Feb. 2017 and thereafter) Anchor: #JTEOKKQW
- District Small Business Enterprise Coordinator Standard Operating Procedures (internal access only)
- For federally funded projects in the Diversity Management System (DMS), the Contractor must request to add a subcontractor in DMS. Anchor: #YQHHYIJD
- As a Best Practice, a Texas Unified Certification Program (TUCP) printout to show, DBE or SBE certification. Ensure date is current in header and footer. The TUCP must be verified for all DBEs, both race conscious and race neutral.
Confirm the following information prior to subcontractor approval:
- Anchor: #BYYFFFUO
- Total value of all subcontracted work does not exceed 70% of the original contract value. Anchor: #DTQWXYFJ
- DBEs/SBEs will perform a commercially useful function (CUF). Anchor: #MPGLWCPH
- Race conscious DBE participation (DBE on an approved commitment agreement form or utilization plan) and race neutral DBE participation. Note: this form is used for projects executed prior to February 2017. For projects executed after February 2017, the form is used to document DBE substitutions. Anchor: #KKTTIHCR
- Race conscious DBE subcontract work item must match the work items in the executed commitment agreements. Anchor: #GKTJJCLK
- The subcontractor is not on the TxDOT or federal list of Debarred/Sanctioned Contractors. Anchor: #GQJHVBCO
- The subcontractor has submitted documents for E-Verify. Anchor: #PQPRJPHQ
- On federal-aid projects, the subcontract contains Federal Highway Administration (FHWA) Form-1273. Ensure required Special Provisions are included in the subcontract. For an approved DBE or approved substitute DBE used to meet the goal, the subcontractor approval must equal or exceed the committed amounts and contain the same items of work approved on the commitment/utilization plan.
Subcontracts are considered approved once the District approval date is entered into SiteManager. (Refer to the SiteManager Contract Administration Manual.) Notify the Contractor of such approval by letter or by email in a timely fashion, so as not to create delay impacts to the project.Anchor: #i1040037
Non-DBE subcontracts do not have to be collected at the beginning of the project. However, one subcontract must be audited per project. If there are any concerns, additional subcontracts may be audited. The number of audits does not need to exceed the number of subcontracts. DBE subcontracts are still collected and reviewed at the beginning of the project.Anchor: #i1020142
Per Article 8.2.1, “Construction Contracts and Federally Funded Maintenance Contracts,” ensure that the Contractor, including DBE-certified prime contractor, performs at least 30% of the total original contract amount (25% if the Contractor is a Small Business Enterprise on a wholly State- or local-funded Contract), less any specialty items, with the Contractor's own organization. The percentage of work subcontracted is calculated for first-tier subcontractors only; do not apply the subcontracting limitations to second or third-tier subcontractors. All DBEs must self-perform 30% of the work in order to perform a Commercially Useful Function (CUF).
The Contractor’s own organization only includes:
- Anchor: #LCHWUCNU
- workers employed and paid directly by the contractor or wholly owned subsidiary, Anchor: #GEEYMLOY
- equipment owned by the contractor or wholly owned subsidiary, Anchor: #KBUBTGPL
- rented or leased equipment operated by the Contractor’s employees or wholly owned subsidiary employees, Anchor: #HNMIBADB
- materials incorporated into the work if the majority of the value of work involved in incorporating the material is performed by the Contractor’s own organization, including a wholly owned subsidiary’s organization; and Anchor: #XWKCWIGU
- labor provided by leasing firms licensed under Chapter 91 of the Texas Labor Code for non-supervisory personnel if the Contractor or wholly owned subsidiary maintains direct control over the activities of the leased employees and includes them in the weekly payrolls (Payrolls may be submitted by either the contractor or the licensed staff leasing firm.)
Allow the Contractor to subcontract any specialty items contained in the contract. Specialty items are work items not commonly found in contracts for similar work and may include:
- Anchor: #NXSCOROU
- removing an underground storage tank on a widening project, Anchor: #FGQQIWBD
- plumbing on a widening project, Anchor: #MFIMHJBO
- electronic work on a typical road construction project, or Anchor: #CYXCSJYD
- work designated as specialty work in the contract.
