109.10 Contract Assignment Process - Contract Reassignment to a New Contractor (for Sec 109.10)
The Missouri Highway and Transportation Commission (MHTC) and MoDOT advertise construction projects, open bids and award several hundred contracts each year. Typically, the awarded contractor performs the work, with subcontractors, through completion and the contract is closed out. However, contracting companies are sometimes purchased by other contractors, or find they have taken on too much work, or decide for other reasons, they are unable to finish a contract they were awarded. When any of these scenarios occur, the contractor will submit a request to the State Construction & Materials Engineer to transfer the contract, or remaining contract work, to another entity to be completed under all original terms. When such a request is received, the first step is for MoDOT to evaluate the purpose and need to determine if the request should be approved or denied. The transfer process is somewhat involved, so requests that are primarily a convenience to the contractor, as opposed to a need, are less likely to be approved.
This article provides guidance on the primary steps necessary to transfer a contract to a new prime contractor by reassigning the contract through an “Assignment Agreement”, subject to consent and approval by the MHTC. Chief Counsel's Office (CCO) has created template assignment agreements for the typical scenarios. These are found in the eAgreements templates when you filter by division, CM - Construction and Materials. They are CM2 – Assignment Agreement and CM14 – Assignment agreement with Bond. The Construction and Materials Division (CM) is responsible for working with the contractors to process the assignment agreement allowing the new contractor to work on the project and collect payment from MoDOT.
Although the original contract remains in place, the assignment agreement assigns responsibilities for completing the contract to the new contractor. MoDOT does not pay any additional compensation to the contractor for a transfer agreement. The original contractor (assignor) and the new contractor (assignee) have their own agreement regarding this transaction which sometimes includes transferring other assets from one contractor to the other. MoDOT is primarily concerned with continuing surety protection while the work is still active, and completing the contract on time and within budget. For buyout situations, MoDOT and the MHTC could object to a transfer, but the likely outcome is a situation where the original prime contractor has been purchased, has no assets remaining and their surety would have to be engaged to complete the work. Therefore, consenting to the assignment is generally in the best interest of all involved parties and likely the best way to get work completed in these situations.
The CM Division will work with the contractor(s) and CCO on executing the agreement. CM will work with the contractor(s) to determine which contracts are impacted by this reassignment. Running the most recent State of Construction Cognos report is a good place to start. Once the contracts that are to be included in the reassignment are determined, the agreement can be drafted. The Assignment Matrix provides the details of the reassignment agreement requirements for different scenarios; including which agreement is appropriate, how to update the bond, power of attorney, and insurance. Any new bonds or bond riders will be attached in the agreement. Originals need to be sent to Bidding and Contract Services in Design. Reassignment of any subcontracts the assigner may have with other primes is not necessary.
If the assignee is not on MoDOT’s list of approved prime contractor, they will need to follow the steps to become a prime contractor with MoDOT. MoDOT’s Construction Contract Administrator can assist with this at ContractorSupport@modot.mo.gov.
When the agreement is complete and executed, CM will send a copy of the agreement to Bidding and Contract Services to have an updated 5060 Tax Exempt Certification prepared for the new contractor. This new certification should be sent to the contractor for use. Once a contract is reassigned, the new contractor (assignee) is the responsible contractor that MoDOT expects to and is contractually obligated to complete the work, will be paid for work completed and will be held accountable to finish the contract on time and within budget.
CM will transfer the information in AASHTOWare Projects to recognize the new contractor and the Resident Engineer’s office will be notified of the changes. Contract specific insurance must be on file before work may resume under the new ownership. As soon as practical, the process to register in Missouri Buys should be complete to ensure no delay in payment, Supplier Registration | MissouriBUYS Statewide eProcurement System.
Attention should be given at the next estimate period to ensure the correct contractor is receiving payment. Financial Services, Accounts Payable section may be able to assist AP.Payments@mdot.mo.gov.