Managing Mystery Subcontractors on Projects

Whether you're a public agency or a contractor, how do you keep track of what subcontractors are working on a construction project site?

Without a clear system and procedures in place, there can be increased liability for both public agencies and contractors relating to:

• Quality of performance
• Compliance with laws

Prevailing Wage Audit Risk:  For example, in Washington State, prior to the owner making payment to a contractor, the owner must have on file a Statement of Intent to Pay Prevailing Wages for the contractor and every subcontractor, regardless of tier, that worked during the month for which payment is being requested (RCW 39.12.040).  Without the approved "Intent" document, owners are subject to an audit finding by the Washington State Auditor's Office.  

4 Tracking Tools:  Here are four tools that owners and contractors can use to ensure they are aware of all subcontractors working on the site:

1. Daily Inspection Report:  Owners should require the completion of a daily inspection report by its representative on site that includes a listing of subcontractors present that day.  This is one of the most effective tools, as it doesn't rely on others to report to the owner the names of subcontractors, but collects live information from the field.  Similarly, contractors should keep daily records of subcontractors on site each day.
   
   
2. Contract Notification Requirement:  Include a provision in the contract between the owner and contractor requiring the contractor to notify the public agency of any subcontractors used, and require that such a provision be passed down into lower tier subcontracts as well.
   
   
3. Subcontractor Approval Process:  Some public agencies have established a subcontractor approval application process that provides that no subcontractor may be present on site until approved by the owner.  This helps in identifying subcontractors on site, but is not a substitute for the owner's "eyes and ears" on site keeping daily records of subcontractors working that day.
   
   
4. Listing Subcontractors with Pay Applications:  Require with each application for payment, whether to the owner from the contractor or to the contractor from subcontractors, a form identifying all subcontractors who worked during the month.  This form should be compared with the daily inspection reports of the owner to ensure that the report is complete and accurate.

Regardless of how the information is collected by the owner about what subcontractors are working on site, that information must find its way back to those responsible for ensuring that all Statements of Intent to Pay Prevailing Wages are on file prior to authorizing payment to the contractor.

Other tools?  If you use other tools to keep track of subcontractors working on projects, I'd like to hear from you.  You can either submit a comment on this blog entry (see below), or contact me by e-mail.