California Department of Transportation Construction Manual March 2024
Payment Page 3-9.i
Chapter 3 General Provisions
Section 9 Payment
3-901 General
3-902 Measurement
3-902A Method of Measurement
3-902B Accuracy
3-902C Source Documents
3-902D Audit Trail
3-902E Weighing Equipment and Procedures
3-902E (1) Personnel
3-902E (2) Responsibilities
3-902E (2a) Resident Engineers
3-902E (2b) District Weights and Measures Coordinator
3-902E (2c) Assistant Resident Engineers
3-902E (2d) Contractors
3-902E (2e) Division of Construction Weights and Measures Coordinator
3-902F Final Pay Items
3-903 Force Account
3-903A Authorization for Force Account Payment
3-903B Force Account Records
3-903C Tentative Agreements
3-903D Markup for Subcontracted Work
3-903E Owner-Operated Labor and Equipment
3-903F Billing for Extra Work at Force Account
3-903G Labor
3-903H Material
3-903I Equipment Rental
3-903I (1) Equipment Selection
3-903I (2) Equipment Rental Rates
3-903I (3) Time in Operation
3-903I (4) Equipment Not on the Job Site
3-903I (5) Non-Owner-Operated Dump Truck Rental
3-903I (6) Standby Time
3-903J Extra Work Performed by Specialists
3-904 Payment Adjustments
3-904A Changed Quantity Payment Adjustments
3-904A (1) Increases of More Than 25 Percent
3-904A (2) Decreases of More Than 25 Percent
3-904A (3) Eliminated Items
3-904A (4) Surplus and Salvaged Material
3-904B Payment Adjustments for Price Index Fluctuations
3-904C Work-Character Changes
3-905 Time-Related Overhead
3-905A Audit Examination and Reports
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3-905B Payment
3-906 Progress Payments
3-906A Bid Items
3-906B Schedule of Values
3-906C Extra Work
3-906D Interest
3-906E Materials on Hand
3-906E (1) Materials at the Project
3-906E (2) Materials Not at the Project
3-906F Withholds
3-906F (1) Progress Withholds
3-906F (1a) Noncompliant Progress
3-906F (1b) Plant Establishment Work
3-906F (2) Performance Failure Withholds
3-906F (3) Stop Notice Withholds
3-906F (4) Penalty Withhold
3-906G Deductions
3-906H Supplemental Progress Payments
3-906I Negative Estimates
3-907 Payment After Contract Acceptance
3-907A Payment Before Final Estimate
3-907B Proposed Final Estimate
3-907C Semifinal Estimate
3-907D Final Payment and Claims
3-907D (1) Material to Submit with the Final Estimate
3-907E Payment Offset
3-908 Arbitration
Example 3-9.1. Quantity Calculations
Example 3-9.2. Form Letter for Submitting Proposed Final Estimate to the
Contractor
Example 3-9.3. Acceptance Statement Form
Example 3-9.4. Sample of the Proposed Final Estimate
Example 3-9.5. Schedule of Extra Work
Example 3-9.6. Schedule of Deductions
California Department of Transportation Construction Manual March 2024
Payment Page 3-9.1
Chapter 3 General Provisions
Section 9 Payment
3-901 General
This section covers measurement and payment of bid item work and change order
work, partial payments, and payment to the contractor after contract acceptance.
The contract provides the following methods to make payment for all work
performed:
• Payment for bid item work at unit prices. The contractor establishes the fixed
prices of the bid items included in the contract. Fixed prices of bid items should
not be confused with the costs to produce the work. Loss of profit, damage,
repair, cost escalation, or other unanticipated changes of item costs are the sole
responsibility of the contractor unless specifically provided for in the contract.
• Adjustments to contract prices, known as payment adjustments.
• Payment for change order work. Before payment can be made for change order
work, the resident engineer must issue an approved change order as described
in Section 5-3, “Change Orders,” of this manual. For additional information
regarding Caltrans policies on change order work, refer to Section 3-403,
“Changes and Extra Work,” of this manual. The methods specified for paying for
change order work are bid item prices, force account, agreed price, and
specialist billing.
• Deductions and withholds are temporarily or permanently taken from monies due
under the contract.
3-902 Measurement
Contract work, as bid on by the contractor, is measured and paid for as bid items.
Bid items are measured for payment as units. The unit for each bid item is shown in
the bid item list as “unit of measure.” Bid items may be measured by units of count,
length, area, volume, weight, or lump sum. The bid item list also includes the
estimated quantity of each bid item. Resident engineers and assistant resident
engineers must determine, by measurement and calculation, the quantities of the
various bid items actually performed by the contractor.
3-902A Method of Measurement
Check the “measurement” and “payment” clauses in the specifications for the
required method of measurement for each bid item. Use the specified method to
measure quantities. For more information about measuring quantities for specific bid
items, refer to Chapter 4, “Construction Details,” of this manual.
A change in the unit or the method of measurement changes the contract. Do not
change the unit or the method of measurement unless the change is provided for in
a change order.
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3-902B Accuracy
Measure and calculate bid item quantities to a degree of accuracy consistent with
the unit price of the item. Give early consideration to the accuracy desired so that all
personnel on a given project will measure and calculate uniformly. The general rule
is to measure to a degree of accuracy that, when calculated, the resulting value will
be within 0.2 percent to 0.5 percent. A $50,000 item should be measured and
calculated to result in payment within about $100.
3-902C Source Documents
Enter measurements and calculations for bid item quantities on permanent record
sheets that are commonly referred to as “source documents.” Include on each
source document the appropriate bid item number, the location of installation if
applicable, the necessary measurements and calculations, and the name of the
person preparing the document. Check source document calculations
independently, and enter the name of the checker on the document.
Check source document calculations as soon as possible, preferably before the
quantity is entered on a progress pay estimate. Always check them before entry on
the proposed final estimate. Whenever possible, measure, calculate, and check bid
item quantities as the work on a bid item is completed. Resident engineers must
assign responsibility for checking calculations to assistant resident engineers in the
same manner that other project responsibilities are assigned.
Enter into the system for progress payment the quantities from the source
documents. For a description of the progress payment process, refer to Section 5-1,
“Project Records and Reports,” of this manual.
3-902D Audit Trail
State the source of any figure, calculation, or quantity shown on the source
document. For instance, a quantity may be the result of a field measurement, scale
weights, a count, or a calculation based on planned dimensions.
Create a clear and easily followed trail for the total pay quantity in the proposed final
estimate back to the first measurement or calculation for each bid item.
Consider organizing source documents for each bid item so an easily followed audit
trail exists. Category 47, “Drainage Systems,” in Section 5-102, “Organization of
Project Documents,” of this manual, provides guidance, especially for large projects,
for organizing source documents for drainage-related bid items. Category 48, “Bid
Item Quantity Documents,” in the same manual section, describes the numbering
system to be used for source documents for other bid items.
3-902E Weighing Equipment and Procedures
The following describes the duties and responsibilities of the people involved in
weighing and measuring materials and the procedures for assuring accurate
weighing and measuring:
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3-902E (1) Personnel
The process of determining bid item quantities by weighing and measuring includes
the following personnel:
• The resident engineer
• Assistant resident engineers
• The district weights and measures coordinator
• The Division of Construction weights and measures coordinator
In addition to Caltrans personnel, the following people are involved in the weighing
and measuring process:
• County sealers of weighing and measuring devices
• Representatives of the California Department of Food and Agriculture, Division of
Measurement Standards
• Private scale technicians performing Material Plant Quality Program (MPQP)
testing
3-902E (2) Responsibilities
All Caltrans personnel must be alert for conditions that contribute to failure to obtain
the accurate weight and measurement of materials. The following describes the
typical duties and responsibilities for verifying compliance with the specifications for
weighing and measuring:
3-902E (2a) Resident Engineers
The resident engineer must:
• Verify accurate weighing and measuring through inspection.
• Routinely determine that proper weighing procedures are used.
• Record, or verify recording of, spot-checks of weighing procedures in daily
reports.
• Require the contractor to correct any malfunctioning weighing or measuring
device.
• Order the resealing and retesting of scales and meters as often as necessary to
assure accuracy.
• Determine when weighmaster certificates are to be used. Order the use of
weighmaster certificates except when the number of loads is very small or
conditions preclude proper weighing procedures. In the daily report, record the
reasons for not using weighmaster certificates.
3-902E (2b) District Weights and Measures Coordinator
The district weights and measures coordinator must do the following:
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• Provide technical assistance to the resident engineer and assistant resident
engineers.
• Provide information to resident engineers regarding the adequacy of scales and
the validity of seals.
• When requested by the resident engineer, witness the testing of scales or meters
in compliance with the requirements of the MPQP.
• Furnish copies of the MPQP report to each project using material plants tested in
accordance with the MPQP.
• Furnish and attach an MPQP Approval Sticker to tested scales.
• Maintain a file on the current status of all scales that are commonly used for
weighing materials for Caltrans projects in the district.
• On request, provide scale status information to adjacent districts.
• Perform spot-checks of weighing and measuring devices and procedures in the
district, and furnish written reports to the resident engineer.
• Determine whether any weighing or measuring problems should involve the
California Department of Food and Agriculture, Division of Measurement
Standards. Request any such involvement through the Division of Construction
weights and measures coordinator.
3-902E (2c) Assistant Resident Engineers
Assistant resident engineers act for the resident engineer and, depending on the
authority delegated to them, do the following:
• Observe the installation of scales installed primarily for use on a given project.
Decide whether such scales and appurtenances meet the requirements of the
specifications. When necessary, request assistance from the district weights and
measures coordinator.
• Inspect and observe the general condition of all scales used on the project. If the
scales are in questionable condition, request advice from the district weights and
measures coordinator.
• Request a material plant approval report from the district weights and measures
coordinator. If a seal or approval sticker is not valid, require the contractor to
have the scales tested before use.
• Witness scale testing. Determine that the scales have been tested to the capacity
for which they are being used on the project. Request that the district weights
and measures coordinator observes the procedure.
• Whenever a scale is moved, overhauled, or shows obvious deficiencies, require
the scale to be restored to normal operating condition and then retested.
• To observe the weighing of materials, visit the scale house or plant periodically. If
necessary, request technical assistance from the district weights and measures
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coordinator. Check the scale sheets and weighmaster certificates to verify that
they are being used properly.
• Spot-check tare and gross weights to see that weighmasters are using the
correct tare. Verify that the weighmaster is licensed for the scale location.
• Observe all meters that are required under the contract, and verify that they have
been tested and sealed.
• Collect weighmaster certificates at delivery. A Caltrans employee should be
present at the work site to collect weighmaster certificates. Sign or initial the
weighmaster certificate to indicate that the represented material was used in the
work.
When certified summary scale sheets are used, and weighmaster certificates are not
used, verify that material shown on the summary sheets has been used in the work.
Do this verification by using a tally sheet, a spread record, or a random check. In the
daily report, record that the material has been used in the work and the type of
verification method. Sign the summary scale sheets to certify that the represented
material, less any material deducted from the total, was used in the work.
Return to the contractor a copy of any weighmaster certificates or scale sheets
representing loads or partial loads that are not to be paid for. On the weighmaster
certificate or scale sheet, indicate the quantity of material not included for payment.
