108.1 Subletting of Contract (for Sec 108.1)

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The prime contractor is obligated to do a specified portion of the work, as indicated in Sec 108.1.1. Any exception to this clause of the contract must be approved by the Division of Construction and Materials and a change order must be issued to establish the revised terms.

Specifications permit the contractor to utilize approved subcontractors to perform up to 70 percent of the work under subcontract agreement. The Commission is not a party to the subcontract agreement, but holds final approval on all subcontract requests.

108.1.1 Review and Approval of a Subcontract Request

When a contractor desires to sublet a portion of the work, the request will be submitted to the resident engineer on Request to Subcontract Work (Form C-220). The resident engineer, or a designee assigned by the District Construction Engineer, shall perform the following review on all subcontract requests:

1. Check all information on the header for accuracy and determine if the request a) involves a 2nd tier relationship, b) is for a DBE subcontractor, or c) includes any line item with a unit price or quantity that differs from the contract. If any of those three situations apply, then the request must include the subcontract agreement between the prime and the sub. For 2nd tier requests, the agreement between the 1st and 2nd tier subcontractor should also be submitted.
2. For DBE requests, verify that the unit price and quantity matches what is on the DBE Identification Submittal Form. If there are line items listed on the C-220 for a DBE that go beyond the DBE Identification Submittal found in the contract, verify whether they can be counted for DBE credit and if they do not count, a separate C-220 should be submitted for these line items. For more information on DBE requests, refer to the article on DBE Subcontracting. If additional DBE subcontractors, suppliers, manufacturers or brokers are proposed by the prime contractor after the project commences, the engineer should work with the contractor to complete the "DBE Change" form so that the total utilization of DBEs can be accounted for on the project towards MoDOT’s overall statewide DBE goal attainment. In addition, any added DBEs need to be evaluated for CUF.
3. The Line No. and item Description should be as shown in the contract. However, the Quantity and/or the Subcontracted Unit Price will often differ from the contract; this is acceptable as long as they match the values in the subcontract agreement between the prime and the sub. Additionally, in rare cases, even the unit of measure might differ. For example, let’s say the contract line item is Diamond Grinding – 10,000 SY @ $3/SY = $30,000, yet the C-220 shows “Diamond Grinding (per hour)” with a quantity of 100 @ $250 = $25,000. This is acceptable if those are the terms in the subcontract agreement. Since there is not a field to show a revised Unit of Measure, the form instructions require the contractor to state the revised unit of measure in the Description. Also, even though their subcontract agreement may not include an estimated quantity, insist that your contractor provide an estimated quantity on the C-220. All of the above data is necessary for AWP to accurately track the total percent sublet on 1st tier subcontracts.
4. Verify that all 1st tier requests include all work they plan to perform, as well as all work they plan to sublet to a 2nd tier sub. The 2nd tier request will only list items the 2nd tier plans to perform. See EPG 108.1.2 Second Tier Subcontracting and EPG 108.1.3 Disadvantaged Business Enterprise Subcontracting for more information.
5. Verify that the requested subcontractor is on the approved Subcontractor List on the Bid Opening Info page under the Documents section and is qualified as a DBE (if the DBE box is checked) on the MRCC directory page. Refer unapproved subcontractors to the Perform Subcontracting Work webpage. If the requested subcontractor is performing a Professional Service, refer to EPG 108.1.4 Professional Service.
6. For Federal Aid projects, verify that the subcontract request is accompanied with a completed Subcontractor Certification Regarding Affirmative Action form, and a document listing the name, address, and telephone number of the subcontractor's EEO Officer on the subcontractor’s letterhead.
7. Confirm the request has been signed by an authorized representative of the prime contractor.
8. For federal aid projects, the prime contractor is required by federal statute to insert the contract Federal provisions and wage rates (including FHWA 1273) in all subcontract agreements. The reviewer should perform a random check on submitted subcontract agreements to help ensure the prime is meeting this requirement.
9. If all information is correct and all requirements are met, promptly enter the subcontract information into AASHTOWARE Project (AWP). Verify that the subcontract limit has not been exceeded (A pop-up notice will occur in AWP). Apply the MoDOT approval signature to the form. Save the approved subcontract request electronically according to current policy, with an electronic copy sent to the contractor as an attachment to an email.
10. If any of the information on the form is incorrect, or if approval cannot be granted for any reason, the contractor should be notified immediately with an explanation so they can correct the form or take other actions to proceed without delay. Once the subcontract request is approved and work begins, work performed by the subcontractor will be recorded in AWP daily on the Daily Work Reports (DWR) work items tab, with the subcontractor designated on the contractor line.

Subletting Limitation

The self-perform requirement for prime contractors is a minimum of 30% by specification which is also the federal requirement. The minimum requirement is tracked by the C-220 request to subcontract forms. No self-perform re-evaluation will be required for contract change order adjustments. The prime contractor is allowed to purchase materials for subcontractor’s work. The material purchased by the prime for the subcontractor should be clearly indicated on the C-220 subcontract form.

108.1.2 Second Tier Subcontracting

Upon approval from the prime contractor, subcontractors may sublet a portion of their assigned work to another subcontractor. This relationship is called “2nd tier subcontracting”. A separate C-220, submitted by the prime, is required for 2nd tier subcontract requests. The contractor shall disclose the name of the 1st tier subcontractor on the form.

The C-220 for the 1st tier subcontractor should list all of the work items they plan to perform, as well as all work they plan to sublet to their second tier subcontractors. The quantity and unit price for each line shall be that designated in the subcontract agreement between the prime contractor and the first tier subcontractor. The C-220 for the 2nd tier subcontract work lists only the work the 2nd tier sub will perform, and shows the quantity and price from the subcontract agreement between the 1st and 2nd tier subcontractors.

