PURPOSE
The purpose of this procedure is to document the method for retaining a portion of funds from the Contractor's invoiced amounts, to ensure that the Contractor will complete all of its work and the subsequent release of that retention in compliance with California Public Contracting Code, Section 7107.
REFERENCES
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RESPONSIBILITIES
Construction Manager (CM): The CM is responsible for working with the Bureau of Contract Administration (BCA) to evaluate the amount of retention to ensure that the proper amount is retained relative to the work performed.
Bureau of Contract Administration (BCA): BCA is responsible for making the determination that the retention can be reduced and the final retention can be released, less disputed monies, within sixty (60) days of the date of the final Field Acceptance (FA).
Contractor: Contractor is responsible for requesting a reduction in retention.
PROCEDURE
On a monthly basis, as construction work progresses, the City will make a progress payment (See related Procedure 19.2) to the Contractor equal in amount to the approved estimate, less a retention of five percent (5%) and the total of all previous payments. Upon acceptable completion of fifty percent (50%) of the original contract amount, the Contractor may request that BCA at its sole discretion, discontinue further retention on the original contract value for all subsequently approved payment claims, provided work is proceeding at a satisfactory pace and of satisfactory quality.
On January 19, 2001, the Board of Public Works (BPW) adopted a policy for expediting the closeout of construction projects (Attachment 25.3-1). The following closeout procedures are the result of that policy.
Final Retention is not released until the project is complete. Upon completion of the construction work, all required inspections, and physical corrections required by the Final Inspection Correction List, the Final Inspector will issue a Statement of Completion. The issuance of the Statement of Completion shall establish the date of final FA of the project.
Within sixty (60) days of the date of final FA, all retention funds will be released to the Contractor less any disputed monies retained under the provisions of the Contract such as:
Potential penalties from BCA, Office of Contract Compliance (Labor and Business Inclusion Section - OCC)
Withholdings requested by the CM
Liquidated Damages, as applicable
Final Acceptance of the project by the BPW may or may not occur at the same time as the release of retention funds but will occur as soon as possible following final FA.
The following is a chronology of events as they occur in the closeout procedure:
Upon acceptable completion of all work, the Lead Inspector (LI) will request a Final Inspection.
Final Inspection will be conducted by the BCA Final Inspector (FI) and a Final Inspection Correction List will be issued to the Contractor.
The Contractor is to complete all corrections contained in the Final Inspection Correction List. If the Contractor does not complete all corrections within thirty (30) days of issuance of the Final Inspection Correction List, the FI may conduct another Final Inspection and issue another Final Inspection Correction List.
The Contractor is to forward the Final Subcontracting Report and all outstanding Certified Payrolls to OCC as soon as possible following Final Inspection.
At the time of Final Inspection, the Project Administration Section of the BCA will generate a draft copy of the Final Acceptance Board Report.
Upon completion of all physical corrections required by the Final Inspection Correction List, the FI will issue a Statement of Completion for the project.
Issuance of the Statement of Completion shall establish the date of final FA and as a result, it establishes the completion date of the project.
In accordance with the Public Contract Code and terms of the contract, BCA will release retention, less any disputed monies, to the Contractor within sixty (60) days of the FA date.
Retention will be released, less any disputed monies (i.e. potential penalties from OCC, withholdings requested by the CM, liquidated damages, etc.).
Failure by the Contractor to forward Final Subcontracting Reports, Certified Payrolls, or to sign final change order(s) will result in funds being held in retention until such time as all administrative processes have been completed. Retention release shall not be tied into final change order(s) unless there are potential liquidated damages.
Final Acceptance by the BPW shall take place upon completion of any investigation(s) by OCC and/or negotiations of final change order(s) by the Bureau of Engineering (BOE).
The Contractor has direct influence on the FA of a project. The following are items for which project acceptance and/or full release of retention may be delayed:
Failure of the Contractor to complete items of work listed on the Final Inspection Correction List within thirty (30) days of receipt
Penalty investigation(s) by OCC into potential illegal substitution of Subcontractor(s)
Investigation(s) of potential violation(s) of labor laws
Failure of the Contractor to submit the Final Subcontracting Report immediately following Final Inspection
Failure of the Contractor to submit all certified payrolls immediately following Final Inspection
Failure of the Contractor to settle final quantities and/or final change order(s) with the BOE
The CM also has a direct influence on the Final Acceptance of the project. If the negotiations of change orders or disputes are not successful within thirty (30) days following Final Acceptance by the FI, the CM will work with the LI to withhold sufficient retention money. The CM will continue negotiations, elevate the issue in accordance with the Issues Resolution Ladder as necessary, and if an impasse is reached, a unilateral change order may be required to continue the Project Closeout.
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