Retain a copy for the project records. When a determination is made to reduce the
quantity, advise the contractor’s foreperson or superintendent of the amount and
reason for the reduction. In the daily report, note the reduction and the name of the
contractor’s employee whom you advised of the reduction.
3-902E (2d) Contractors
The following describes some of the duties and responsibilities of contractors and
their agents in using scales and measuring devices for measuring and proportioning
materials:
• The contractor and materials suppliers must maintain scales and meters within
the accuracy specified.
• The owner of the scale or meter must maintain it in good operating condition at
all times. If breakdowns or suspected inaccuracies occur, the owner must make
repairs. After repairing a commercial device, the owner must notify in writing the
county sealer of weights and measures that a repair was made. The device must
be resealed before it is used to weigh materials for payment. For noncommercial
devices, the contractor must verify the MPQP test is performed. The contractor
must notify the resident engineer at least 24 hours before any scheduled testing
so that the testing can be witnessed.
Do not directly contact the county sealer of weights and measures for the contractor.
The owner of the measuring device must request the testing. The resident engineer
may only inform the contractor that such testing is necessary.
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The district weights and measures coordinator may contact the Division of
Construction weights and measures coordinator on any question regarding the
validity of a seal or the legal capacity of a scale.
3-902E (2e) Division of Construction Weights and Measures Coordinator
The Division of Construction weights and measures coordinator does the following:
• Oversees that the weights and measures program is operating satisfactorily
throughout Caltrans.
• Serves as a contact between the district weights and measures coordinators and
the California Department of Food and Agriculture, Division of Measurement
Standards.
• Keeps the district weights and measures coordinators informed of the latest
equipment and technology being developed throughout the industry.
3-902F Final Pay Items
Section 9-1.02C, “Final Pay Item Quantities,” of the Standard Specifications, defines
and specifies the procedure for calculating pay quantities for final pay items.
3-903 Force Account
The force account method, used to determine payment for extra work, consists of
adding specified markups to the actual cost of labor, equipment, and material used
to perform the extra work.
Section 9-1.04, “Force Account,” of the Standard Specifications specifies the force
account method of payment. Section 5-3, “Change Orders,” of this manual contains
guidance for change orders with payment for extra work at force account. See
change order examples at:
https://dot.ca.gov/programs/construction/change-order-information
Normally, the contractor will use labor and equipment that is on the site and used for
work in progress. The change order will usually specify materials to be used in the
extra work. However, before the work begins, the resident engineer should discuss
with the contractor the labor, equipment, and materials to be used. The resident
engineer can avoid misunderstandings and inefficiencies by knowing the resources
to be used ahead of time. After the work is performed, Caltrans must pay the
contractor for material used and at the appropriate rates for the number of hours that
labor and equipment was used.
3-903A Authorization for Force Account Payment
On the authorizing change order, always show the amount to be paid for extra work
at force account as an estimated amount. For the format for change orders, refer to
Section 5-3, “Change Orders,” of this manual. You may make payment for extra
work in excess of the estimated amount shown on the contract change order up to
100 percent of the estimated amount or $15,000, whichever is smaller. To authorize
any additional payment, use a supplemental change order.
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3-903B Force Account Records
On daily reports, record observations and inspections of extra work in progress in
sufficient detail to provide a reasonable basis for agreement on payment. Records
must be original, not a copy from other documents.
Include the following information when appropriate to the method of payment for the
work:
• Description of work performed. This description must be consistent with the
description of extra work authorized by the change order.
• Time and date of inspection.
• The change order number.
• Location of work.
• Types of labor, equipment, and materials used.
• Estimated hours worked.
• General measurement or amount of work accomplished.
Make entries on the day of observation. If clarifying reports are necessary to cover
work not previously reported, state the facts as known and date the clarifying report
as of the day it is written.
The daily report must also contain a reference to any known off-site work.
When extra work is performed at force account, decide whether the magnitude of the
work warrants the full-time presence of an assistant resident engineer. An assistant
resident engineer assigned full time must include in the daily report the number of
hours actually worked at the site. When an assistant resident engineer is assigned
only part-time, daily reports must present only known facts. On the daily report,
record that inspection was “intermittent.” A typical entry might read as follows:
Hours reported on report dated 6/26/20 entry based on 1 inspection
during the day. Later found out that crew and equipment worked whole
shift instead of half shift (add the date of the supplemental entry and
sign the entry).
Include notations concerning decisions to allow or deny payment for work that may
be in dispute or not considered a legitimate part of extra work. Similarly, prepare a
supplemental daily report if it is later found that the number of hours or labor and
equipment was substantially different than recorded on the original daily report. Such
a supplemental daily report might read as follows:
6/24/20 – 10:15 a.m. – Change Order No. 17 – Placing Riprap Lt. of
Sta. 500.
Crew of 2 laborers and foreperson with a D-6 crawler tractor with side
boom and operator laid about 150 sq ft of salvaged rubble riprap.
Estimate crew and tractor worked about 4 hours.
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3-903C Tentative Agreements
Do not give copies of daily reports to the contractor’s personnel. Do not permit the
contractor’s personnel to sign or initial daily reports. However, at the earliest
possible time, reach tentative agreement on extra work details with the contractor’s
foreperson. Discuss labor, equipment, and materials at the end of each shift or no
later than the following shift that extra work was performed. Good communication at
this time will help to prevent misunderstanding and arguments over details at a later
date. Use Form CEM-4907, “Tentative Daily Extra Work Agreement,” for this
purpose. On this form, tentatively agree to and list hours of labor and equipment
used in extra work at force account for each change order each day.
3-903D Markup for Subcontracted Work
Section 9-1.04A, “General,” of the Standard Specifications includes an
administrative markup for the prime contractor when a subcontractor performs the
work.
When an engineer’s cost analysis is based on force account, using rates as
specified in the contract, include a markup in the calculation of the work performed
by a subcontractor in the following situations:
• Changes and extra work at the agreed prices in accordance with Section 4-
1.05A, “General,” of the Standard Specifications.
• Work performed before item elimination in accordance with Section 9-1.06D,
“Eliminated Items,” of the Standard Specifications.
• Bid item adjustment because of increased or decreased quantities in accordance
with Section 9-1.06B, “Increases of More Than 25 Percent,” and Section 9-
1.06C, “Decreases of More Than 25 Percent,” of the Standard Specifications.
• Payment adjustments for work-character changes are made in accordance with
Sections 4-1.05B, “Work-Character Changes,” and 9-1.15, “Work-Character
Changes,” of the Standard Specifications.
3-903E Owner-Operated Labor and Equipment
For owner-operated labor and equipment, refer to Section 9-1.04A, “General,” of the
Standard Specifications. The method for paying for owner-operated equipment on a
force account basis is at market-price invoice. Because owner-operators include
labor and equipment markups and the labor surcharge in their invoice price, only
apply the applicable administrative markup for the owner-operated labor and
equipment invoice. The administrative markup to be applied to the invoice for
projects with the time-related overhead bid item is 10 percent. The administrative
markup to be applied to the invoice for projects without the time-related overhead bid
item is 15 percent.
3-903F Billing for Extra Work at Force Account
The following are the procedures for billing for extra work at force account:
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• The contractor must submit change order bills covering extra work under each
change order each day that extra work is performed. The contractor must use the
Caltrans internet change order billing system to submit change order bills. Refer
to Section 5-103E, “Change Order Billing,” of this manual for additional
information.
• Field Construction personnel must do the following when reviewing change order
bills:
1. Compare change order bills against assistant resident engineer’s daily reports
and tentative agreements, if they are used. Make this comparison to verify the
correctness of the contractor’s billing, and to avoid the possibility of a
duplicate payment for the same work. For a discussion of assistant resident
engineer’s daily reports and tentative agreements, refer to Sections 3-903B,
“Force Account Records,” and 3-903C, “Tentative Agreements,” of this
manual.
2. The contractor must include everything to be paid for on the change order bill.
Do not add any items even though you know them to be legitimate charges.
Instead, call the omitted items or underbilling to the contractor’s attention and
document the notification. The contractor may submit a supplemental change
order bill to include omitted items or underbilling amounts. Include any
notifications and support documentation in the change order billing project
records.
3. Delete items for which the contractor is not entitled to payment.
4. You may correct hours for labor and equipment downward, but not upward.
Notify the contractor of such corrections and include notification and support
documentation in the change order billing project records.
5. Do not correct wage rates that the contractor has submitted. Reject any
change order bill with incorrect wage rates. Note that Caltrans must pay for
extra work at the same wage rate paid by the contractor. Do not refuse to pay
a particular wage rate because it is above the prevailing wage rate.
6. Correct equipment rental codes that are obviously in error, or reject the
reports. Verify that the rental codes shown are for the equipment that was
actually used.
7. The person, whether a contractor or Caltrans employee, who makes
corrections to a change order bill must print out, sign rather than initial, and
date the corrected change order bill.
8. Maintain a log of change order bills received and rejected.
The resident engineer must approve the change order bill to authorize payment for
extra work. The resident engineer’s approval of a change order bill for progress
payment certifies that payment is in accordance with contract requirements and
established administrative procedures. Maintaining documentation for extra work at
force account payments is critical in supporting these payments.
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3-903G Labor
The markups to be applied to the cost of labor performed on force account work are
specified in Section 9-1.04B, “Labor,” of the Standard Specifications, or as changed
by the special provisions.
A “labor surcharge” is included in the cost of labor. The Labor Surcharge and
Equipment Rental Rates (Cost of Equipment Ownership) book in effect at the time
the work is performed contains the labor surcharge percentage. A general rate
applies to most crafts, and the book contains several higher rates for certain crafts.
The resident engineer must determine the correct surcharge percentage to be used
and verify that the percentage has been entered on the change order bill.
At times, a superintendent or an owner acts as a working foreperson, or an
equipment operator works at some other craft. In such situations, make payment on
a “value received” basis. Payment will be made for owners or supervisory personnel
at the proper rate for the work performed. For example, pay for a superintendent
acting as a foreperson on force account work at the normal hourly rate for a
foreperson. Do not prorate the superintendent’s weekly or monthly salary to an
hourly rate. In paying for a superintendent on force account work, make the payment
on a functional basis and not on a position or classification basis.
On some projects, a superintendent or project manager directs the activities of
several forepersons or 1 or more general forepersons who directly supervise the
forepersons. The general forepersons are sometimes referred to as superintendents,
such as grading superintendents or paving superintendents. This change in
nomenclature does not change the functional nature of these positions. They are
general forepersons or forepersons and are not considered to be supervisory or
overhead personnel. Make payment at the actual hourly rate paid by the contractor
when such personnel function as forepersons on force account work.
When paying for salaried personnel, do not authorize force account payment for
overtime hours unless the contractor has an established practice of paying overtime
to salaried personnel. The usual case is that the weekly or monthly salary covers the
number of hours required by the work.
The Standard Specifications allow for payment of the actual subsistence and travel
allowances paid by the contractor.
Pay per diem and travel allowances on force account only when the contractor is
paying these allowances on bid item work.
