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ShaunaMSACM

52.232-5 Payments under Fixed-Price Construction Contracts

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All,

I am aware that FAR 52.232-5 allows the KO to take into consideration materials delivered to the KTR at off-site locations if: consideration is specifically authorized by the contract and the KTR furnishes satisfactory evidence that it has acquired title to such material and that the material will be used to perform the contract.

Question for you - do the same requirements apply to materials delivered on-site? Specifically, does the KTR have to provide title to the materials and a paid invoice for said materials to receive a progress payment?

Thanks!

Shauna

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The contract clause at FAR 52.232-5 clearly and definitively answers your question. Look in para. ( b ).

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All,

I am aware that FAR 52.232-5 allows the KO to take into consideration materials delivered to the KTR at off-site locations if: consideration is specifically authorized by the contract and the KTR furnishes satisfactory evidence that it has acquired title to such material and that the material will be used to perform the contract.

Question for you - do the same requirements apply to materials delivered on-site? Specifically, does the KTR have to provide title to the materials and a paid invoice for said materials to receive a progress payment?

Thanks!pray

Shauna

Shauna, paragraph ( b ) (2) doesn't provide any detail concerning the requirements for on-site stored materials. Although there are 40 USACE contracting offices with ( to my knowledge) no agency supplement guidance for on-site stored materials, we did not require evidence of payment for on-site stored materials, just invoices to establish the cost of the materials. I worked in four different Division/Districts and none required paid invoices for on-site stored materials.

I checked the USACE Acquisition Instructions and they specifically address only off-site stored materials with the requirements that you described.

This is not to say that some other organization might not have more stringent on-site materials requirements, perhaps for unsecured project sites...?

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Question for you - do the same requirements apply to materials delivered on-site? Specifically, does the KTR have to provide title to the materials and a paid invoice for said materials to receive a progress payment?

The clause is silent in that regard. Whenever a clause is silent, the parties can negotiate an agreement as they see fit, unless your agency has established a policy of its own. What you want to avoid is the contractor stockpiling materials on site that won't go into the work in the very near future and seeking payment on that basis. Think critically, and negotiate the same way. Use your head. Think like a developer and ask yourself if you want to pay for a lot of stockpiled stuff. Even if you could get title, would you necessarily want it?

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Vern, from another thread, Shauna indicated that she works for a construction company.

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Thanks, Joel. My answer is still the same, but she must look at it from her side. If she wants payment for materials delivered to the site, she should consider the things I think a CO should consider and apply for the payment accordingly.

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The contract clause at FAR 52.232-5 does not provide for automatic Government reimbursement of contractor costs for materials delivered to the site.

However, the clause does allow for progress payments based on progress towards completion, and the delivery of materials may be considered by the Government in arriving at an estimate of completion.

For example, let's assume the contractor's costs for a set of materials is ten percent of the job price, and the contractor delivers all the materials to the job site. The Government might consider the presence of the materials as constituting two percent of progress towards completion. According to the clause, the Government may make a progress payment of two percent of the job price (the estimate of completion), not ten percent (the cost of the materials).

The clause is not silent. The clause answers the question. [EDIT: The clause answers the question on whether the Government may consider materials delivered to the site in its estimates of completion -- however, the clause is silent on the particulars -- as a contracting officer, it all depends on the totality of the circumstances -- sometimes I say YES and sometimes I say NO -- but the mere facts of delivery, title, and paid invoice do not automatically create an entitlement for a progress payment.]

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The contract clause at FAR 52.232-5 does not provide for automatic Government reimbursement of contractor costs for materials delivered to the site.

However, the clause does allow for progress payments based on progress towards completion, and the delivery of materials may be considered by the Government in arriving at an estimate of completion.

For example, let's assume the contractor's costs for a set of materials is ten percent of the job price, and the contractor delivers all the materials to the job site. The Government might consider the presence of the materials as constituting two percent of progress towards completion. According to the clause, the Government may make a progress payment of two percent of the job price (the estimate of completion), not ten percent (the cost of the materials).

The clause is not silent. The clause answers the question.

ji, Shauna is asking if she has to furnish title to the materials with paid invoices to support reimbursement for materials delivered to the site for later installation.

