In accordance with
Article 108-6 of the Specifications, the Contractor is permitted to sublet a portion of the work when approved in writing by the Engineer. In addition, the Contractor may find it necessary to sublet work to certain types of business firms in order to meet the requirements of the contract. Federal Highway Administration requirements establish Disadvantaged Business Enterprises (DBE) program goals for federally-funded projects. Accordingly, a DBE percentage goal is established for each project that includes federal funds. The North Carolina General Statutes establish Disadvantaged Businesses program goals for state-funded projects. Further, the General Statutes establish percentage goals for two specific elements of Disadvantaged Businesses; they are Minority Businesses (MB) and Women Businesses (WB). MB and WB goals are established for each state-funded project. Simply stated, federally-funded projects are single goal projects, DBE goal only, while state-funded projects are dual goal projects, MB and WB goals only.
The Resident Engineer should ensure that the goals established in the contract are met by the Contractor.
PRIME CONTRACTOR SUBLETTING CONDITIONS
The Specifications require that the Contractor shall perform work amounting to a minimum of
40 percent of the original contract amount with his own organization. This is commonly referred as the threshold for the project subletting. In determining the amount of work to be performed by the prime Contractor, the value of items that have been sublet to DBE, MB, or WB Subcontractors and the value of items identified in the contract as
specialty items that have been sublet are to be deducted from the original contract amount prior to computing the percentages.
However, the accumulative total of DBE, MB, or WB items that are deducted in the computation of percentages will in no case exceed the dollar amount of the contract DBE, MB, or WB goal. The dollar value of the DBE, MB, or WB goal equals the total original contract amount multiplied by the respective contract DBE, MB, or WB percentage goal.
Any specialty item sublet to a DBE, MB, or WB firm should be counted as a specialty item and not as a DBE, MB, or WB sublet item. Items of extra work and overruns are not considered in the computation of the amount of work that a Contractor is required to perform with his own work forces. A Subcontractor may sublet any portion of the work that has been sublet to his firm. The subletting of work by a Subcontractor is called second tier subcontracting.
No work can be sublet by a prime Contractor or a Subcontractor without the following conditions being satisfied:
- The Contractor proposing to sublet work shall properly complete the appropriate
Subcontract Approval Form (SAF) for the subcontractor and/or second tier subcontractor and submit it to the Resident Engineer for approval prior to beginning any work associated with the contract.
- Subcontract Certification portion of the SAF shall be completed on all Subcontract Approval Forms (SAF) for state
and federally-funded highway construction projects.
- DBE/MBE/WBE Subcontractors should be identified on the Subcontract Approval Form for work sublet to qualified DBE, MBE, and WBE Subcontractors. If the Subcontractor or second tier Subcontractor is not a DBE, MBE, or WBE the box beside "NONE" should be marked.
The proper procedures to follow in the subletting of work are to be discussed at the Preconstruction Conference. The Contractor should be advised that he may find an electronic version of the Subcontract Approval Forms for use in requesting approval of any subcontract on the Construction Unit’s website under
Resources and Forms.
The Specifications require the Contractor to submit a certified copy of the actual subcontract agreement only when directed by the Engineer. The Resident Engineer or Contract Administrator or his delegate shall review 10%, with a minimum of two, of the actual subcontract agreements to the satisfaction of the Resident Engineer. The agreements received would be in addition to those received under the requirements for DBE, MBE, and WBE Subcontractors.
RESIDENT ENGINEER RESPONSIBILITIES
Upon receipt of a request by a Contractor to sublet work, the Resident Engineer is responsible to ensure that: (they have the proper forms found in this manual to give to Contractor.)
- The Subcontract Approval Forms and attachments have been properly completed. Instructions for proper completion are located on the Construction Unit Website under Resources and Forms.
- Work designated in the contract to be performed by specific DBE, MBE, or WBE Subcontractors is not performed by others. A listing of items of work to be performed by specific DBE, MBE, or WBE Subcontractors can be found in the contract preceding the listing of contract items.
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The percent of work remaining to be performed by the Contractor must be at least 40 percent of the original contract amount minus any specialty items and DBE, MBE, and WBE items that have been sublet. Extra work and/or overruns sublet are not to be used in any percentage computations. A Subcontractor can only sublet work that has been subcontracted to him by the Prime Contractor. There are no percentage restrictions on the amount of work which a Subcontractor may sublet. However, subletting by DBE, MBE, and WBE Subcontractors will be governed by the Special Provisions relative to DBE, MBE, or WBE participation which may be applied towards the contract goal.
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When a portion of the contract quantity is sublet, the unit price for the item of work is the same as the contract price.
- When a partial item of work is sublet, the monetary distribution reflects the work to be performed. The Resident Engineer may request a copy of the actual subcontract agreement to verify prices submitted.
- The firm to which the work is being sublet is must be a prequalified Bidder or Subcontractor. If a certified DBE, MBE or WBE firm is sublet work, then that firm must be a prequalified Bidder or Subcontractor.