When 7-day subsistence is included in labor contracts in lieu of per diem and travel
time, subsistence will be paid for the entire period involved if the workers are
employed full time on force account.
When workers are employed on both force account work and bid item work in the
same day, prorate subsistence payments and travel allowances between the
contractor and Caltrans. Base the prorated amount on the first 8 hours worked. Do
not pay per diem for time worked after the first 8 hours in any 1 day.
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3-903H Material
Payment for material purchased for force account work must be supported by a copy
of the vendor’s invoice whenever possible. If no individual invoice is available, as in
the case of materials taken from contractor’s stock, a copy of the mass purchase
invoice may be used as support. If no invoice is available to support unit purchase
prices, submit a statement with the change order bill. In the statement, explain how
the unit prices were verified. Any invoice the contractor submits must represent the
material actually used.
3-903I Equipment Rental
For equipment used for extra work paid at force account, refer to Section 9-1.04D,
“Equipment Rental,” of the Standard Specifications or as modified by the special
provisions. The following are guidelines for paying for equipment rental.
3-903I (1) Equipment Selection
In accordance with Section 5-1.03, “Engineer’s Authority,” of the Standard
Specifications, approve equipment used on force account work. Before giving
approval, determine whether available and suitable equipment is already on the job
site or whether equipment not on the job site is required. For example, a piece of
equipment on the job site that can perform a given operation satisfactorily may be
larger than necessary. Determine if it will be economical to use oversized equipment
at its rate or to obtain equipment of the proper size. Obtaining equipment not on the
job site necessitates payment for move-in and move-out expenses and for minimum
rental periods. The determination may also be based on other factors, such as public
safety and the urgency of the work. Availability of equipment on the job site can be
determined by using daily reports, progress schedule, and other contractor-provided
information. When there is no contractor-owned equipment available for use and
only rented equipment is available on the job site, the engineer may approve the use
of the rented equipment at the rental invoice price in accordance with Section 9-
1.04D, “Equipment Rental,” of the Standard Specifications. If both contractor-owned
and rented equipment on the job site are suitable and available for use, the
contractor-owned equipment should be used.
Some equipment includes accessories as an integral part of the basic machine.
When accessories are an integral part of the machine, the rates in the Labor
Surcharge and Equipment Rental Rates (Cost of Equipment Ownership) book
indicate that the accessory is included in the quoted rate. Do not make deductions
for accessories on such integral equipment. For unusual situations, consult the
Division of Construction. When the accessories are not integral and not necessary
for the effort of the extra work, payment is only for the equipment required.
3-903I (2) Equipment Rental Rates
Labor Surcharge and Equipment Rental Rates (Cost of Equipment Ownership)
contains the cost of ownership rates for most of the equipment used on Caltrans
projects. However, the Division of Construction has also established cost of
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Page 3-9.12 Payment
ownership rates for some equipment that is not in the book. These rates are
available at:
https://dot.ca.gov/programs/construction/equipment-rental-rates-and-labor-surcharge
Establish rates that are not listed in the book or on the website, use the following
procedure:
• Obtain a complete description of the equipment, including the manufacturer,
model number, horsepower, size or capacity, and accessory equipment.
• If the equipment is nonstandard or unusual, request the following data from the
contractor:
1. Type of equipment, such as segmented, self-propelled, telescoping hydraulic
crane, articulated, or rubber-tired roller
2. Trade name
3. Model and serial numbers
4. Year manufactured
5. Size, capacity, or both
6. Type and amount of power
7. Whether crawler, rubber-tire, or other
8. Manufacturer or distributor: if local, give address
9. Initial cost of the basic machine and attachments
10. Operating requirements, costs, or both, if available or unusual
11. Name of owner
• Transmit this information to the Division of Construction. The Division of
Construction will establish a cost of ownership rate, codes, and effective time
period and advise the district by mail, email, or fax. Use this document as the
authority to pay the rate established.
• The contractor must be advised of the codes so that its billings can include them.
• For equipment not on the job site, and in special circumstances, the Standard
Specifications permit a rate to be paid that is in excess of the rate listed in the
Labor Surcharge and Equipment Rental Rates (Cost of Equipment Ownership)
book. When the contractor proposes a rental rate in excess of the listed rate,
verify that the equipment meets all the conditions listed in Section 9-1.04D(1),
“General,” of the Standard Specifications. The higher rate will constitute a
change to the contract and must be established by a change order. Use the
following procedures to determine the rate:
1. Obtain a written statement from the contractor. The statement must include
the proposed rate and the justification that Section 9-1.04D(1), “General,” of
the Standard Specifications requires.
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2. Decide whether the conditions of use and ownership of the equipment meet
all the specified criteria for payment of the higher rate.
3. Submit a change order that provides for the proposed rate. State in the
change order whether the table titled “Equipment Rental Hours” is applicable.
The table appears in Section 9-1.04D(3), “Equipment Not On the Job Site and
Not Required for Original-Contract Work,” of the Standard Specifications. If
the equipment is used for bid item work, use the normally established rental
rates for the entire time the equipment is used for extra work. Include in the
change order a clause similar to the following: “In the event this equipment is
subsequently used on bid item work, this rate is void.”
4. Include justification for approval in the change order memorandum, and
attach the contractor’s letter.
• Equipment for which the rental rate is not shown in the Labor Surcharge and
Equipment Rental Rates (Cost of Equipment Ownership) book, but for which the
Division of Construction established a rental rate, is eligible for the higher rate if
all necessary conditions are met.
3-903I (3) Time in Operation
The engineer in the field must determine the rental time to pay for equipment in
accordance with Section 9-1.04D(2), “Equipment on the Job Site,” of the Standard
Specifications.
In general, consider equipment to be in operation when all of the following conditions
exist:
• The equipment is at the site of the extra work or being used to perform the extra
work.
• The equipment is not inoperative because of breakdown.
• The force account work being performed requires the equipment.
Use the following examples as guidelines for determining rental time to be paid for
equipment.
• An air compressor is on the job site for 8 hours on a force account operation. It is
actually used for only a few periods during the 8 hours, but it is impractical to use
it on other work during the standby periods. Pay for the compressor and all
accessories used intermittently for the entire period. The engine does not have to
be running continuously during the period to qualify for payment. If the air
compressor was also used on bid item work intermittently, prorate the 8 hours
between the extra work and the bid item work.
• An air compressor is on the job site for 8 hours. It is used for the first 2 hours, but
after those hours, it is no longer needed. Pay the rental for only 2 hours whether
the contractor chooses to remove it or chooses to leave it at the site of the work.
Apply the same reasoning if the time of operation occurred at any other time of
the day. In this example, if a pavement breaker was needed intermittently for 2
hours and a tamper intermittently for 2 hours, pay 2 hours for each tool. If the
California Department of Transportation Construction Manual March 2024
Page 3-9.14 Payment
pavement breaker is needed for the first hour and the tamper for a second hour,
pay 1 hour for each. Advise the contractor when equipment is no longer needed
at the site. In the daily report, record this notice and the time.
• A skip loader is used to load dump trucks; however, the skip loader is used only
intermittently during the shift because 1 of the dump trucks broke down. The
resident engineer allows the operation to continue because it is critical. Make
payment for the loader for the entire shift. In such a situation, the resident
engineer must try to do whatever is necessary to balance the operation. When
balancing cannot be achieved, decide whether suspending an operation is more
economically feasible than allowing it to continue.
Sometimes 2 pieces of equipment perform extra work at force account, yet the work
does not require full-time use of both. In such instances, it is appropriate to accept,
but not order, the use of only 1 operator for both pieces of equipment. Determine the
rental time in the same manner as if each piece of equipment had a full-time
operator and was used intermittently.
On extra work at force account, pay the same time for a foreperson’s pickup that you
would pay for the foreperson.
3-903I (4) Equipment Not on the Job Site
In general, the contractor schedules extra work paid for on a force account basis and
uses equipment available on the project. However, circumstances may require use
of equipment not on the job site that must be brought in especially for the extra work.
The resident engineer should make decisions regarding the type of equipment and
its scheduled use. Sections 9-1.04D(3), “Equipment Not On the Job Site and Not
Required for Original-Contract Work,” and 9-1.04D(4), “Equipment Not On the Job
Site and Required for Original-Contract Work,” of the Standard Specifications specify
the requirements for paying for the use of such equipment. These specifications
apply when the contractor does not use or uses the equipment for bid item work.
Change any previous payment as “equipment not on the job site” to payment as
“equipment on the job site” when such equipment is used for bid item work.
Order the equipment removed from the project, pay move-out and possible
subsequent move-in costs, or continue paying for the equipment during a
suspension in extra work. Perform a cost analysis to determine the most cost-
effective alternative. Temporary removal of the equipment to the contractor’s shop or
a storage area off the project is not removal from the project. To end payment for the
equipment, the resident engineer must order its removal.
3-903I (5) Non-Owner-Operated Dump Truck Rental
Section 9-1.04D(5), “Non-Owner-Operated Dump Truck Rental,” of the Standard
Specifications specifies that the resident engineer must establish the hourly rate to
be paid for dump truck rental. The actual hourly rate paid by the contractor or the
truck broker may be the established rate if it is consistent with rates paid for the
same trucks on other work. For help in establishing hourly rates, compare with rates
paid for similar equipment on other Caltrans work.
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3-903I (6) Standby Time
Pay standby charges for commercial delivery at the invoice rate.
3-903J Extra Work Performed by Specialists
Section 9-1.05, “Extra Work Performed by Specialists,” of the Standard
Specifications, allows extra work to be performed by a specialist subcontractor that
neither the contractor nor its current subcontractors can perform. In general,
specialists are to be used only for minor portions of the work. The specifications also
allow for the specialist work to be paid for by invoice if itemized billing is not the
established practice of the specialist’s industry.
Do the following when considering the use of specialists:
• Before work begins, determine whether the work is normally done by any of the
contractor’s forces. The contractor’s forces include any firms or organizations
performing bid item work, including subsidiaries of such firms or organizations
and subsidiaries of the contractor. Subsidiaries of a subcontractor are considered
to be a part of the subcontractor’s organization. If you determine that the
contractor’s forces can perform the work expediently, do not authorize the use of
the specialist.
• Allow the contractor to hire a specialist only if an established firm with
established rates would do the work.
• Districts must establish procedures to pre-approve invoiced billing. Invoiced
billing must not be used to circumvent the force account method for determining
payment.
3-904 Payment Adjustments
A payment adjustment is a monetary increase or decrease applied to the unit price
of a bid item. The adjustment is a change to the contract and must be made by
change order. Payment adjustments are either unit adjustments to the unit price of a
bid item or they may be a lump sum increase or decrease applied to a bid item.
Payment adjustments are provided for in Sections 9-1.06, “Changed Quantity
Payment Adjustments”; 9-1.15, “Work-Character Changes”; “9-1.17C, “Proposed
Final Estimate”; and 9-1.17D(2)(b), “Overhead Claims,” of the Standard
Specifications. Other payment adjustments may be required, depending on the bid
items, such as hot mix asphalt and concrete pavement.
Do not pay for payment adjustments until change orders authorizing the adjustments
have been approved.
