Section 4: Subcontracting

A subcontractor is defined in Article 1.128 of the Standard Specifications 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.”

Ensure that the contractor performs at least 30% of the total contract amount, less any specialty items, with the contractor’s organization. The contractor’s organization includes:

  • workers employed and paid directly by the contractor
  • equipment owned by the contractor
  • rented or leased equipment operated by the contractor’s employees
  • materials incorporated into the work if the majority of the value of work involved in incorporating each material is performed by the contractor and
  • labor provided by leasing firms licensed under Chapter 91 of the Texas Labor Code for non-supervisory personnel if the contractor 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:

  • removing an underground storage tank on a widening project
  • plumbing on a widening project
  • electronic work on a typical road construction project or
  • work designated as specialty work in the contract.

Approve all subcontractors performing work on a contract. Refer to “ Subcontracting and Payroll Requirements” for additional guidance related to subcontractor determinations and payroll record requirements. Do not apply the subcontracting limitations to subcontractors. Refer to Standard Specifications Article 8.8 for further information.

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Disadvantaged Business Enterprise (DBE) and Small Business Enterprise (SBE) Prime Contractors

Ensure that SBE certified prime contractors perform at least 25% of the total contract amount, less any specialty items, with the contractor’s organization. Ensure DBE certified prime contractors perform at least 30% of the total contract, less any specialty items, with the contractor’s organization. When approving subcontracts for DBEs/SBEs being used to satisfy a contract goal, ensure that the DBE/SBE performs a commercially useful function.

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Subcontracts Exceeding 70% of the Total Contract Amount

Do not approve subcontracts that exceed 70% of the total contract amount after deducting the cost of specialty items. Include in the total contract amount known quantity overruns that will not require a change to the contract. Notify the district construction office of any subcontract rejections. If the reduction or elimination of work quantities that are being performed by the prime contractor’s organization results in the subcontracted amount exceeding 70%, no action is needed. In such an instance the intent of Standard Specification Article 8.8 is satisfied. When overruns occur or work is reduced or eliminated, do not adjust any contract requirements that are related to the original contract amount, such as DBE goals or liquidated damage amounts.

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Subcontractor Approval Procedure

Obtain a written subcontract request from the prime contractor for each subcontractor. Ensure the request contains the following information:

  • description of work to be sublet
  • geographic area in which the subcontracted work is to be done
  • subcontractor’s name, address, and telephone number
  • subcontractor’s federal identification tax number
  • estimated start and completion dates
  • amount and percentage of the total contract
  • DBE/ HUB goal credit, when the subcontractor is classified as a DBE/HUB.

For CIS contracts, use the Subcontractor Monitoring System (SMS), E2 screen, Form sms8901 to approve requests for subcontracts. Designate certified DBE or SBE subcontractor as such on Form sms8901. When approving subcontract requests, ensure compliance with the contractor approved DBE/SBE commitments. Subcontracts are considered approved once the district approval date is entered. Contact the Business Opportunity Programs Office (BOP) for more information regarding SMS. For SiteManager contracts, refer to the SiteManager Contract Administration Manual.

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DBE/HUB Monthly Progress Reports

For August DBE/SBE monthly reports, input reports into SMS or SiteManager no later than two working days prior to September 15th. For all other months, input DBE/HUB monthly progress reports into SMS or SiteManager no later than the 20th of the following month. Instructions for verifying and inputting DBE/HUB monthly progress reports are found in Chapter 14, DBE/HUB Monthly Progress Reports. Contact BOP for more information.

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