Unless things have changed in our organization in the past couple of years, we don't count stored materials as "progress". Progress consists of work accomplished including materials incorporated into the work. The inventory of stored materials are then added to the total to determine total progress payments allowed. As the materials are incorporated into the work (as progress), they are liquidated from the inventory of stored materials. Thus, at 100% progress, there would be no stored materials remaining.

We liquidate the prepaid performance and payment bond premium similarly. It doesn't count as "progress" separately from the associated work. It is a separate line item on our progress payments.

Thus, we don't consider purchase of materials or bond premiums to be "progress" but do allow reimbursement for them in progress payments, provided that they are secured and protected from the weather.

I'm sure that different organizations do this differently. However, that wasn't Shauna's question.

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We don't count stored materials or bond premiums as "% of progress". We allow payment for materials as they bring them to the jobsite. Thus they are "considered", as per paragraph ( b )(2) of the clause. Bond premiums are handled under paragraph ( g ). Both stored materials and bond payments are liquidated as the work progresses. My office also did a reality check to make sure that we weren't paying more for the material inventory than they were worth installed as their share of the associated contract line item (CLIN). This is generally only necessary when there are unbalanced bid items (CLINs) that were underpriced.

Again, different organizations may do things differently. We did not want to count uninstalled materials as % of progress. That skews the impression of how far along a project is. Generals and Congressmen don't want to be told that a job is 40% complete and drive out for a site visit to view a mostly bare job-site, when the material is all stored in trailers or in off-site warehouses.

[As an example, we once had a CLIN for installation of a steel Through-Truss railroad bridge over a river cut-off that was underbid by a million dollars or more on a large project that included the bridge, earth embankments, driven pile foundations, trackage and a mile or so of elevated pre-cast concrete approach trestles. We allowed payment for the off-site bridge fabrication but pro-rated it by a factor to limit the material costs to their share of the CLIN, which also included dissassembling the bridge sections, shipping them by barge from Pennsylvania to Mississippi and assembly and installation of the fabricated bridge sections of the bridge over the relocated section of the Tombigbee River.]

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Vern, our organization doesn't generally have a problem, if the contractor brings some or all of the materials to the jobsite as long as they are properly stored and secured. This helps reduce job financing costs for contractors. It allows them to obtain materials at current pricing. It allows them to order long lead items, fabricated materials and equipment. It allows them to get volume pricing, etc.

Material shortages and delivery delays cause one of the most disruptive type of impacts * to timely progress and job efficiency. It is a good construction management technique and a good business practice to get the materials and equipment to the jobsite as soon as possible. "Just in time" delivery" methods often don't work well in construction. Encouraging proper on-site storage of construction materials often results is higher productivity, fewer delay impacts and better pricing.

*This is documented by Construction Industry Institute studies and by Construction Management experts as one of the primary impacts to construction project costs and productivity. For example, a 2000 report for the US Army's Chemical-Demilitarization Program, entitled "Factors Affecting Labor Productivity" by H. Randolph Thomas, Jr. Professor of Civil Engineering, Penn State University.

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All,

Thank you for your responses.

Joel, I am dealing with a particular East Coast ENDIST (via the prime KTR) on this one; 90% of the time I work with the CEHNC.

The on-site stored items in question had very long lead times and we were instructed to procure them up front to ensure timely delivery. We are now being told the items won't be needed for quite some time and we simply don't have the cash flow to pay for everything up front to simply obtain title.

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Joel,

If you don't consider delivery of materials to the worksite as part of the percent complete, then you cannot make a progress payment for reimbursement of materials -- unless maybe USACE is using something other than FAR 52.232-5 as the authority? The FAR clause only allows for progress payments based on progress towards completion, and allows for consideration of materials delivered on-site.

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Shauna, my wife and I are on the road for a couple of days. But I will try to find out what the deal is and will message you as soon as I can.

ji, you don't have to consider purchasing materials as percent complete towards progress. Stored materials are authorized and are shown as a separate line on our automated ENG Form 93, similar to the bond premium. The form rolls up the total requested payment, less previous payments and retain age into a net progress payment. I have no concern as to what the DoD's tail-wagging SPS shows as progres. Our contract management software differentiates (it used to, at least) between % complete and stored materials and the unliquidated bond premiums.

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But I will try to find out what the deal is and will message you as soon as I can.

Joel, I'm curious -- are you saying you're going to stick your nose into this matter?

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Joel, I'm curious -- are you saying you're going to stick your nose into this matter?

Yes. I helped the OP satisfactorily resolve the issue

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