If you anticipate that payment adjustments in accordance with Sections 9-1.06,
“Changed Quantity Payment Adjustments,” or 9-1.15, “Work-Character Changes,” of
the Standard Specifications will result in decreases in final payment, withhold an
amount sufficient to cover the value of the decrease.
For more discussion about determining payment adjustments, refer to Section 5-3,
“Change Orders,” of this manual.
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3-904A Changed Quantity Payment Adjustments
When the total pay quantity of a bid item varies from the bid item list by more than
25 percent, the variation may be the result of more or fewer units than shown in the
bid item list required to complete the planned work. The variance may also result
from ordered changes or a combination of both of these factors. When the variation
exceeds 25 percent, adjust the compensation in accordance with Section 9-1.06,
“Changed Quantity Payment Adjustments,” of the Standard Specifications, or
document in the contract records the reason for not making a payment adjustment.
When the accumulated increase or decrease in bid item units shown on a change
order exceeds 25 percent of the bid item list, the overrun or underrun must be
acknowledged and provided for in the current change order. Refer to Section 5-
306C, “Methods of Payment,” of this manual for more information on change orders.
Provide for this overrun or underrun through 1 of the following options, whichever is
applicable:
• Adjust the contract price in accordance with Section 9-1.06, “Changed Quantity
Payment Adjustments,” of the Standard Specifications.
• Defer any payment adjustment because of the overrun or underrun.
• State in writing that the bid item is not subject to adjustment. Refer to Section 5-
3, “Change Orders,” of this manual for a discussion and examples of change
orders providing for payment adjustments resulting from increased or decreased
quantities.
3-904A (1) Increases of More Than 25 Percent
It is usually appropriate to defer adjustment if work on the bid item has not been
completed. Additional change orders may affect the quantity, or the number of units
required to complete planned work may not be known. However, as soon as unit
costs and final quantities can be reasonably determined, calculate any required unit
adjustment and provide for it through a change order. When work on the bid item is
completed, apply the unit adjustment to the total number of units in excess of 125
percent of the quantity shown on the bid item list.
Unless requested by the contractor in writing, the engineer does not have to adjust
the contract price of an item if the bid item cost of the work in excess of 125 percent
of the quantity shown on the bid item list is less than $15,000. However, before
exercising this right, verify that Caltrans will not gain any economic benefit from an
adjustment. On the other hand, make an adjustment if it would decrease cost and
the amount of the decrease would exceed the cost of making the adjustment.
3-904A (2) Decreases of More Than 25 Percent
If a bid item underruns the quantity shown on the bid item list by more than 25
percent, inform the contractor in writing as soon as work on the item has been
completed. Unless the contractor requests an underrun adjustment in writing, no
adjustment will be made.
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3-904A (3) Eliminated Items
Section 9-1.06D, “Eliminated Items,” of the Standard Specifications applies only to
bid items eliminated in their entirety. Advise the contractor as soon as it is known
that an item will be eliminated. Caltrans will not be responsible for costs incurred for
material ordered after notification.
Write the change order providing for the elimination of a bid item to include the
disposition of any surplus material. Refer to Section 3-904A (4), “Surplus and
Salvaged Material” of this manual for how to handle surplus material resulting from
an eliminated item that cannot be returned to the vendor.
3-904A (4) Surplus and Salvaged Material
Minor differences between quantities of material required to complete the planned
work and quantities shown in the bid item list or shown in quantity summaries on the
contract plans are normal operating differences. Caltrans is not liable for a surplus of
material resulting from these operating differences.
If the final quantity of an item is less than 75 percent of the quantity shown on the bid
item list, include any actual loss because of excess material in the costs as
computed in accordance with Section 9-1.06C, “Decreases of More Than 25
Percent,” of the Standard Specifications.
Do not make any allowance for material the contractor keeps.
Caltrans recognizes that certain materials or manufactured items required for the
planned construction may be unique and not usable by the contractor, the supplier,
or for other projects or customers. If such materials or items become surplus by
reason of an ordered change, resulting in a direct and unavoidable loss to the
contractor, such loss must be compensated. Determine compensation on the basis
of actual cost as provided in Section 9-1.06D “Eliminated Items,” of the Standard
Specifications. The following guidelines describe how to dispose of material that the
contractor cannot economically dispose of.
A determination to salvage items made surplus by ordered changes should be
based on economic benefit to Caltrans, conservation of the energy and materials
required to fabricate the items, or both. Base economic benefit on the following:
• The item’s condition is adequate to perform its function satisfactorily. Damage
does not necessarily make an item unsuitable for salvage. Caltrans has the
capability to repair some items, so investigate this approach before deciding to
dispose of a damaged item. Also consider repair costs when determining the
cost-effectiveness of salvaging.
• The value equals or exceeds the difference in the cost of salvaging, including
hauling, and the cost of removal and disposal.
Also, an item should be salvaged if it meets 1 or more of the following conditions:
• It is a stock item with a definite, foreseeable use. Stock items include all items
that Caltrans normally uses.
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Page 3-9.18 Payment
• It is not a stock item but can be put to immediate use or has a definite,
foreseeable use. This classification would include items that can be reinstalled in
the immediate project or could be installed on future projects.
• It is part of an electrical installation owned jointly with another agency, and the
other agency requests its salvage.
• It can be used immediately for some other beneficial purpose.
Most districts maintain a district salvage yard or other designated areas for receiving
salvaged material. Each district also has a district recycle coordinator. Before the
delivery of potentially salvageable items, make arrangements with the appropriate
person. Materials should not be salvaged until such arrangements are made.
3-904B Payment Adjustments for Price Index Fluctuations
Section 9-1.07, “Payment Adjustments for Price Index Fluctuations,” of the Standard
Specifications specifies payment adjustments for various bid items that contain
paving asphalt. The payment adjustment occurs when the California statewide crude
oil price index fluctuation exceeds the threshold as described in the contract
specifications. Compensation is adjusted when the paving asphalt price fluctuates
from the month of the bid date to the month in which the contract item containing
paving asphalt was placed. Refer to the example in Section 5-3, “Change Orders,” of
this manual.
It is important to make timely payments for price index fluctuations. Increases in the
cost of paving asphalt may place financial burdens on contractors and can cause
projects to exceed allocated supplemental and contingency funds. The resident
engineer is responsible for the following:
• Initiating a change order within 30 days of contract approval.
• Verifying that monthly payment adjustments for paving asphalt are included in
monthly estimates when items that contain paving asphalt are used.
• Monitoring monthly expenditures and estimating future months of expenditures of
payment adjustments for paving asphalt to avoid exhausting the project
supplemental funds and contingency balance.
• Notifying the construction engineer and project manager if you anticipate the
project contingency balance will be depleted so that appropriate action can be
taken.
• At the time of bid, the contractor has the option to opt out of payment
adjustments for price index fluctuations. Form DES-OE-0102.12A, “Opt Out of
Payment Adjustments for Price Index Fluctuations,” is included in the bid book.
To determine if the contractor has opted out, review the bid book for the project.
If the opt-out form in the bid book is not completed, then all of the requirements
apply to the project. The bid book may be viewed at:
http://ppmoe.dot.ca.gov/des/oe/bidsub/post_bid_archived.php
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3-904C Work-Character Changes
Before work can be considered a “work-character change,” there must have been an
ordered change to the plans or specifications. If such an ordered change materially
increases or decreases the unit cost of a bid item, then a work-character change has
occurred. Work-character changes are not to be confused with “differing site
conditions.” For a discussion of differing site conditions, refer to Section 3-5, “Control
of Work,” of this manual.
When calculating the adjustment for a change in work-character, the original bid
price bears no relation to the adjustment unless it can be demonstrated that the bid
price actually represents the cost of the work.
3-905 Time-Related Overhead
Section 9-1.11, “Time Related Overhead,” of the Standard Specifications applies to
projects that have a time-related overhead bid item. This section includes a
description of time-related overhead and a description of time-related field- and
home-office overhead included in the time-related overhead bid item. The contractor
includes time-related overhead costs in the time-related overhead bid item.
Overhead that is not related to time is included in other bid items. Any contract time
adjustments made by change order will result in an equivalent adjustment to the
time-related overhead bid item quantity.
The markups for force account work performed by the prime contractor on time-
related overhead projects are modified in Section 9-1.04A, “General,” of the
Standard Specifications.
Refer to Section 5-410, “Overhead Claims,” of this manual for information regarding
claims for overhead for projects without a time-related overhead bid item.
3-905A Audit Examination and Reports
When the time-related overhead bid item quantity paid exceeds 149 percent of the
quantity at time of bid, consult with your district management before requesting that
the contractor provide an audit of its overhead costs. Refer to Section 5-411,
“Audits,” of this manual for more information.
3-905B Payment
Time-related overhead (TRO) is compensated on monthly progress payments based
on the number of working days charged during the pay period. Separate plant
establishment period and permanent erosion control establishment period working
days do not receive time-related overhead compensation. The quantity of time-
related overhead is not adjusted for concurrent delays. The quantity of time-related
overhead will be adjusted only because of critical delays or time saving adjustments
that revise the current contract completion date. Adjustments to contract time are
handled as follows:
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Page 3-9.20 Payment
• If contract time is adjusted by change order, and there are no revisions to
working days charged to date, payments for increase time adjustments occurs
when the original bid item quantity is exceeded.
• If you have charged nonworking days that you later determine to be a critical
delay, write a change order to make a time adjustment and promptly pay for the
revised working days charged to date.
• If contract time is decreased by change order, the corresponding reduction for
time-related overhead is processed in the next progress estimate.
Whether TRO is bid by working day or lump sum within the bid item list, a 20 percent
maximum limit is contractually established for progress payment purposes. Amounts
more than the 20 percent limit are released in the estimate following completion of
the contract work excluding plant establishment or permanent erosion control
establishment work.
For contracts with a TRO lump sum quantity on the bid item list, calculate the
amount to be paid for each working day charged within a progress payment period
as follows:
Case 1 - TRO lump sum bid is less than or equal to 20 percent of total bid amount:
• TRO working day rate is the TRO lump sum bid amount divided by the
original number of working days bid. Note: TRO is not paid on plant
establishment or permanent erosion control establishment working days and
such days are not included in the TRO working day rate calculation.
• For contract time adjustments, include corresponding unit TRO working day
rate payment adjustments within the change order.
Case 2 - TRO lump sum bid is more than 20 percent of total bid amount:
• TRO working day rate is 20 percent of total bid amount divided by the original
number of working days bid. Note: TRO is not paid on plant establishment or
permanent erosion control establishment working days and such days are not
included in the TRO working day rate calculation.
• Calculate an excess TRO working day rate that is equal to the difference of
the TRO lump sum bid and 20 percent of the total bid amount, divided by the
original number of working days bid. This excessive amount of TRO will be
released after non-plant establishment and non-permanent erosion control
establishment work has been completed in the subsequent payment estimate.
• Note that change orders with time adjustments will need 2 corresponding unit
TRO working day rate payment adjustments of 20 percent maximum rate and
excess rate.
