Subcontractor and Materials Supplier Non-Payment Notices

Ensure subcontractors submit all complaints in writing. The complaint should identify specifics regarding the subcontract language, items of work in question, and the subcontractor’s attempts to obtain payment from the prime Contractor. Notify the subcontractor that the complaint will not be accepted until the subcontractor provides satisfactory written evidence they have contacted the prime Contractor and its payment bond surety in an attempt to resolve the issue
(see
Prompt Pay
Sample Letter CST Support page on Crossroads internal access only).
 A sworn statement of account notice is required to be sent to the bonding company under
Tex. Gov. Code §2253.041
, “Public Work Performance and Payment Bonds”. The applicable portion corresponds to Subchapter C, “Notice Requirements”. We recommend that
the
 statement include the project information and location.
If the subcontractor is a DBE, the District should contact the Civil Rights Division for initial guidance. Also, TxDOT’s responsibility (in addition to what service CIV can offer) is limited to providing the subcontractor/supplier the name of the Bonding Company, their listed mailing address, and the bond number.
If a complaint is accepted, follow the procedures outlined below:
  1. Verify the Department has approved the work in question.
    • if the Department has not approved the work or materials in question, notify the prime Contractor and subcontractor that no prompt payment issue exists. *
    • if the Department has approved the work, determine if the Department made payment. If not, make payment to the prime Contractor and notify the parties involved of the resolution. *
  2. If the Department paid for work or materials, determine if a dispute exists by referring to prompt payment certifications and other supporting information. NOTE: Supporting information aids in the determination of a dispute or resolution to a dispute that may include a subcontractor. Examples: subcontractor agreements (includes quantities and unit prices) or supplier agreements, invoices, subcontract or supplier revisions (change orders), canceled checks, identification of billing errors, etc.
    • if YES, a dispute is determined to exist, go to step 3.
    • if NO, a dispute is determined not to exist, go to step 4.
  3. Advise the subcontractor that they may file against the
    surety payment bond
    • forward the subcontractor's letter of complaint to the prime contractor advising it of its responsibility to work with the subcontractor to resolve the dispute.
    • provide copies of the letter to the prime contractor, subcontractor, and the
      surety payment bond.
       *
  4. Request payment or justification for non-payment.
    • if the prime contractor makes payment or provides documentation that substantiates the dispute, forward the response to the subcontractor, and advise that payment was made, or a dispute exists. Send a copy of the subcontractor notice to the
      surety payment bond
      . In instances of a dispute advise the parties it is the responsibility of the parties involved to resolve the issue. *
    • if the prime contractor has not made payment and does not provide notification of a dispute within the timeframe specified, initiate the appropriate administrative action. Possible administrative actions include suspending work, withholding all or a portion of an estimate, withholding project acceptance, placing the prime contractor in default for breach of contract, or other actions deemed appropriate.
    • set a deadline.
  5. Second-tier subcontractor complaints should be forwarded to and addressed by the prime contractor, with a copy of the prime contractor's notice sent to the payment bond surety.
  6. Ensure the prime contractor and subcontractor receive the notices associated with prompt payment prior to the 20th calendar day from the date of the subcontractor's written notice of complaint.
* No further Department action necessary related to prompt payment.