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Section 2: Material on Hand (MOH)

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Overview

The Department offers payment for MOH to help offset large capital outlays in assembling and stockpiling material to be used in the contract. Contractors should request MOH payments for those materials that have an invoice cost of at least $1,000.00. Do not make MOH payments for incidentals such as nuts, bolts, washers, etc.

To request payment for MOH, the Contractor must submit Form 1914, “Request for Material on Hand Summary Sheet,” and Form 1915, “Request for Payment of Material on Hand,” by the last working day of the month or earlier, as agreed by the Engineer and the Contractor at the preconstruction meeting. These forms may be reproduced by the Contractor provided that they are in the same format and contain all the required information and certifications.

Once a Contractor elects to request MOH payments, they must continue to submit Forms 1914 and 1915 on a monthly basis until a zero balance is reached—even if there are no changes from the previous month’s submitted forms.

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Eligible Items

Only nonperishable items are eligible for MOH payments. Nonperishable items are those that do not have a shelf life or whose characteristics do not materially change when exposed to the elements. The following are examples of nonperishable items eligible for MOH payment.

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  • Concrete Traffic Barrier (CTB)
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  • Precast Concrete Box Culverts (PCBC)
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  • Concrete piling
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  • Reinforced Concrete Pipe (RCP)
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  • Illumination poles
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  • Base materials or aggregates stockpiled onsite, or produced and stockpiled specifically for the contract at a non-commercial source in the vicinity of the work locations. (If more than one contract is being supplied, ensure that separate stockpiles are maintained for each contract). For the purpose of MOH payment for the base materials and stockpiled aggregates, a commercial source is defined as any source that supplies base, aggregates, hot-mix asphalt (HMA), or concrete to the general public, while a non-commercial source is defined as a source that does not supply to the general public.)

Transportation costs are eligible for MOH reimbursement when the materials are delivered to the project. Transportation costs may be eligible when Contractors receive the materials at a remote Contractor-owned yard where the Department can monitor the materials. If materials are delivered to a remote Contractor-owned yard, the transportation cost cannot exceed the cost for a direct delivery to the project.

Other materials determined to be nonperishable and approved as such may be considered for MOH payment.

If determined beneficial, separate identifiable stockpiles located at a commercial source may be eligible for MOH payment. In addition, any item considered unique in nature and fabricated specifically for a contract may be considered for MOH payment. Verify that all materials meet contract requirements.

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Acceptable Storage

Ensure that material is accessible and properly stored (e.g., reinforcing steel on wood blocks off the ground.) MOH payments may be made for some products (e.g., precast concrete and steel girders) when stored at the fabrication plant, if the material has been sampled, tested, approved, or certified, and is ready for incorporation into the work.

Ensure that hot-mix and concrete aggregates stored at the Contractor’s plant are not contaminated or comingled with other materials. Unless the Engineer approves an exception, do not make MOH payments for materials stockpiled at a commercial plant that sells or supplies to numerous customers.

The Contractor must physically check quantities shown on the request for payment each month to ensure the materials are located in the stockpile. Inspect and measure the material stockpiled and included in the request for payment as determined necessary. Resolve any quantity discrepancies prior to including the payment for MOH on the monthly estimate.

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Testing and Approval

Ensure that materials are approved and properly tagged or marked. Verify test reports for approved materials, including those stored at approved sites. For prefabricated structural materials with the test method TXTRST that are stored at approved sites run the Material Verification Report (MVR) (CIS26) for verification. This is found on the SiteManager – Report Server (Production). Quality Monitoring (QM) materials are not on the CIS26 report, nor are other materials tested in the labs. If a discrepancy exists between a requested quantity and an approved quantity, email MTD_StructuralDeficiencies@txdot.gov for assistance.

Do not make MOH payments for perishable materials. Perishable materials are materials that have a shelf life or whose characteristics materially change when exposed to the elements.

The following are examples of perishable materials.

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Records and Reports

The Contractor is responsible for maintaining all documentation supporting MOH payments and retaining the documentation until final acceptance of the contract. Contractor documentation must include paid invoices for all MOH within 60 days of receiving MOH payment. The Contractor’s paid invoices must contain:

The Department may conduct audits and examine the Contractor’s recordkeeping system to ensure that accurate records are maintained for the payments requested.

Future MOH payments may be excluded if the Contractor is found in violation of MOH contract requirements. The Form 1259, “Summary Materials Received and Used,” can be used to aid with MOH.