For contracts with a TRO working day quantity on the bid item list, the amount to be
paid for each working day charged within the pay period is the bid item price unless
the 20 percent maximum limit has been exceeded. If the maximum limit was
exceeded, provide a corresponding 20 percent unit rate on progress payments and
release the corresponding excess unit rate amount after non-plant establishment
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Payment Page 3-9.21
and non-permanent erosion control establishment work has been completed in the
subsequent payment estimate.
Excluding terminated contracts, if the contractor completes the contract work before
the expiration of allotted contract time, which is the original number of working days
and time adjustments by approved contract change orders, pay any remaining TRO
item quantity balances as follows:
• For contracts without plant establishment or permanent erosion control
establishment work, process the corresponding remaining working day balance
on the after contract acceptance estimate. Include payment for any additional
TRO compensation that was bid more than 20 percent of the total bid.
• For contracts with plant establishment or permanent erosion control
establishment work, process the corresponding remaining working day balance
in the first progress payment after all non-plant establishment and non-
permanent erosion control establishment work is completed. Include payment for
any additional TRO compensation that was bid more than 20 percent of the total
bid.
If the TRO bid item quantity exceeds 149 percent of the quantity shown on the bid
item list or as converted under section 9-1.11B, “Payment Quantity,” of the Standard
Specifications, and the engineer authorizes a TRO rate through audit that differs
from that bid, process a payment adjustment. Calculate the payment adjustment
based on the difference in the actual TRO rate and that bid. Apply the differential
rate to the quantity of TRO exceeding 149 percent threshold. Include a separate
payment adjustment for Caltrans’ share of the contractor’s audit report cost as
described under section 9-1.11E, “Payment Adjustments,” of the Standard
Specifications.
TRO payments are not made during liquidated damage periods because
contractors’ TRO during these periods is noncompensable.
3-906 Progress Payments
Section 9-1.16, “Progress Payments,” of the Standard Specifications requires
Caltrans to make an estimate of work completed each month. Such estimates are
designated as progress pay estimates. Each progress pay estimate must include
payment for work completed up to and including the 20th day of the month. Include
payment for change order bills that are submitted on time. Also include payment for
extra work performed at agreed price and payment adjustments. Billing for this work
must be submitted by the resident engineer during the pay period in which the work
was performed.
Caltrans supports a collaborative progress payment process allowing contractor
participation in estimating bid item quantities completed for progress payments.
Contractor participation in this process is optional but should be determined at the
preconstruction conference. When a contractor provides a submittal of estimated
item quantities and supporting calculations for work completed up to and including
the 20th day of the month, 2 working days before the progress payment cut-off date,
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Page 3-9.22 Payment
the resident engineer will provide Caltrans’ estimate of item quantities and
supporting calculations to the contractor. One working day before the progress
payment schedule cut-off date, the contractor and resident engineer will attempt to
resolve differences in the estimated quantities. If an agreement cannot be reached
for a particular item quantity, the progress payment will be based on Caltrans’
estimated quantity for the item. If modifications in estimated quantities are
supported, revise the Caltrans estimated quantity and supporting calculations before
processing the progress payment. Where the contractor does not submit a timely
monthly estimate of item quantities, omits certain item quantities, or does not provide
supporting calculations, the collaborative process cannot be used. Other
collaborative process arrangements that are mutually agreeable to the contractor
and Caltrans may be established.
Resident engineers must transmit to the district Construction office the documents
and information required to prepare progress payment vouchers. All documents
must be in the district office no later than the date established by the district, usually
no later than the end of the contract time start day after the 20th of each month.
District Construction must arrange a schedule with the Division of Construction that
will accommodate the Division of Accounting.
A monthly estimate and payment must be made if any amount of money is due the
contractor.
Show all quantities submitted for payment on source documents. Typically, Form
CEM-4801, “Quantity Calculations,” is used for this purpose. Form CEM-4801 is
shown in Example 3-9.1. at the end of this section. The estimate must reflect the
totals on the source documents. A source document is defined as the basic
document executed to record or calculate quantities, percentages of lump sums, or
extra work for payment. Refer to Section 3-902C, “Source Documents,” in this
manual for a discussion of source documents. Example 3-9.1., “Quantity
Calculations,” is a sample of a source document.
The quantity shown on the estimate for a bid item must agree with the sum of the
quantities to date on all of the source documents for that item.
The resident engineer is responsible for the accuracy of a progress pay estimate. By
approval, the resident engineer verifies that the quantities are correct, and that data
submitted conforms to the policies of Caltrans. All entries on Form CEM-6004,
“Contract Transactions Input,” must be checked by other Construction personnel for
errors such as transposition and wrong numbers.
The resident engineer must review and approve each monthly estimate before
district Construction office staff can process it for payment. To expedite handling, the
resident engineer need not sign the estimate itself to indicate approval. Approval
may be by telephone. Confirm telephone approval by sending a memo or a “pre-
verification of pay estimate” form letter to the district Construction office.
Refer to Section 5-103, “The Contract Administration System,” of this manual for
technical details on the production of estimates.
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3-906A Bid Items
Include all bid item work completed satisfactorily in accordance with the contract in
progress payments. Do not include in progress payments preparatory or
organizational work such as assembling equipment, shop work, forming, or crushing
or stockpiling of aggregate unless provided for in the special provisions. Do not pay
for material placed or installed for which you have not obtained the required
evidence of acceptability, such as Form TL-0029, “Report of Inspection of Material”;
Form TL-0624, “Inspection Release Tag”; certificates of compliance, or acceptance
tests.
For items bid on a unit basis, include in progress payments work that is substantially
complete. Withhold a sufficient number of units to cover the value of the incomplete
incidental work. In each case, a source document must be on file showing the details
of the quantity’s determination.
Refer to intermediate source documents for items that are bid on a unit basis with a
fixed final pay quantity, such as structural concrete and bar reinforcing steel (bridge),
to show how partial payment was estimated. Withhold units of work to cover the
value of incomplete incidental work. Base the withheld amount on a force account
analysis of the remaining incidental work.
The following examples are listed to illustrate the procedure for partial payments:
1. Mobilization item
The Contract Administration System (CAS) will automatically calculate and
enter partial payments for the item, “Mobilization.”
2. Maximum value items
Handle items for which maximum payment is limited until after a time fixed in the
contract as follows:
a. Include on the estimate the quantities completed in the same manner as for
any other bid item. The quantity will be extended at the bid price and added to
the total of work done.
b. The system will make a deduction for any overbid.
c. The system will return the deduction at the time set forth in the contract.
3. Roadway excavation
In normal situations, material is excavated, hauled, placed in final position in
embankment, and compacted, but slope finishing is not done. This is considered
incidental work, and a quantity may be withheld to cover the value of the work
remaining.
4. Aggregate for subbase and base
Material may be produced, hauled, placed, and compacted, but final trimming to
tolerance has not been performed. This is incidental work, and a quantity may be
withheld to cover the value.
5. Portland cement concrete pavement
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Page 3-9.24 Payment
Concrete may be in place and cured but not ground to meet surface tolerance.
Grinding is incidental work, and units may be withheld to cover the estimated cost.
6. Sewers and irrigation systems
Pipe may be placed and backfilled but not tested. Withhold units to cover this work.
7. Fence
Posts and wire or mesh may be in place and securely fastened but bracing wires
not completed. Withhold units to cover this incidental work.
8. Structural concrete, bridge, final pay quantity
Bridge construction generally requires erecting falsework to carry dead loads of
concrete or steel members until they become self-supporting. When falsework
supports the superstructure concrete of box girder or slab bridges, make partial
payments for the bid item.
When the soffit plywood is complete in place, make a partial payment equivalent to
35 percent of the projected superstructure concrete volume.
Withhold 5 percent for removal of the falsework materials and the final surface
finishing of concrete.
9. Bar reinforcing steel
Pay for bar reinforcing steel that is complete and in place in the forms. It does not
have to be encased in concrete before payment is made.
10. Structural steel, final pay quantity
Steel placed is paid by units erected and in place. Withhold units to cover incidental
work such as additional bolting and welding.
For work that includes an item for “furnishing,” make no payment for furnishing until
all contract requirements have been met, including acceptability of the material and
delivery to the project. However, payment may be made for materials on hand, as
covered in Section 3-906E, “Materials on Hand,” of this manual, for items that qualify
and meet specified eligibility requirements. Refer to the Bridge Construction Records
and Procedures manual for additional instructions.
For lump sum bid items, if a schedule of values is required, refer to Section 3-906B,
“Schedule of Values,” of this manual. Certain lump sum bid items may include
specified payment provisions that describe payments to be made as work on the
item or project is completed. Otherwise, pay a percentage of the lump sum bid price
as work progresses. Use for this calculation the ratio of the number of working days
an item of work has been in progress divided by the estimated total number of
working days required to complete the item work. Be aware that such a simplified
method might not reflect the value of the work actually completed. Reach an
equitable agreement with the contractor for the basis of determining progress
payments on lump sum items in such cases.
If any work or material on hand paid for on a previous monthly estimate loses value
through loss, damage, or failure to function, deduct units representing the lost value
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from the following monthly estimate. Another example is storm damage requiring
repair or replacement in accordance with Section 5-1.39B, “Damage Caused by an
Act of God,” of the Standard Specifications.
Do not pay for item work added by change order until the change order is approved.
However, payment for bid item overruns that are not the result of a change in the
contract may be included in the monthly estimate.
3-906B Schedule of Values
A schedule of values is required for specific lump sum bid items such as electrical
systems. Building construction will also be a lump sum bid item and will require a
schedule of values as specified in the special provisions. Structure Construction will
provide a technical review to verify that progress payments can be based on the
value of the work in place.
3-906C Extra Work
Do not pay for change order work until the change order is approved. Refer to
Section 3-403, “Changes and Extra Work,” Section 3-906D, “Interest,” and Section
5-3, “Change Orders” of this manual, for further information on change orders
providing for extra work.
3-906D Interest
Section 9-1.03, “Payment Scope,” of the Standard Specifications provides for
interest to be paid on unpaid and undisputed progress payments, payments after
acceptance, change order bills, claim payments, and awards in arbitration.
Keep a log of the dates change order bills are received, rejected, and resubmitted. In
a timely manner, process all change order bills, and fully document reasons for
rejecting change order bills.
Make interest payments for late payments by change order as a payment
adjustment at lump sum. Refer to Section 5-3, “Change Orders,” of this manual for
more information.
3-906E Materials on Hand
Pay for acceptable materials on hand with individual material costs of at least
$50,000 or at least $25,000 for requestors certified as a disabled veteran business
enterprise, disadvantaged business enterprise or small business, provided that all
specified conditions have been met. Do the following:
• Give the contractor Form CEM-5101, “Request for Payment for Materials on
Hand.”
• The contractor must initiate payment by submitting in duplicate a properly
completed Form CEM-5101. Make no payment for any material if the contractor
has not requested payment on the Caltrans-furnished form. The contractor must
submit a request 1 week before the end of the estimate period for each estimate.
Each request must represent the current status of materials on hand at the time
California Department of Transportation Construction Manual March 2024
Page 3-9.26 Payment
the request is made. Do not honor a request if it does not represent the actual
amount on hand.