Per 23 CFR 635.116, the Contractor is to perform the work defined in the contract by installing the pay items, not to provide contract administration oversight (which is not a pay item and not part of their contract). The prime contractor must perform at least 30% of the contract work using their own company resources. Mobilization does not count towards performing 30% of the contract.Anchor: #i1021874
For non-DBEs, when assuring compliance with the 30% contract provision, the Department can perform its monitoring and approve the subcontract based on the total amount of the subcontract. If a question arises regarding the prime contractor performing 30% of the work with their own forces, require additional details from the Contractor, including actual unit prices, to verify contract compliance.Anchor: #b100008
Subcontracts Exceeding 70% of the Total Contract Amount
Do not approve subcontracts, or cumulative subcontracts, that exceed 70% of the total contract amount after deducting the cost of specialty items. Notify the District Construction Office of any subcontract rejections. If the reduction or elimination of work quantities being performed by the prime contractor’s organization results in the subcontracted amount exceeding 70%, no action is needed. If the overrun, increase, or addition of work quantities being performed by a subcontractor's organization results in the subcontracted amount exceeding 70%, no action is needed. However, new subcontractors will require approval to perform additional work. In either instance, the intent of Standard Specification Article 8.2.1 is satisfied.Anchor: #i1022074
Disadvantaged Business Enterprise Requirements
In accordance with Article 8.2, “Subcontracting”, the Department requires submission of an executed subcontract agreement for all DBE subcontracts, including all tiered DBE subcontracts, with unit prices. Verify that the unit prices are commensurate with the work. The unit prices, however, do not have to be based on bid item units.
For an approved, or an approved substitute, DBE used to meet the goal the subcontract agreement must equal or exceed the commitment/Utilization Plan total dollar amount and the items of work must match.Anchor: #b100010
DBE/SBE Monthly Progress Reports
Refer to the following Civil Rights Division (CIV) Standard Operating Procedures for instructions on processing monthly progress reports.
- Anchor: #JULDSWDJ
- District Disadvantaged Business Enterprise Coordinator Compliance and Monitoring Guide (for projects let prior to Feb. 2017) Anchor: #UVMMCWOW
- District Disadvantaged Business Enterprise Coordinator Compliance Monitoring Guide (for projects let Feb. 2017 and thereafter) Anchor: #FDCLGWBD
- District Small Business Enterprise Coordinator Standard Operating Procedures (internal access only)
For projects not in the Diversity Management System (DMS), complete and file Form 4903, “DBE Monthly Progress Report,” or Form 4902, “DBE Prime Contractor Payments to Non-DBE Subcontractors.”Anchor: #i1022401
Verify the subcontractor is not on the TxDOT list or federal list of Debarred/Sanctioned Contractors. Any project where the subcontractor was approved prior to the date of debarment is not affected.Anchor: #i1022508
Subcontractors must remain maintain active in the Department of Homeland Security's (DHS) E-Verify program until their work is completed. Check TxDOT’s list of contractors for whom CST has confirmed participation in E-Verify.
- Anchor: #RHCJEPJQ
- If a subcontractor does not appear on the TxDOT list, check the DHS website for participation using the DHS E-Verify Employers Search Tool. Anchor: #XSGGAHPM
- If a subcontractor does not appear on the TxDOT list, the district must require that the subcontractor submit the appropriate documentation to CST_everify@txdot.gov prior to allowing the subcontractor to begin work.
Instructions to access list of E-Verify Participants:
- Anchor: #NPIKPYWH
- Access the DHS E-Verify Search tool https://www.e-verify.gov/about-e-verify/e-verify-data/how-to-find-participating-employers Anchor: #EEMKYRNM
- If the DHS E-Verify Search tool yields results, then the employer is verified as participating in E-Verify. Follow your documented process to save a record of your search results. Anchor: #HIBEMIAO
- The DHS system does not report results for employers of fewer than 5 employees. If the DHS E-Verify search tool does not yield results, it’s because the employer has registered as having fewer than 5 employees or because they have not registered with E-Verify. Anchor: #IHSKSIQH
- For those employers with no search results, check the List of Participants (second tab below entitled “List of Participants”). If the employer is on TxDOT's List of Participants that means TxDOT has a fully executed MOU on file for the employer, indicating they have registered with E-Verify. Anchor: #MJYBTIGR
- For those employers with no search results
and that do not appear on TxDOT's List of Participants, request
that they provide a copy of their fully executed (signed and dated
by the employer and by DHS) Memorandum of Understanding (MOU).
How employers obtain a copy of their fully executed MOU:
- The employer will log into => https://www.e-verify.gov/ Anchor: #WCYJDIDL
- Select Company Anchor: #YJAYMJYR
- Select Edit Profile Anchor: #EWFNMXJK
- Go to MOU tab at the bottom of the page
- For those employers that are not on TxDOT's List of Participants and need to register with DHS, refer the employers to the following: https://www.e-verify.gov/employers Anchor: #GWFLHYPX
- Once the employer provides their fully executed MOU, email the MOU to the following email and they will be added to TxDOT's list: CST_everify@txdot.gov Anchor: #KWJRAVFD
- Contractors and Subcontractors must remain active with E-Verify registration for the life of the contract so regularly scheduled verification of the employer's registration with E-Verify should occur. This again accomplished following the aforementioned steps.