PURPOSE
One critical element of successful cost control is timely, accurate payments to the Contractor for completed contract work and completed change order work. Monthly progress payments to the Contractor throughout the construction period must be administered in accordance with the contract documents. BOE’s Master Specifications cover progress payment estimate due dates, payment allocation for mobilization, the process for withholding payments, procedures for final payment and retention release, and other details governing progress payments. Contractor progress payment procedures used throughout the construction period are necessary to minimize delays and disputes arising over the handling of payments.
The purpose of this Procedure is to establish the process for making monthly progress payments to the Contractor.
REFERENCES
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RESPONSIBILITIES
Bureau of Contract Administration (BCA): BCA is responsible for reviewing the Contractor’s Unit Bid Prices and approving the Schedule of Values. BCA is also responsible for the approval and processing of all monthly progress payment estimates and providing a copy to the Construction Manager for information only. For contracts awarded by the Department of Recreation and Parks (RAP), the Project Manager and Construction Manager approve the monthly progress payment estimates. Any problems encountered in the normal processing of monthly progress payment estimates should be directed to the Payment Section of BCA’s General Services Division.
Project Manager (PM): On projects with multiple funding sources, the PM is responsible for identifying the appropriate funds and accounts and informing the Payment Section of BCA for inclusion in the progress payment.
Construction Manager (CM): The CM is responsible for reviewing the monthly progress payment estimates and discussing any concerns or discrepancies with the Lead Inspector (LI). The CM is also responsible for notifying the LI of the need to reduce or withhold the monthly progress payment(s) because of the Contractor’s failure to meet specific contract requirements such as keeping record drawings current or making timely construction schedule submittals. In addition, the CM should confer with the LI to anticipate quantity overruns on Unit Price projects so that there is no payment delay for work completed.
Contractor: Upon approval of the project’s baseline construction schedule, the Contractor is required to submit to BCA, for approval, a detailed schedule of the Contractor’s Unit Bid Prices (for Unit Price contracts) or a Schedule of Values (for Lump Sum contracts). The Schedule of Values is a schedule of cost loaded construction activities equal, in total, to the lump sum bid amount for the project.
PROCEDURE
Establishing the Payment Schedule
There are generally two types of payment schedules established for construction contracts: a Unit Price Payment Schedule for use on Unit Price contracts and a Schedule of Values for use on Lump Sum contracts.
Unit Price Payment Schedule: On Unit Price contracts or unit price portions of a Lump Sum contract, the quantities listed in the Schedule of Work and Prices will not govern final payment to the Contractor. Rather, the LI will track the actual quantities of contract items completed each month and include these in the Contract Progress Payment Estimate (CPPE). At the completion of the project, if the actual quantities show either an increase or decrease from the quantities listed in the Schedule of Work and Prices, the actual contract unit prices will prevail subject to the provisions of General Requirements, Section 01254 – Change Orders. The LI and CM must closely monitor the quantity of work performed by the Contractor. Should it be necessary to exceed the quantities listed in the Schedule of Work and Prices, the CM should be prepared to issue the necessary change order(s) in a timely manner so as to not delay the progress of the work.
Schedule of Values: On Lump Sum contracts, the approved Schedule of Values is used as the basis for determining the progress payment. The Schedule of Values is a schedule of cost loaded construction activities equal, in total, to the Contractor’s lump sum bid. Upon approval of the construction baseline schedule, the Contractor shall, typically, proceed to cost load the construction activities to generate a Schedule of Values. Each construction activity shall be encoded to its bid item. The total of the cost loaded activities for each bid item shall equal the amount bid for that item. The total of the Schedule of Values shall equal the current contract value at all times. The Contractor shall submit the Schedule of Values to BCA for approval. After approval, the Contractor shall use the Schedule of Values to estimate the value of work performed each month. At any time during the progress of the work, the LI reserves the right to review the cost loading of the schedule and direct necessary revisions. For less complex projects with a smaller dollar value, the CM may find that a cost loaded schedule is not warranted.
Processing Progress Payments
Field Procedure
The Contractor shall submit its progress payment request for work, acceptably completed during the payment period, to the LI on the date designated each month.
The LI will review the Contractor’s progress payment request; discuss with the Contractor any disputed items; verify quantities and amount of work acceptably completed; verify materials or equipment delivered but not incorporated into the work (that may be eligible for payment); and any change order work acceptably completed, for which a final change order has been received. The LI may solicit input from the PM or CM on the Contractor’s progress payment request, particularly on large or complex projects.
Upon resolution of any disputed items and agreement on the items to be paid, the LI will prepare BCA Form No. 248A - Contract Progress Payment Estimate (CPPE) and deliver it to the Principal Inspector (PI) for review and signature.
The PI will sign, prepare the routing slip, and forward the CPPE to the Payment Section of BCA.
For contracts awarded by the Department of Recreation and Parks (RAP) Board, the PM will forward the CPPE to the Payment Section of RAP.
Office Procedure
The Payment Section of BCA should enter the date received on the routing slip and review the CPPE for the following:
Mathematical computations
Verification of Contractor’s insurance
Final change orders to be paid
Total payment(s) to date
Total retention to date
Disputed funds to be withheld
(Note: On projects with multiple funding sources, the Payment Section will forward a copy of the CPPE to the appropriate BOE Program to identify the additional funding, accounts, etc.)
Upon review and verification of the CPPE, the Payment Section should note the date on the routing slip and forward the payment to the Division Manager for signature on behalf of the Inspector of Public Works.
The Payment Section should then forward the completed and signed CPPE to the Office of Accounting for payment and send a copy to the CM for their information.
The Office of Accounting will review the CPPE for completeness, mathematical errors, insurance, Stop Notices received, and disputed monies, and forward the payment to the Office of the Controller for issuance of the check to the Contractor.
The Office of the Controller mails the check to the Contractor for the amount indicated in the CPPE, minus any disputed funds or monies held for Stop Notices.
The total payment processing time, from the day the LI approves the Contractor’s progress payment estimate to the day the City issues the check to the Contractor should not exceed 30 calendar days.
Status of Payment, after LI approval, is available at BCA’s website using the following link: https://bca.lacity.org/Payments/payments_search.php
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