• Upon receipt of a request for payment for materials on hand, the resident
engineer must check that it is filled out properly, meets specified eligibility
requirements, and that the contractor attached evidence of purchase. Check on
requestor’s certification for a disabled veteran business enterprise,
disadvantaged business enterprise, or small business when the material cost is
$25,000 to $50,000. When the contractor’s supporting evidence of purchase
shows that a discount has been allowed, reduce the payment for materials on
hand by the amount of the discount.
• Before processing a materials-on-hand request, inspect all materials for
acceptability. Materials must have a certificate of compliance or Form TL-0029,
“Report of Inspection of Material.” Form TL-0029 is evidence that the material
was inspected at the source. In general, accept only completely fabricated units,
ready for installation on the project with the following exceptions:
1. Piling—Steel plate used for steel pipe piling and driven steel shells filled with
concrete and reinforcement as described in Section 49, “Piling,” of the
Standard Specifications, may be considered acceptable as raw material.
However, pay for such material as raw material only until shop fabrication of
the pile is 100 percent complete. After shop fabrication is complete, the
estimated fabricated value may be paid, subject to other specified restrictions
and administrative guidelines.
2. Structural Steel—Structural steel used in steel structures as described in
Section 55, “Steel Structures,” of the Standard Specifications, may be
considered acceptable as raw material. However, pay for such material as
raw material only until shop fabrication of a usable member, such as a girder
or other shape ready for shipment to the job site, is 100 percent complete.
After shop fabrication is complete, the estimated fabricated value may be
paid, subject to other specified restrictions and administrative guidelines.
3. Sign Structures—Structural steel used in overhead sign structures as
described in Section 56, “Overhead Sign Structures, Standards, and Poles,”
of the Standard Specifications, may be considered acceptable as raw
material. However, pay for such material as raw material only until shop
fabrication of a usable member, such as a sign frame or other member, is 100
percent complete. After shop fabrication is complete, pay for the estimated
fabricated value, subject to other specified restrictions and administrative
guidelines.
• Verify proper storage of materials listed on Form CEM-5101, “Request for
Payment for Materials on Hand,” in accordance with the following procedures:
3-906E (1) Materials at the Project
For all valid requests for material located at or near the project, determine whether
the materials are stored in conformance with the contract. To conform to this
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Payment Page 3-9.27
requirement, the contractor may have to store materials in fenced areas with locked
gates, in locked warehouses, or in areas where it is improbable that materials would
be lost from any cause. In addition to having controlled storage, the contractor is
required by the Standard Specifications to provide proper storage and handling so
that the materials do not become damaged or contaminated. For stored materials
with water pollution potential, the contractor must establish and maintain water
pollution control measures. Call any indication of improper storage to the
contractor’s attention. Withhold payment for materials on hand until the materials are
properly stored.
Do not pay for material accepted on the basis of certificates of compliance until such
certificates have been received.
The resident engineer or an assistant resident engineer must review Form
CEM-5101 to verify that the request is acceptable.
3-906E (2) Materials Not at the Project
For materials not delivered to the job site, obtain evidence, and establish the fact of
purchase, proper storage, acceptability, accessibility, and other factors. Materials
Engineering and Testing Services (METS) maintains representatives in major
industrial areas and provides inspection in all other areas for this purpose. The
following is the procedure for requesting METS’s assistance:
• If it is not practical for the resident engineer or assistant resident engineers to
verify quantity, quality, location and proper storage, send the duplicate copy of
the Form CEM-5101 to METS.
• Upon receipt of Form CEM-5101, METS will immediately notify the appropriate
inspection office or offices. The METS representative will notify the resident
engineer directly using Form TL-0649, “Inspector’s Report of Material on Hand,”
or TL-6037, “Fabrication Progress Report,” that the material has been inspected
and that it is in acceptable condition and properly stored. METS will use Form
TL-6037 for structural steel, precast prestressed concrete members, or sign
structures. For other products, METS will use Form TL-0649.
METS may also indicate on its correspondence the percentage complete of shop
fabrication on various structural components. This figure is given for the purpose of
reporting progress on the affected items. Do not use it to increase payment for
materials on hand during fabrication.
• Upon receipt of the Form CEM-5101, “Request for Payment for Materials on
Hand,” and percentage-complete verification, the resident engineer can approve
the partial payment. The contractor must submit a new Form CEM-5101 for each
estimate, and the percentage-complete procedure must be followed. However, it
is possible METS may not be able to respond in time for payment on the
estimate. METS gives priority to new or changed requests. Therefore, for
requests that have not changed since a previous submittal, resident engineers
may approve subsequent payments in the absence of any METS reports to the
contrary.
California Department of Transportation Construction Manual March 2024
Page 3-9.28 Payment
On the monthly progress pay estimate, enter the total value of acceptable material
as material on site regardless of storage location. Use Form CEM-5105, “Materials
on Hand Summary,” to summarize, authorize and document material on hand
payments.
The maximum payment for materials on hand should be such that, when the
estimated placing and other remaining costs of the work are added, the contract
price is not exceeded. The purpose of this is to prevent payment of more than the
contract price for the materials and to leave sufficient funds in the item to complete
the work.
3-906F Withholds
3-906F (1) Progress Withholds
Progress withholds are usually determined by noncompliant or unsatisfactory
progress. Whenever a contractor’s performance is unsatisfactory, the resident
engineer notifies the contractor of the apparent failure.
3-906F (1a) Noncompliant Progress
Progress is determined by comparing the contractor’s actual progress with the curve
on Form CEM-2601, “Construction Progress Chart (Oversight Projects).” This
requires calculation of the percentage of work completed and the percentage of time
elapsed. If the plot of these percentages falls on or above the curve on Form
CEM-2601, progress is considered satisfactory. Otherwise, it is considered
unsatisfactory except under extenuating circumstances. Refer to Section 9-1.16E(2),
“Progress Withholds,” of the Standard Specifications for noncompliant progress
conditions.
After each progress estimate, update Form CEM-2601. The Contract Administration
System (CAS) uses the formula contained on this form to determine progress. For a
description of this process, refer to Section 5-1, “Project Records and Reports,” of
this manual.
The contractor’s progress is usually considered unsatisfactory when the contractor’s
progress curve falls below the curve of the contract progress chart or when
successive points on the contractor’s progress curve indicate the contractor’s
progress rate will soon fall below the curve.
The percentage of work completed is determined by dividing the amount on the line
titled “Total Work Completed” on the “Project Record Estimate” by the “Authorized
Final Cost” on the “Project Status.” CAS calculates this percentage. Calculations for
percentage of work completed for Type 1 plant establishment projects is an
exception. Calculations are shown in Section 3-906F (1b), “Plant Establishment
Work,” of this manual.
CAS computes the percentage of contract time elapsed by dividing the number of
working days elapsed to the date of the progress estimate, by the original working
days specified in the contract plus “Total time extension days approved to date,” on
Form CEM-2701, “Weekly Statement of Working Days.”
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Payment Page 3-9.29
Whenever the contractor fails to prosecute the work adequately, determined by the
plot of actual progress and your concurrence, you must notify the contractor of the
apparent lack of progress. If you judge that the work on the remaining work activities
will not be completed by the “computed date for completion” as defined in Section 3-
804, “Time,” of this manual, you must request that the contractor submit a revised
schedule showing how the balance of the work will be carried out.
Occasionally, the resident engineer has information indicating that the percentage of
time elapsed is different from that which CAS will calculate. The usual reason for this
is that pending time extensions have not yet been approved and entered into the
system. The percentage of time elapsed can be calculated using the anticipated time
extension in the formula described previously. The resident engineer must document
the calculated percentage of time elapsed as well as the reasons therefore. Enter
the calculated percentage of time elapsed in the appropriate place on Form CEM-
6101, “Project Record—Estimate Request.” CAS will calculate satisfactory or
unsatisfactory progress based on this figure.
Whenever the district believes the contractor’s bonding company should be notified
of unsatisfactory progress, advise the Division of Construction of the reasons
supporting such an action. If appropriate, the district will initiate the notification.
If the district believes the lack of progress on a contract justifies a meeting, the
district arranges a conference to be attended by the contractor’s representatives, the
bonding company, and Caltrans. If appropriate, the Division of Construction will
arrange the conference. For more information, refer to Section 3-808, “Contractor’s
Control Termination,” of this manual.
3-906F (1b) Plant Establishment Work
For specifications and administrative guidelines for plant establishment time
requirements refer to Section 20-4, “Plant Establishment Work,” of the Standard
Specifications, and Section 4-2002C (8), “Plant Establishment Work,” of this manual.
In general, a withhold for unsatisfactory progress should be waived only for
landscape projects or on other projects only after a corrected entry has been made
for “percent time elapsed” as covered for Type 1 and Type 2 plant establishment.
For projects with Type 2 plant establishment, the percentage of time elapsed and
percentage of work completed is determined as described in Section 3-906F (1a),
“Noncompliant Progress,” of this manual.
For projects with Type 1 plant establishment, compute the percentage of time
elapsed and the percentage of work completed for the periods before the start of
plant establishment. After the start of Type 1 plant establishment, the resident
engineer will decide if the progress is satisfactory. In general, consider progress
satisfactory if the contractor entered the plant establishment period on time and
carries out plant-establishment work on time. Progress will be considered
unsatisfactory if there will be an overrun in contract time because of a delayed start
of Type 1 plant establishment.
California Department of Transportation Construction Manual March 2024
Page 3-9.30 Payment
Determine the percentage of work completed by dividing the value of work
accomplished by the authorized contract amount minus the authorized plant
establishment work.
% Complete=
$ Value Completed Work
($ Total Auth. Contract Amt. – $ Plant Estab. Work)
Determine the percentage of time elapsed by dividing the number of working days
elapsed to the time of the estimate on Form CEM-2701, “Weekly Statement of
Working Days,” by the total contract time limit plus “Total change order days
approved to date” on Form CEM-2701 and minus the length of the plant
establishment period.
% Time =
Working Days Elapsed
(Orig. Contract Time + Time Ext. to date – Plant Estab. Period)
Compare these 2 percentages to the curve on Form CEM-2601, “Construction
Progress Chart (Oversight Projects).” If progress is satisfactory, check the “Override
Unsatisfactory Progress” on Form CEM-6101, “Project Record—Estimate Request.”
3-906F (2) Performance Failure Withholds
Whenever the contractor fails to comply with a contract part, including timely
submittal of a required document, the resident engineer notifies the contractor of the
apparent performance failure. For example, performance failure withholds may be
taken if any of the following required documents are late or missing:
• Quality control plan
• Baseline schedule
• Updated schedules
• Revised schedules
• Time impact analyses
• Final schedule
• Traffic control plans
• Traffic contingency plan
• Water pollution control plan
• Storm water pollution prevention plan
The resident engineer gives the contractor 7 days from this notification to either
provide the submittal or a request for information. If neither is provided on time, the
resident engineer should take the performance failure withhold in the next progress
pay estimate. If the contractor submits a request for information, the resident
engineer should allow another 7 days from the time the request for information is
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Payment Page 3-9.31
answered in full before taking the performance failure withhold. Refer to Section 9-
1.16E(3), “Performance Failure Withholds,” of the Standard Specifications. Other
withholds, such as progress withholds, stop notice withholds, and penalty withholds,
are separate and may be taken simultaneously if justified.
