We won our first prime contract, a county renovation job, 236220 Commercial and Institutional Building Construction. It's not a set-aside, just a regular competitive bid. We have three subs working with us. Twice now, one of our subs submitted their certified payroll late, and the county compliance officer called me directly. I had to chase the sub down to get it submitted. I know that as the prime, I am ultimately responsible, but what can I do to keep my subs on track and ensure their mistakes don't negatively impact my company's standing or future ratings? What are some best practices for structuring sub agreements, especially regarding things like weekly checks and retainage, to enforce compliance? What happens when a sub falls behind, and what are my options then?
How do you manage subs on a public job so their mistakes do not land on my certified payroll or my rating?
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As the prime contractor, you are ultimately responsible for your subcontractors' performance and compliance, and their mistakes can absolutely impact your past performance ratings and future opportunities. To manage your subs effectively, your subcontracting agreement needs clear terms for compliance and consequences for non-compliance. For certified payroll, specify the exact submission deadline to you, which should be several days before the county's deadline, allowing you time to review and address any issues. Include a clause that allows you to withhold payment or apply penalties for late or incorrect submissions. Many primes tie payment to receipt of compliant certified payroll from the sub.
When a sub falls behind, you need to first consult your subcontracting agreement. If it allows, you could issue a formal notice of non-compliance, outlining the specific failures and a timeline for correction. For persistent issues, the agreement should detail the steps for termination for cause, which might include bringing in a replacement sub and back-charging the original sub for the additional costs. On federal contracts, the requirements are spelled out in the FAR, but for county jobs, you need to rely on your contract terms and local procurement regulations. Your past performance is built on your ability to deliver, and that includes managing your team.
To manage subcontractors effectively on a public job, you should incorporate a robust process for reviewing and approving their certified payroll before submission to the county, as the county compliance officer will hold you accountable as the prime. While Priya correctly noted the importance of subcontracting agreement clauses, the operational detail is in setting up an internal review step. Your firm should require subs to submit their certified payroll to you several business days before the county's deadline, allowing your team to check for completeness, accuracy, and adherence to prevailing wage requirements, which are often applicable to construction jobs through the Davis-Bacon Act. This proactive review helps catch errors before they become issues with the county and impact your past performance record. If a sub consistently fails to meet these internal deadlines, your subcontract should allow for withholding progress payments until compliant payroll is received.
Your subcontracting agreement should include specific language about the prime's right to withhold retainage and progress payments until all required documentation, including certified payroll, is submitted and approved. Priya is right about the importance of clear terms. On federal jobs, the FAR dictates many of these requirements, but for county work, your contract with the county and your subcontracts are the main drivers. Make sure your subcontracts clearly state that failure to submit certified payroll on time and accurately can result in withheld payments or even termination. We do VA and DoJ work, and they are strict about certified payroll, especially when the Service Contract Act applies; county jobs can be just as demanding.