The listings of prequalified Contractors, Subcontractors, and certified DBE, MBE, and WBE firms are maintained electronically and can be reviewed utilizing the
Directory of Transportation Firms on the DOT website. Any firm currently listed as a prequalified Bidder or Subcontractor is acceptable to perform subcontract work on NCDOT projects. In addition, any certified DBE, MBE, or WBE must be listed as a prequalified Bidder or Subcontractor in the Directory of Transportation Firms to be acceptable to perform subcontract work on NCDOT projects.
A firm can be considered for inclusion in the Department's list of known Subcontractors by submitting a list of available equipment, a brief description of the company's work history, and a list of the firm's owners/principals, along with brief resumes for those individuals. The firm shall submit the information to the Resident Engineer, who will forward it to the Contractual Services Engineer.
After reviewing the Contractor's submitted Subcontract Approval Form, the Resident Engineer should verify the amount of work performed by the Prime Contractor is within the
40 percent threshold, determine that the submittal is in order, and sign the form for approval.
The Resident Engineer should retain all original forms in the project files.
In those instances where a second tier Subcontractor is working on a federally-funded project, certified payrolls are to be submitted to the Resident Engineer’s office. The payrolls shall contain the following statement:
“(Name of Subcontractor), Second Tier Subcontractor for (Name of Contractor), Prime Contractor.”
Once a Subcontract Approval Form (SAF) has been approved, it will remain in force until a change is initiated by the prime Contractor. If a Subcontractor cannot or will not perform all the work, the prime Contractor must submit a new Subcontract Approval Form (SAF) to document the quantity of work performed by the Subcontractor. The new SAF shall be completed in its entirety and numbered in succession to the most previous SAF. The following statement shall also be included on the new SAF,
“This documents the work actually performed under approved SAF Number (#) .” This new SAF must be submitted regardless of whether the remainder of the work will be performed by the prime Contractor or by another Subcontractor.
Until a new SAF is submitted by the prime Contractor, the original Subcontractor is the only firm authorized to perform the indicated work. In the event no work was performed by the original Subcontractor and the identical work is to be performed by another Subcontractor, a new SAF should be submitted and numbered in succession. The following statement shall also be included on the new SAF,
“This Request for Subcontract replaces all work previously sublet on SAF Number (#) .” Should additional work be sublet to a previously approved Subcontractor, a new SAF should be submitted that lists only the additional work. The SAF should be numbered in succession to the most previous SAF.
Every SAF shall be completed in its entirety, including the computations to be completed by the Resident Engineer. All SAF's should be numbered chronologically in the order in which they are submitted.
Revised SAF's shall not be submitted. Section 107-9 of this Manual should be referenced for subcontracting of work within Railroad rights-of-way.
TITLE VI REQUIREMENTS
The NCDOT Title VI policy requires the FHWA 1273 "Required Contract Provisions" and / or the Title VI and Nondiscrimination language must be included in their entirety as part of the actual subcontract agreement between the Contractor and the Subcontractor and between the Subcontractor and the second tier Subcontractor. For contracts with federal funding,
both the Title VI and Nondiscrimination language and the FHWA 1273 are required to be incorporated in subcontract agreements. Subcontract agreements for state funded contracts require the inclusion of
only the Title VI and Nondiscrimination language. The required language shall not be attached as an exhibit or appendix.
The Resident Engineer or the Contract Administrator is responsible for reviewing a sample of the actual certified copies of the subcontract agreements to verify the Title VI and Nondiscrimination language and the FHWA 1273 have been incorporated in their entirety, as stated above. The Resident Engineer or Contract Administrator or his delegate shall review 10%, with a minimum of two, of the actual subcontract agreements to verify the inclusion of Title VI and Nondiscrimination language and FHWA 1273, when applicable. The subcontract agreement of the first approved subcontract shall be reviewed and the remaining subcontract agreement(s) to be reviewed shall be randomly selected by the Resident Engineer or Contract Administrator. At least one subcontract agreement for one DBE/MBE/WBE firm and one non DBE/MBE/WBE firm shall be reviewed. The Resident Engineer or Contract Administrator shall notify the Contractor of the actual subcontract agreements to be submitted for review. Documentation of the findings shall be entered on the
NCDOT Title VI Compliance Checklist located in SharePoint on the project team site.
Contractors' Responsibilities:
Contractors are responsible for informing its subcontractors of their rights under Title VI and applicable Federal Regulations.
- Post NCDOT's Notice of Nondiscrimination (English Version and Spanish Version) and the Contractors' own Equal Employment Opportunity (EEO) Policy on all jobsite and field office bulletin boards.
- Physically incorporate the required Title VI and Nondiscrimination clauses into all subcontracts on federally-assisted and state-funded projects and ensure inclusion by subcontractors into all their lower-tier subcontract agreements.
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Physically incorporate the FHWA-1273, in its entirety, into all subcontracts (at all tier levels) on
Federal-aid contracts only.
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Provide language assistance services, at no cost, to LEP employees and applicants
Resident Engineers' Responsibilities:
Resident Engineers are responsible for ensuring that Contractors (at all tier levels) have informed subcontractors of their rights under Title VI Nondiscrimination and FHWA 1273 contract requirements.