3-906F (3) Stop Notice Withholds
Refer to the Division of Accounting all inquiries regarding bills for labor, material, or
equipment rental not paid by Caltrans’ contractor. Detailed information for
construction payments, legal withholds, labor compliance withholds, levies and liens,
including stop notice contacts can be found on the Division of Accounting “Major
Construction Payment & Information” website:
https://misc-external.dot.ca.gov/pets/
3-906F (4) Penalty Withhold
For penalty withholds, refer to Sections 7-1.02, “Laws,” and 9-1.16E(5), “Penalty
Withholds,” of the Standard Specifications. Penalty withholds may become a
deduction if appropriate. Withholds may be required in accordance with Sections 7-
104, “Air, Water, and Noise Pollution Control”; 7-105, “Permits, Licenses,
Agreements, and Certifications”; and 8-102, “Labor Compliance Responsibilities,” of
this manual.
3-906G Deductions
Deductions, as opposed to withholds, are amounts held back for specific purposes.
The resident engineer must identify, initiate, and control all deductions. Refer to
Section 5-103F (1c), “Deductions,” of this manual for information on administering
deductions.
Make a deduction from payment to the contractor as soon as the liability for the
event requiring a deduction has been determined. It is preferable to base deductions
on known amounts resulting from agreements or actual billings, but, if necessary,
they can be estimated.
Resident engineers must keep source documents and summary sheets in the
appropriate contract records to cover all deductions. In the absence of any
information to the contrary, CAS will carry deductions forward from the previous
month.
Whenever the contractor’s progress is unsatisfactory and the project has progressed
to a point where a reasonably accurate estimate of probable liquidated damages can
be made, the resident engineer must deduct an amount sufficient to cover probable
liquidated damages. Make the deduction instead of any withhold for unsatisfactory
progress. Enter the amount and description of deductions on Form CEM-6101,
“Project Record–Estimate Request,” and check “Override Unsatisfactory Progress,”
to prevent the withhold.
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Page 3-9.32 Payment
3-906H Supplemental Progress Payments
Resident engineers are responsible for the completeness and accuracy of each
progress payment. Supplemental progress payments are used to correct omissions
or make adjustments to a previously processed progress payment estimate for work
performed within that pay estimate period. Supplemental progress payments may be
run only between the completion of the original monthly progress payment and the
15th of the following month.
Refer to Section 5-103F, “Generating Estimates,” of this manual for the process of
generating a supplemental progress payment.
3-906I Negative Estimates
The resident engineer is responsible for the accuracy of all payment estimates,
including progress payment, after acceptance, semifinal, and final estimates.
Negative estimates reflect an overpayment made to the contractor. When a negative
estimate is necessary, you must prepare a brief justification and submit it with the
estimate request to the district Construction office. The district Construction office
must obtain concurrence from the deputy district director of Construction or
delegate, and the Division of Construction’s field coordinator before running the
negative estimate.
When a negative estimate is approved for processing, the Division of Accounting
creates an accounts receivable and directly bills the contractor for the amount due.
Accounting provides a monthly listing of all pending accounts receivable and their
status to the progress pay coordinators and expects that further action is taken by
district Construction and the Division of Construction. For specific instruction on
billing, contact the Division of Accounting.
Section 3-907E, “Payment Offset,” of this manual describes another method
available to the resident engineer and the Division of Accounting to resolve
overpayment to the contractor.
3-907 Payment After Contract Acceptance
Caltrans makes final payment as soon as possible after the contract is accepted and
the contractor submits the required documents requested by the resident engineer.
Any estimate covering a payment after contract acceptance is identified either as
“after acceptance,” “semifinal,” or “final.”
Soon after the contract is accepted, meet with the contractor to discuss submitting
required information to complete the contract. If the contractor does not submit
required data within 4 weeks after acceptance, you must notify the contractor in
writing that Caltrans will issue the proposed final estimate and deduct the
appropriate amount. Section 5-406, “Claims Resolution Process,” of this manual lists
the timeline for completing payment steps after the acceptance process.
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Payment Page 3-9.33
3-907A Payment Before Final Estimate
A payment after acceptance but before the proposed final estimate must adhere to
Section 9-1.17B, “Payment Before Final Estimate,” of the Standard Specifications.
The purpose of this type of progress payment is to release all money due the
contractor that exceeds any amounts withheld under the contract. When determining
amounts to be paid or deducted for this type of estimate, do the following:
1. Include payment for the following:
a. Any work completed since the previous estimate
b. Any errors that may have been discovered and corrected
c. Any labor compliance deficiencies that have been cleared
2. Include payment for any overbids on maximum value items, including the
mobilization item. You do not need to take any additional action for this step.
3. When delinquent or inadequate payrolls exist, make a deduction from the
payment.
4. When the contractor has failed to correct deficiencies in its equal employment
opportunity program, make a deduction from the payment. These deficiencies
include failure to submit Form CEM-2402F, “Final Report—Utilization of
Disadvantaged Business Enterprises First-Tier Subcontractors.”
The deductions will be in the same amount as for any progress estimate. Refer to
Section 8-1, “Labor Compliance”; Section 8-2, “Equal Employment Opportunity”;
Section 8-3, “Disadvantaged Business Enterprises,” and Section 8-4, “Disabled
Veteran Business Enterprises,” of this manual.
5. To cover any outstanding documents required under this contract, make a
deduction from the payment. These outstanding documents include the following:
a. Reduced prints of working drawings
b. Outstanding payrolls that are not yet delinquent
c. Any information upon which to base the proposed final estimate, such as payment
adjustments of contract unit prices
The deduction, regardless of the number of outstanding items, will be the lesser of 10
percent of the “Subtotal Amount Earned Without Mobilization,” or $10,000, and at least
$1,000.
In addition to the steps listed for determining amounts to be paid or deducted for an
estimate after contract acceptance, the resident engineer must also do the following:
1. Notify the district of what deductions are applicable.
2. Compound the deductions when a combination of the situations outlined
previously occurs:
a. The contractor has delinquent or inadequate payrolls
California Department of Transportation Construction Manual March 2024
Page 3-9.34 Payment
b. The contractor failed to correct deficiencies in its equal employment opportunity
program
c. The contractor failed to honor requirements related to disadvantaged business
enterprises
3. Also compound permanent deductions. Permanent deductions include items
such as material royalties, railroad flagging charges, material testing, out-of-
specification material, or restaking charges.
Also considered permanent are deductions for anticipated liquidated damages.
When warranted, anticipated liquidated damages can be made on progress
estimates. However, anticipated liquidated deductions will need to be made
permanent on the after-acceptance estimate. To do so, release anticipated
liquidated damages; then take actual liquidated damages under liquidated
damages on the after-acceptance estimate.
4. When you make deductions for outstanding items, advise the contractor in writing
of the specific missing items.
5. Before processing an after-acceptance estimate, run the following 2 reports,
“Status of CCO,” and “CCO master listing.” These reports will show any contract
change order adjustment of compensation credit or deferred time not yet taken.
3-907B Proposed Final Estimate
The purpose of the proposed final estimate is to obtain formal agreement regarding
final payment. For this type of estimate, follow these guidelines:
• Submit the proposed final estimate to the contractor within the time frame
outlined in Section 5-406, “Claims Resolution Process,” of this manual.
• Before processing the proposed final estimate, check that all change order bills
submitted by the contractor are processed and ready for payment. Make sure the
estimate’s issuance is not delayed for change order bills that remain outstanding.
• If the contractor has not submitted required information, the proposed final
estimate must still be issued on time, and the following guidelines apply:
1. Any time before a proposed final estimate is issued, the district may exercise
an option described in Section 9-1.04C, “Materials,” of the Standard
Specifications. This section identifies the conditions under which Caltrans
may establish the cost of materials when valid copies of vendors’ invoices are
not forthcoming. When the district decides to establish such costs, use the
following procedure:
a. If the established cost is necessary to determine compensation, complete the
pending change order, and have it unilaterally approved. To determine
compensation, refer to Sections 9-1.06, “Changed Quantity Payment
Adjustments,” or 9-1.15, “Work-Character Changes,” of the Standard
Specifications.
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Payment Page 3-9.35
b. If the established cost is necessary to make force account payment on an
existing change order, include this established cost as a lump sum payment on
a supplemental change order. Also, unilaterally approve this supplemental
change order.
2. On the proposed final estimate, you may list, in the amount the district
determines to be payable, any force account billings that have not been paid
because of a dispute. Upon return of the proposed final estimate, the
contractor must reiterate the disputed extra work, which must be handled like
any other claim. Do not list in the proposed final estimate any force account
billings the contractor has not yet submitted. It is the contractor’s
responsibility to either submit these bills before the proposed final estimate or
list them as exceptions to the proposed final estimate.
3. The district will show the required deduction on the proposed final estimate in
the same manner as for any other deduction when the contractor has the
following outstanding items:
a. Delinquent or inadequate payrolls
b. Deficiencies in its equal employment opportunity program
c. Violations of requirements related to disadvantaged business enterprises
These items are also described in Section 3-907A, “Payment Before Final Estimate,”
of this manual. When such deductions are shown, include a statement similar to the
following on the letter that accompanies the proposed final estimate: “The amount of
$_________, which has been deducted for nonsubmittal of documents required by
the contract, will be paid when all such documents have been received.”
• Submit Form CEM-6101, “Project Record—Estimate Request,” to the district
office with the proposed final estimate box checked to initiate the proposed final
estimate.
• The proposed final estimate is to be prepared and sent to the contractor by the
district Construction office. It should include the following:
1. A letter transmitting the proposed final estimate to the contractor. This letter
should include the statements shown in Example 3-9.2., “Form Letter for
Submitting Proposed Final Estimate to the Contractor.”
2. A form for the contractor’s acceptance of the amounts listed in this estimate.
Verify that the form contains wording similar to the wording in Example 3-9.3.,
“Acceptance Statement Form.”
3. The proposed final estimate report showing the status of item payments
generated by CAS along with the “schedule of extra work” and “schedule of
deductions” reports. Samples of these reports are shown in Examples 3-9.4.
through 3-9.6.
4. If deductions for items such as staking charges, laboratory charges, railroad
flagging charges, and overruns of contract time are not finalized and shown
on the reports, a list of their estimated maximum amounts must be attached.
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Page 3-9.36 Payment
• Use separate correspondence, not the proposed final estimate, for funds
deducted for labor violations and wage restitution as opposed to outstanding or
inadequate payrolls.
• When money is due on the proposed final estimate, make sure the semifinal
estimate processed immediately after reflects the same “totals” as the proposed
final estimate. If you follow this approach, the contractor will submit claims based
on the “statement of total amount earned,” rather than a “revised” number.
• To establish the beginning of the 30 days during which the contractor may submit
written claims, send the proposed final estimate by certified mail, “return receipt
requested,” or overnight delivery.
• From the issuance of the proposed final estimate to the receipt of the contractor’s
response, do not enter into any negotiations, written or verbal, concerning the
proposed final estimate or potential claims, except as described in the following
paragraph. During this time, negotiating or communicating with the contractor, or
issuing change orders, may negate the finality of the proposed final estimate. If
the finality is negated, the contractor may have 30 days from the most recent
communication to respond.
