Written by: Roderick Sumpter and John Terhaar
You are a subcontractor performing a scope of work on a federal construction project. The prime contractor is an out-of-town firm with offices all over the country.
You’ve been working diligently on the project but due to various issues, the project is behind schedule. You have now submitted three payment applications and heard nothing about them.
It’s been almost four months since you received payment. When you ask the Prime Contractor about it you get seemingly evasive answers. All of a sudden, you are getting emails stating that you are not adequately manning the project and a lack of staffing is contributing to project delays. When you go to the weekly meetings, everything seems to be normal business, no discussion of manning issues, and even more confusing, you’re not even on the critical path. The lack of payment is starting to have an effect on your ability to procure man power and you cannot get the Prime to give you a status on your payment.
Seeking Payment as a Federal Subcontractor
When it comes to Federal Construction Projects, it’s a story as old as time… or at least as old as Miller Act payment bonds, and if it sounds like what you are experiencing, then you need to act fast. Federal Construction is not like normal commercial construction. The tools that a subcontractor has to ensure payment are limited with strict timelines. Documentation is very important. If it’s been two months or longer since you have received a payment from the Prime, seek counsel immediately because you may need to act quickly to preserve your rights. Contact us today to learn how we can assist you.
The Prime Contractor has no incentive to allow its Subcontractors to participate in direct conversations with the Government. But you don’t need to see the Prime contract to know what’s in that contract. All of the meaningful terms can be found in the Federal Acquisition Regulation. If you know how that contract operates, then you have a better idea of when the story you are receiving from the Prime Contractor simply does not make sense.
Here are a few important things you should know:
- FAR Clause 52.232-27 is in every Federal Construction Contract.
- The Prime contractor is obligated to pay its subcontractors within 7 days of receiving payment. See FAR Clause 52.232-27
- If the Prime Contractor is going to withhold payment from its Subcontractor, it must provide written notice to both the subcontractor AND the Government detailing: (1) the amount to be withheld; (2) the specific causes for withholding under the terms of the subcontract; (3) the remedial actions to be taken by the subcontractor in order to receive payment of the amounts withheld. See FAR 52.232-27(g).
- The Prime contractor is not allowed to request funds from the Government for work completed by a Subcontractor that it intends to withhold. FAR 52.232-27 at (h).
- If a Prime contractor submits a pay application requesting funds to pay a Subcontractor for work completed, and then, after receiving those funds, discovers a basis to withhold payment from the Subcontractor, the Prime is obligated to pay those funds back to the Government. The Government then holds those funds until the Prime contractor certifies that the Subcontractor has corrected the issue and is not entitled to payment. See FAR 52.232-27 at (l); See also FAR 52.232-5(d). The effect is that at no time should a Prime contractor be holding Subcontractor payment for more than 7 days.
- With each request for payment that the Prime submits to the Government, they must certify under oath “(1) [t]he amount requested are only for performance in accordance with the specification, terms, and conditions of the contract; (2) All payments due to subcontractors and suppliers from previous payments received under the contract have been made, and timely payments will be made from the proceeds of the payment covered by this certification, in accordance with subcontract agreements and the requirements and the requirements of Chapter 39 of Title, United States Code; (3) This request for progress payment does not include any amounts which the prime contractor intends to withhold or retain from the subcontractor or supplier in accordance with the terms and conditions of the subcontract…” FAR 51.232-5.
- The Government will notify a Prime Contractor within 7 days if there is a error with the request for payment, meaning that if there is a problem with the Subcontractors pay application holding up payment, you should know within 7 days of the Prime submitting its request for payment. See FAR 52.232-27 (a)(2)
The Government is obligated to pay the Prime contractor a properly submitted pay application within 14 days of receipt. FAR 52.232-27(a)(i)(A). So if they are telling you they still haven’t received payment for a pay application submitted more than a month ago, that story doesn’t make sense.
About Roderick Sumpter
Roderick Sumpter is a Retired Major and 24 year US Army veteran with extensive experience in Federal Contracts. Roderick has his Level III Defense Acquisition University Certification as a Contracting Officer and has operated as a Contracting Officer hundreds of Government Contracts.
Roderick W. Sumpter, a native of Monrovia, Liberia received a commission in the US Army Transportation Corps from Augusta State University Reserve Officers Training Corps. His civilian education includes a Master of Business Administration in Human Resources Management and graduated Magna Cum Laude from Troy State University with a Bachelor of Science in Criminal Justice and a minor in Military Science. He is a Master Logistician, Certified Contracting Officer Level III from Defense Acquisition University and holds a Top-Secret Sensitive Compartmented Information (TS/SCI).
His 24 years of military service includes multiple combat tours in support of Operations Iraqi Freedom (’03-‘04, ’08-’10), Operation Joint Guard and Operation Joint Forge (Bosnia ‘98), Task Force Hawk (Albania, Macedonia, Kosovo ‘99), USAPAC Coordination Element (South Korea ’14), Operation Spartan Shield (Syria ‘18) an overseas tour in Alaska, Hawaii, and Kuwait respectively; and a wide variety of assignments in the United States.
Previous key assignments include Platoon Leader 62nd Transportation Company, Logistical Director for a Forward Support Company and Battalion level Budget and Sustainment Manager for the 17th Combat Sustainment Support Battalion located at Joint Base Richardson Elmendorf, Alaska. Allocated and assigned to the 130th Engineer Brigade as the Assistant Brigade level Budget and Sustainment Manager, later 65th Engineer Battalion level Budget and Sustainment Manager at Schofield Barracks, Hawaii. Formerly the Commander of the 545th Transportation Company, Joint Base Hickam Pearl Harbor, Hawaii as of 30 October 2013. Roderick moved to support the USARPAC Coordinating Element Officer (TCS) in Daegu, South Korea for a period of 7 months in 2014. Roderick has functioned as the Operations Officer for the Defense Coordination Element- Hawaii directly supporting Region IX of FEMA for a period of one year. Later he was the Deputy Defense Coordination Officer for the Defense Coordination Element- Hawaii for a period of seven months. Roderick was positioned as a contracting officer for the 408th Contracting Support Brigade in South Carolina and Army Contracting Command in Aberdeen Proving Ground, MD for a period of six years.
Currently, retired from Army Contracting Command as an Acquisition Officer – Aberdeen Proving Ground.
Roderick’s humanitarian values came from the root essence of our forces coming to the aid of other nations through all his deployments. His desire to do more for his community as he returned home after deployments, pushed Roderick to volunteer at local boys and girls club and lead a community based nonprofit organization in his personal life. In 2017, partnering with another Army Officer, the team opened a franchised fitness center to help their community get to a healthier place. Since the conception of Anytime Fitness Moncks Corner; located in Moncks Corner, South Carolina. The gym has touched many lives teaching, promoting, and providing fitness solutions helping to reducing a 58% obesity rate in the Berkeley County area.
He is married and has two beautiful daughters. Roderick and his family are continually active with in the community volunteering to feed the homeless once a month and active financial members of community-based organizations such as Kappa Alpha Psi and Delta Sigma Theta.