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Review 10 percent (or a minimum of two) subcontracts to confirm that Title VI Nondiscrimination and/or FHWA 1273 language have been incorporated into subcontract agreements.
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Confirm that Contractors post the following policy statements: 1) Contractor's EEO Policy Statement (for state and federal projects); 2) NCDOT Notice of Nondiscrimination and Accessibility Rights (for state and federal projects); and 3) Required Federal-Aid Posters for Federal-Aid Projects.
REQUIREMENTS FOR SUBLETTING CONTRACTS
The following requirements are applicable to the subletting of contracts:
- The prime Contractor must perform with his own organization work amounting to not less than 40 percent of the total original contract bid minus subcontracted specialty items unless otherwise specified by a special provision.
- The prime Contractor and first tier Subcontractors may sublet work with the approval of the Engineer.
- Neither the Contractor nor any Subcontractor may enter into any written or oral equipment lease or rental agreement, materials purchase agreement, and/or labor agreement that circumvents the provisions of Article 108-6 of the Specifications.
- A lease or rental agreement for equipment entered into by a Contractor or Subcontractor based upon payment for a unit of work, production basis, will be considered subletting of the contract unless the lease or rental agreement is with a commercial equipment company, manufacturer, or commercial leasing agency approved by the Engineer.
- An equipment lease or rental agreement that is based upon reasonable unit prices per unit of time will not be considered subletting of the contract. This type of agreement will be considered a bona fide equipment lease or rental agreement.
- It is considered proper and acceptable for the following parties to enter into bona fide lease agreements for equipment:
A. Prime Contractor with approved Subcontractor
B. Prime Contractor with another Contractor who is not approved to perform work on that particular project
C. Approved Subcontractor with another Contractor who is not approved to perform work on that particular project
D. Prime Contractor with an equipment dealer
E. Approved Subcontractor with an equipment dealer
F. Approved Subcontractor with approved Subcontractor
- It is considered proper and acceptable for the following parties to enter into lease agreements for fully operated equipment:
A. Prime Contractor with approved Subcontractor
B. Approved Subcontractor with approved Subcontractor
C. Prime Contractor or approved Subcontractor with an independent, commercial trucking firm
D. Prime Contractor or approved Subcontractor with an owner/operator of hauling equipment, such as trucks
- Proposed lease agreements for fully operated equipment between the following parties are not considered proper and will not be approved unless special conditions are deemed necessary and are approved by the Engineer:
A. Prime Contractor and another Contractor who is not approved to perform work on that particular project
B. Approved Subcontractor and another Contractor who is not approved to perform work on that particular project
C. Prime Contractor and equipment dealer
D. Approved Subcontractor and equipment dealer
E. Approved DBE/MBE/WBE Subcontractor and prime Contractor
F. Approved DBE/MBE/WBE Subcontractor and approved Subcontractor
- With the exception of a bona fide lease agreement, no agreement either written or verbal can exist between the prime Contractor and an unapproved Contractor or equipment deal.
- With the exception of a bona fide lease agreement, no agreement either written or verbal can exist between an approved Subcontractor and an unapproved Contractor or equipment dealer.
- Work accomplished by the prime Contractor's organization has to be performed with bona fide employees of the prime Contractor and with equipment either owned or leased by the prime Contractor. Materials have to be negotiated for, purchased, and paid for by the prime Contractor unless this portion of the line item is sublet to an approved Subcontractor.
- Work accomplished by an approved Subcontractor has to be performed with bona fide employees of the approved Subcontractor and with equipment either owned or leased by the approved Subcontractor. Only that item or portion of an item of work can be sublet to a Subcontractor that is going to be performed by the Subcontractor, or an approved second tier Subcontractor. The furnishing of materials necessary to accomplish the work sublet to a Subcontractor must be the responsibility of the Subcontractor unless the subcontract provides for the prime Contractor to furnish the materials. The Subcontractor must be responsible for the negotiation and payment of the materials unless otherwise approved by the Engineer. Material purchasing mechanisms deemed necessary to assist the Subcontractor in the securing of materials may be used if the particular mechanism is approved by the Engineer and there is no intent to circumvent the subcontracting procedures. The following material purchasing mechanisms are approved to assist Subcontractors in securing materials:
A. Joint payment checks from the prime Contractor to the Subcontractor and a supplier
B. Use of the prime Contractor's purchasing volumes discounts to secure Subcontractor's materials
- Items or portion of an item of work sublet by the prime Contractor to a Subcontractor must be performed by that particular Subcontractor unless a change is approved by the Engineer.
- To be considered bona fide employees of a Contractor:
A. The employees must be under the direct management control of the Contractor, must receive their wages and appropriate fringe benefits directly from the Contractor by appropriate payroll check, and must understand and acknowledge when interviewed that they are in the employ of the Contractor, or
B. The employees may be supplied to the Contractor by a labor service, agency, or pool through an agreement between the two parties. In this case, it is still the employing Contractor's responsibility to ensure compliance with all the contract labor standards clauses and contract minimum wage rates. The employing Contractor shall be responsible for providing all required payroll data and the employing Contractor shall remain responsible for executing all required payroll certifications.
