Progress Payments

General
Progress payments are compensation paid to the prime contractor for the value of work performed during a covered period. The LG shall promptly review the contractor’s progress payment requests in accordance with applicable state and federal laws and regulations. In addition, consistent billing by the LG to TxDOT is required for federal-aid projects. A federal-aid project may be defined as an inactive project obligation by the FHWA if no expenditures are made for a year (see
“Project Accounting” in Chapter 2
of this Manual). All requests for federal reimbursements of payments to the contractor by the LG must go through TxDOT.
The following general requirements apply for stockpiled materials, retention for subcontract work and final payment. The
LGPM Guide
provides detailed information and guidelines related to these topics.
  • Stockpiled Materials
     – When the contract provisions provide for stockpiled materials, federal participation is based on the appropriate value of approved specification materials delivered by the contractor to the project site.
  • Retention for Subcontract Work
     – The federal DBE regulation in
    49 CFR §26.29
    requires recipients to include a “prompt pay clause” in all federally funded contracts that requires contractors to pay subcontractors within 30 days of receiving an invoice (10-day requirement in
    Texas Government Code §2251.022
    ) and also ensures prompt return of retainage payment within 30 days after a subcontractor’s work is completed (10-day requirement in Texas Government Code §2251.022).
  • Final Payment
     – By statute [
    23 U.S.C. §121(b)
    ] FHWA cannot make final payment for a project until TxDOT approves the completion of its construction. In addition,
    Texas Government Code Chapter 2251, Subchapter B
    stipulates payment from the LG to the contractor is considered late on the 31st day after certain conditions are met. Late payments to the contractor will be subject to the appropriate interest as determined by the comptroller in accordance with
    Texas Government Code §2251.025
    .
Federal Requirement
  1. 23 U.S.C. §121(a)
    – Authorizes periodic payment of construction costs incurred. Payment may include the value of stockpiled material not yet incorporated into the project.
  2. 23 U.S.C. §121(b)
    – Specifies the final payment may be made after project completion.
  3. 23 CFR §635.122
    – Further defines periodic progress payments and requirements for federal participation in stockpiled material.
  4. 23 CFR §635.122(c)
    – For design-build projects, requires procedures for making progress payments on lump sum contracts to be defined in the request for proposals.
  5. 49 CFR §26.29
    – The USDOT’s disadvantaged business enterprise regulation requires the prime contractor to pay subcontractors for satisfactory work performance within 30 days of receipt of payment from the contracting agency.
State Requirement
  1. 43 TAC §26.33(g)(1)
    – Requires a RMA to use specifications conforming to the latest TxDOT standard specifications on projects connecting with the state highway system.
  2. 43 TAC §27.56(c)(3)
    – Requires a regional tollway authority to use specifications conforming to the latest TxDOT standard specifications on projects with state fund participation.
  3. Texas Government Code §403.071(b)
    – States a claim may not be paid from an appropriation unless the claim is presented to the comptroller for payment not later than two years after the end of the fiscal year for which the appropriation was made. However, a claim may be presented not later than four years after the end of the fiscal year for which the appropriation from which the claim is to be paid was made if the appropriation relates to new construction contracts.
  4. Texas Government Code §2251.021
    – Requires payment to a contractor within 30 days or interest will accrue.
  5. Texas Government Code §2251.042
    – Allows payment of interest involving a claim if the claim is resolved in favor of the contractor.
  6. Texas Government Code §2251.022
    – Requires a contractor to pay a subcontractor not later than 10 days after receiving payment from a governmental entity.
Required Practices
The
LGPM Guide
provides a detailed discussion of the procedures that must be followed by the LG and TxDOT to ensure progress payments are made in a timely manner throughout the construction project.