AWP will use the total of all work sublet to 1st tier subcontractors to determine the total percent sublet. The total for the 2nd tier work will not be included in that calculation since 2nd tier work is already included in the 1st tier total.

108.1.3 Disadvantaged Business Enterprises (DBE) Subcontracting

Note that compliance with Sec 108.1.1 and DBE goals are distinctly separate issues and are based on different requirements, as stated in this article. Most contracts with federal participation include a goal for the amount of work to be awarded to disadvantaged business enterprises (DBE). At the time of bid, all bidders are required to list on the DBE Identification Submittal Form all proposed DBE subcontractors, suppliers and haulers to be used on that contract, including the amount for each line item on each subcontract. If the totals do not meet or exceed the goal, the bidder must document all good faith efforts to meet the goal. After award of the contract, MoDOT's Business Development and Compliance Division must approve any change to the DBE commitment. In addition, all bidders must submit the DBE and Non-DBE Subcontractor Reporting Form. The DBE and Non-DBE Subcontractor Reporting Form will be due by the last day of the month of the letting being reported.

Once a project is awarded, the contractor must submit a Request to Subcontract Work on Form C-220 to the RE for all DBE subcontractors listed on the DBE Identification Submittal Form with the bid. There may be changes proposed with a C-220 that require BDC pre-approval and others that do not. If additional DBE subcontractors, suppliers, manufacturers or brokers are proposed by the prime contractor after the project commences, the engineer should work with the contractor to complete the DBE Change form so that the total utilization of DBEs can be accounted for on the project towards MoDOT’s overall statewide DBE goal attainment. In addition, any added DBEs need to be evaluated for CUF.

The following are items that require BDC approval:

  • Contractor proposes to eliminate one or more DBEs initially committed on the DBE submittal form (see DBE Termination Form),
  • Contractor proposes a reduction in the quantities for DBE firms initially committed on the DBE submittal form,
  • Propose additional DBE’s beyond the DBE firms initially committed on the DBE submittal form,
  • Increased quantities for DBE’s from what was originally committed on the DBE submittal form,
  • If DBEs are working in a 2nd tier capacity.

Additional work items can be added to any DBE subcontractor, and additional DBE subcontractors can be utilized for other work items, but no DBE work disclosed on the DBE Identification Submittal Form can be changed without approval from MoDOT's Business Development and Compliance division.

Any work subcontracted from a 1st tier DBE contractor to a 2nd tier non-DBE contractor will not count towards the DBE contract goal.

Compliance with the DBE goal is determined by the amounts shown on the subcontract agreement between the prime contractor and the DBE subcontractor, and later verified by the actual amount paid to that DBE once the work is complete.

108.1.4 Professional Service

Contractors sometimes hire a Professional Service to perform a support function to one or more line items of work. Use of a Professional Service does not typically require submittal of Form C-220, unless the work is directly tied to a contract line item. For example, Surveying/Staking is considered a Professional Service that does require a Form C-220 when there is a contract line item for that work. When the Surveying/Staking is considered incidental, no Form C-220 is required. The contractor or subcontractor utilizing a Professional Service is responsible for providing insurance coverage for this work if the Professional Service does not have sufficient coverage. Some professional service work may not require registration as a subcontractor. See EPG 110.3 Prevailing Wages and Records for more information on Professional Services.

Professional Service Contract Labor

Contractors sometimes hire a company to provide trade workers for their workforce. These companies charge a fee to the contractor for providing workers and they pay the workers directly. This is permissible. Since the contract is for workforce and not contracting to perform line item work there is no subcontract required. Insurance for the workers would be covered under the contractor hiring them. The workers would fall under the prevailing wage rate. Their rate of pay for prevailing wage rate is what the worker receives and not what the contractor is paying for their services. Therefore the mark up paid to the labor supplier cannot be used as part of the prevailing wage rate determination. The workers would be paid by the company supplying the worker. So the payroll from that company is what is submitted to the Resident Engineer. It should be submitted along with the prime or subcontractors payroll and not separately.

108.1.5 Rental Equipment

Sometimes the contractor will rent equipment from other contractors to perform work on the project. To avoid the possibility of unauthorized subcontracting, the payroll should be checked to confirm that the contractor is paying the wages of operators and supervision. Checking may also be accomplished during routine labor interviews by determining who pays the operator's wages. The findings of such checking procedures should be noted in the project DWR. In lieu of such checking, the resident engineer may accept a written statement over the contractor's signature that all operators and supervisors are carried on the contractor's payroll. These procedures are not necessary for equipment rented from recognized rental agencies that are not also in the highway construction business. Further explanation of Owner Operator can be found in EPG 110.3 Prevailing Wages and Records.

108.1.6 Termination of a Subcontract

Occasionally it becomes necessary for the contractor to terminate a subcontract. The Commission recognizes cancellation of previously approved subcontracts when the contractor provides:

a. A statement over the signatures of the contractor and the subcontractor that they have mutually agreed to cancel the subcontract, or
b. A certified copy of the contractor's written notice to the subcontractor of cancellation for cause.

After a subcontract has been cancelled, the percentages of work sublet to date should be adjusted. The work involved in the canceled subcontract quite often is proposed to be sublet again. If condition (a) or (b), above, has been met, the proposal should then be handled as a normal request for approval of subcontract.

If the contractor requests replacement of a DBE subcontractor, approval must first be obtained from the Business Development and Compliance Division.

If any subcontractor is replaced for any reason, the existing subcontract item(s) of work for that subcontractor are removed from AWP. Remarks indicating the reason for the revision are included in the record. No revision of the original C-220 is required. The new subcontractor shall be added using the normal C-220 subcontract process documenting the items of work to be performed.

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