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Contractor’s Responsibility for MOH

To request payment for MOH, the Contractor must submit Forms 1914 and 1915. Do not accept these forms from subcontractors. The prime Contractor may request subcontractor MOH on their behalf. With their submittal, the Contractor must:

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  • determine what items are eligible for MOH payment and only request payment for eligible materials (the unit price requested by the Contractor will not exceed the actual cost of the material as established by invoice, or the total costs for the associated item less reasonable placement costs, whichever is less)
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  • establish a procedure to ensure that plan quantity less placed quantity is not exceeded on the request
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  • include a procedure to determine the quantity “used this period” as requested on Form 1915; and
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  • retain paid invoices for all materials included in any request for MOH payment within 60 days (two estimate cycles).
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Approval for Early Estimates

It is the Department’s desire to pay a Contractor for work through the last working day of the month, However, the use of early cut-off dates for monthly estimates and MOH is a project management practice to manage workload at the Area Office level. Approval for using early cut-off dates is at the District’s discretion. The earliest cut-off date for estimates on is the 25th of the month, with MOH submitted no later than 2 days before the estimate cut-off date. As deemed appropriate, consider eligible items for MOH payment. Deduct from the estimate previous MOH payments if the material for which payment was made becomes unusable or is no longer intended for incorporation into the work, or is sold to the general public.

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Area Office Responsibility for MOH

Contract MOH payments are monitored or audited as follows:

The Contractor must allow Department personnel immediate access to MOH records for all spot checks and process reviews.

Cursory Reviews. Review MOH payment requests received from the Contractor to ensure that materials are eligible for MOH payment. Request an explanation from the Contractor for any apparent discrepancies, such as quantity or price irregularities. The monthly MOH payment request must be reviewed and initialed by the Project Manager, Project Engineer, Assistant Area Engineer, or Area Engineer.

Quarterly Audits. Audit one material item per quarter that has reached the 60-day threshold. If issues are found, increase the number of items verified. On the monthly MOH payment request, indicate which item was checked and initial the document to show that the audit was completed and document the reviewer. In addition to these random audits, conduct audits for cause or as directed by authorized personnel.

If an audit indicates the need for corrective action, the affected Contractor request for MOH payment may be corrected. Notify the Contractor in writing of any corrections made.

If an audit indicates that the Department overpaid the Contractor for MOH, correct the overpayment with a supplemental progress estimate or with the next monthly estimate. Make this correction before making any additional payments to the Contractor.

Use the guidelines listed in the following to conduct audits:

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  1. The engineer or their representative performs audit at the Contractor's office.
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  2. Check eligibility of requested material: nonperishable, test report issued (when required)
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  3. Review documentation to verify quantity and manufacturer
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  4. Review Contractor's producer for determining plan quantity for material
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  5. Review Contractor's procedure for determining how much material was used each month
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  6. Verify Contractor has paid invoices (for all material request for payment) dated within 60 days of receiving MOH payment as part of the quarterly audits.
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  7. Verify material are properly stored in approved stockpiles.

Process Reviews. Conduct process reviews to ensure that the Contractor’s internal process satisfies contract MOH requirements (e.g., record-keeping system, site reviews, or measuring procedures.) The Contractor must have sufficient checks and balances in place to ensure the accuracy of requests for MOH payment. These reviews may be initiated at any time by any appropriate Department personnel, the Federal Highway Administration (FHWA), or any other party with a vested interest in the Department’s financial dealings.

If a process review indicates the need for corrective action, notify the Contractor in writing of corrective actions needed. Consider conducting a complete audit of the Contractor’s records and record-keeping system if the process review indicates serious concerns or possible noncompliance with contract MOH requirements. (Refer to “Contractor Record Audits” for additional information.)

Contractor Record Audits. Normally, the Department audits Contractor records for cause only; however, the Department retains the right to audit Contractor records at any time to ensure contract compliance. The following table lists examples of possible causes for initiating an audit of the Contractor’s records.

Possible Causes for Auditing a Contractor's Records:

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  • The Contractor is suspected of submitting erroneous, inflated, deceptive, or fraudulent requests for MOH payment.
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  • An audit of the Contractor's MOH quantities indicates the possibility of a large-scale error.
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  • A process review indicates a major flaw in the Contractor's record-keeping system.
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  • The Contractor is suspected of willfully neglecting to comply with any of the MOH contract requirements.
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  • The Contractor has indicated, or it is suspected, that the Contractor will file for compensation and use MOH records to support the claim.

Once approved, send a written notice via email or certified mail advising the Contractor of the impending audit. Specify in the notice that the Contractor must allow the Department access to conduct the audit within 7 days of receipt of the notice.

The District office will coordinate the audit with all parties involved. Parties involved may include other Department personnel, the FHWA, or any other party with a vested interest in the Department’s financial dealings.

Ensure that all parties involved in the audit are provided with copies of the audit findings. The District office is responsible for ensuring that any corrective actions identified are implemented.

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