1. Contractors may periodically submit payment requests, but no more than once a week, for work completed; when unit prices are specified in contract documents a request for payment must be based upon the quantity completed. Specific payment submission requirements will be stated in the contract documents and must be followed.
- A retainage of no more than 5% of the earned progress payment is to be withheld from the contractor’s payment when the contractor has obtained a payment and performance bond. Ark. Code Ann. § 22-9-604. For projects under $20,000, where a payment and performance bond is not required, a larger retainage may be negotiated.
- No retainage is to be withheld from payments made on account of materials or equipment stored on the job site or in a bonded warehouse and used in the job as required by the construction contract. Ark. Code Ann. § 22-9-604(d).
- For contracts not based on a fixed sum, it is important to be aware of the formulas for calculating total compensation and progress payments as described in the contract. The order of calculations can make a difference. For this reason, the contractor’s calculations should be checked against the contract language or the mathematical process described in the contract.
2 .Unless otherwise provided in the contract documents, payments will be made on account of materials or equipment not incorporated in the work, but delivered and suitably stored at the site if approved in advance by the campus or unit; payments may similarly be made for materials and equipment suitably stored at some other location if agreed upon by the campus or unit in writing; payments for materials or equipment stored on or off the site will be made after the contractor submits a bill of sale, or such other procedures deemed satisfactory by the campus or unit and the design professional; payment will establish the Board’s title to such materials, equipment or otherwise, and protect the Board’s interest, including applicable insurance and transportation to the site for materials and equipment stored off-site.
3. Unless provided otherwise in the contract, a properly supported payment request, made in accordance with the contract, must be processed by design professionals within five working days, and must be processed for payment by the campus or unit within five additional working days, after allowing for time for transmittal of the request. Ark. Code Ann. § 19-4-1411.
4. Change Orders. The process specified in the contract documents must be followed. This will generally entail some or all of the following:
- Written requests, prepared by the design professional and approved by the campus or unit, describing:
- Details of the work or materials to be added, deleted or modified;
- Amount of the adjustment in the contract sum and the basis for calculating the adjustment;
- Extent of the adjustment in the contract completion time; and
- Other changes to terms and conditions of the contract documents.
- The contractor shall present an itemized accounting together with appropriate supporting data to consider additions or deductions to the contract amount including, but not limited to, the following:
- Costs of labor, including social security, old age and unemployment insurance, fringe benefits required by agreement or custom, and worker or workmen’s compensation insurance.
- Costs of materials, supplies and equipment, including cost of transportation, whether incorporated or consumed.
- Rental costs of machinery and equipment, exclusive of hand tools, whether rented from the contractor or others.
- Costs of premiums for all bonds and insurance, permit fees, and sales, use of similar taxes related to the work; and
- Additional costs of supervision and field office personnel directly attributable to the change.
- The burden of proof for a cost adjustment rests on the contractor. The campus or unit or its representative has the right to inspect and audit the books and records of the contractor to verify the propriety of a granting a change order request.
- Compute requests for changes in the contract sum, whether additions or deductions, in accordance with the contract requirements. The following is a sample method.
- For work performed by the contractor:
Net cost of materials A State sales tax B Net placing cost C W.C. Insurance and FICA tax D A+B+C+D Overhead and profit % multiplied by (A+B+C+D) E Allowable bond premium F Total Cost A+B+C+D+E+F
- For work performed by the contractor:
- If the change requires additional funding for the project and an MOF was required, amend the MOF.
- If the change increases the scope or cost of the project, the payment and performance bond must be amended or endorsed to cover the expanded scope or cost.
- Any change that expands or extends the contractor’s obligations must be approved by the surety on the performance bond.