• If you discover an error that requires a decrease in a quantity, send a letter to the
contractor stating the discovery of an error, and specify the item and amount of
the change. Also, state that the error will be addressed after the contractor
returns the proposed final estimate. If the contractor discovers and brings to your
attention any errors or discrepancies, handle this situation through separate
correspondence covering only the affected items. For example, if the contractor
disputes the quantity of an item, send a letter to the contractor stating that the
item must be listed as an exception to the proposed final estimate. In the letter,
also state that the item will be analyzed after the return of the proposed final
estimate and exceptions, also known as the “Acceptance Statement.”
• When the contractor returns the Acceptance Statement, proceed in accordance
with 1 of the following appropriate options:
1. If the returned Acceptance Statement has no exceptions, such as
administrative claims or contract claims, and all documents required under
the contract have been received, prepare the final estimate. Refer to Section
3-907D, “Final Payment and Claims,” of this manual for more information.
2. If the returned Acceptance Statement has no exceptions, but some
documents are still outstanding, continue pressing the contractor, in writing,
for the missing documents. If amounts due the contractor exceed the
deductions by more than $300, prepare and process a semifinal estimate.
3. If the documents have not been received in approximately 60 days, request
advice from the Division of Construction field coordinator about further action.
4. If the Acceptance Statement is returned with exceptions, initiate the claims
procedure as outlined in Section 5-4, “Disputes,” of this manual.
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Payment Page 3-9.37
5. If the Acceptance Statement is returned requesting a payment adjustment in
accordance with Section 9-1.17C, “Proposed Final Estimate,” of the Standard
Specifications, determine if the payment adjustment is warranted. Contracts
that have been terminated or those with time-related overhead bid items are
not subject to this payment adjustment. If the payment adjustment is
warranted, make the payment in the same manner as for any other
adjustment and unilaterally approve in the district. The following is an
example of a calculation to determine this payment adjustment:
Example:
Contractor’s original bid, including mobilization $100,000
90 percent of contractor’s bid $ 90,000
Final estimate of total work, including mobilization,
extra work, and minus permanent deductions $ 85,000
Difference $ 5,000
Adjustment of overhead costs
(10
percent of difference) $ 500
6. When the Acceptance Statement is not returned within the specified 30 days,
verify it has not been lost in transit and then proceed in accordance with 1 of
the following options:
a. If all documents have been received, prepare and process the final estimate.
b. If some documents are still outstanding, request advice from the Division of
Construction’s field coordinator about further action.
c. If the contractor includes in the Acceptance Statement any claim that is
postmarked or hand-delivered more than 30 days after the date the contractor
received the proposed final estimate, the claim is considered late and will not
be processed. On a hand-delivered claim, record the date the claim arrived,
who delivered it, and who received it. Retain the envelope for a claim that
arrived through the mail to establish the date the claim was sent. Inform the
contractor of the late filing by using a letter worded in a similar way to the
following letter. This notification will constitute the final administrative action on
a late claim.
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Page 3-9.38 Payment
Notification to Inform the Contractor of a Late Filing:
Contractor ___________,
The statement of claim included in your letter dated
_________, was submitted to us more than 30 days after you
received copies of the proposed final estimate for Contract
No. ____________, (County Route and Postmile).
A final estimate is, therefore, being processed for issuance to
you as provided in Section 9-1.17C, “Proposed Final
Estimate,” of the Standard Specifications.
Sincerely,
District Construction Office
d. If the contractor includes claims with the return of the proposed final estimate,
the district should immediately acknowledge the receipt of the claims by sending
a written statement similar to the following:
Acknowledgment of the Receipt of Claims:
Your written statement of claims has been received. The
engineer will base the determination of your claims upon the
investigation of your statement.
The investigation of your claim statement will begin
immediately. If it is determined that additional information is
required, you must furnish it within 15 days of the request in
accordance with Section 9-1.17D(2), “Claim Statement,” of
the Standard Specifications. You may request in writing an
extension of time to a specific date. Our purpose is to provide
you with the engineer’s final determination on claims in the
minimum possible time, consistent with the assurance that all
the facts are available for consideration.
e. If the initially submitted claim statement is obviously deficient in information,
instead of stating the timeline for investigation, use a paragraph similar to the
following example:
Notification of Deficiency of Information:
Your initial submission appears to be deficient as to the
following:
[Select appropriate item or items.]
1) Statement of contractual basis for claim
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Payment Page 3-9.39
2) Information as to compliance with Section 4-1.05A,
“General”; or Section 5-1.43, “Potential Claims and
Dispute Resolution,” or both of the Standard
Specifications
3) Breakdown of amount claimed due
4) Other, as applicable
Please submit any further information you wish to have
considered by [date, approximately 15 days after the
contractor will receive the letter]. If you will require additional
time to prepare your supplementary statement, please
request an extension in writing specifying the date to which
the extension is requested. The engineer intends to make
the final determination on claim matters in the minimum
possible time, consistent with the assurance that all the facts
are available for consideration.
f. Examine claims expeditiously. For detailed instructions, refer to Section 5-4,
“Disputes,” of this manual.
3-907C Semifinal Estimate
A semifinal estimate is any estimate prepared after issuing the proposed final
estimate and before preparing the final estimate. The primary purpose of a semifinal
estimate is to make timely payment for all nondisputed items that have not been paid
on a previous estimate. However, semifinal estimates can also be issued to make
payment if some, but not all claims, have been resolved.
The proposed final estimate need not show a zero balance for money owed to the
contractor. If the proposed final estimate does identify money owed to the contractor,
immediately run a semifinal estimate after the proposed final estimate. Do not wait
for any response from the contractor to the proposed final estimate. Do not issue
any other estimates until 30 days after issuing the proposed final estimate.
Normally, use the same procedures to issue a semifinal estimate as those to issue a
progress estimate.
3-907D Final Payment and Claims
Submit a final estimate only after 1 of the following conditions has been met:
• The contractor has submitted all required documents, and complete agreement
on payment has been reached.
• The district director’s final determination of claim has been issued.
• The contractor does not respond to the proposed final estimate in the specified
time but has submitted all required documents.
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Page 3-9.40 Payment
• The district has been advised by the Division of Construction field coordinator to
proceed.
Refer to Section 5-406, “Claims Resolution Process,” of this manual for more
information. As soon as the district approves the final estimate, it must use a
transmittal letter. The letter must state the following: “Submitted herewith in
accordance with Section 9-1.17D(3), ‘Final Determination of Claims,’ of the Standard
Specifications is a copy of the final estimate for your Contract No. X.”
A copy of the transmittal letter is to be sent to the resident engineer to be retained in
the project files.
The district transmits only the final estimate because the disbursing office of the
Division of Accounting will mail to the contractor the corresponding copy of the
progress payment voucher.
3-907D (1) Material to Submit with the Final Estimate
Before payment of a final estimate, the Division of Construction progress pay staff
must make sure that administrative details have been completed. For this purpose,
the district must forward the following data before or with all final estimates:
• Submit the proposed final estimate as originally submitted to the contractor,
including transmittal letters.
• Submit the Acceptance Statement returned by the contractor. If the contractor
has refused to sign the statement, submit it with an explanation of the
contractor’s refusal.
• Submit a transmittal letter containing, but not limited to, the following:
1. A list of the forms and attachments being transmitted or an explanation as to
why a form or attachment is missing. Include letters from the Division of
Construction authorizing the submittal of the final estimate without certain
documents and stating the action taken or to be taken as a result of the
missing documents.
2. A statement about the use of materials agreements. If there are no materials
agreements, state this.
3. A statement that reduced prints of all shop drawings for highway bridges and
railroad bridges have been received from the contractor. If such drawings are
not required, please state so.
4. Correspondence or documents explaining or authorizing the differences
between the proposed final estimate and the final estimate.
5. Form CEM-2402F, “Final Report—Utilization of Disadvantaged Business
Enterprises, First-Tier Subcontractors.”
3-907E Payment Offset
A payment offset is a method of obtaining monies due to Caltrans on 1 contract by
levying against future payments being made to a contractor on another Caltrans
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Payment Page 3-9.41
contract. Offsets may be taken to obtain adequate funds for any amount due and for
determinations made by an arbitrator. The offset process should be completed within
90 calendar days of contract acceptance except when an offset for a determination
by an arbitrator is required.
Many stakeholders are involved in the payment offset process. The following should
be considered when choosing an active contract to apply an offset against:
• There should be sufficient payments pending.
• It should be bonded by the same bonding company if possible.
• It should be administrated within the same district.
To begin the payment offset process, send a letter to the contractor, bonding
company, and offset bonding company. The contractor and the bonding companies
have 20 calendar days from receipt of the letter to request a meeting to discuss the
offset.
If the contract or bonding companies do not request a meeting, execute the offset. If
a meeting is requested, a meeting will be held within 10 calendar days of receipt of
the request. The meeting is conducted by the district director or as delegated to at
least a supervising transportation engineer.
The resident engineer prepares a summary of the facts, minutes of the meeting, and
a final determination report. If the offset is warranted, notify the district administering
the contract being offset, the contractor, and bonding companies of the final
determination, and the amount of the offset. If the contractor or the bonding
companies do not request a hearing, execute the offset. If the hearing officer
determines that an offset is not warranted, continue through the collections process
administered by the Division of Accounting. The Division of Accounting executes
only those offsets authorized by the Division of Construction.
3-908 Arbitration
If the contractor has diligently pursued and exhausted the administrative procedures
specified in the contract for Minor A projects and major projects, the contractor is
entitled to file for arbitration of its claims 240 days after contract acceptance even if
the district director final determination of claims has not been issued.
The Caltrans Legal Division handles all construction contract arbitrations. Refer to
Section 5-412, “Arbitration,” of this manual for more information.
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Page 3-9.42 Payment
Example 3-9.1. Quantity Calculations
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Example 3-9.2. Form Letter for Submitting Proposed Final Estimate to the
Contractor
Subject: Proposed Final Estimate
In accordance with the provisions of Section 9-1.17D(1), “General” of the Standard Specifications,
attached (in triplicate) is a proposed final estimate for
_______________ ______________________________
(Contract) (District County Route Milepost)
Please review the proposed final estimate and, if satisfactory, indicate your approval in the space
provided on the attached Acceptance Statement. Return 3 copies of the Acceptance Statement to
this office. Keep 1 copy or your files.
Please note the following portion of Section 9-1.17D(1), “General” of the Standard Specifications,
which states:
“If you accept the proposed final estimate or do not submit a claim statement within 30 days of
receiving the estimate, the Engineer provides you the final estimate and the Department pays the
amount due within 30 days. This final estimate and payment is conclusive except as specified in
(Standard Specifications) sections 5-1.27, (“Records”), 5-1.47, (“Guarantee”), and 9-1.21, (“Clerical
Errors”).
“If you submit a claim statement within 30 days of receiving the Engineer’s proposed final estimate,
the Engineer provides you a semifinal estimate and the Department pays the amount due within 30
days. The semifinal estimate is conclusive as to the amount of work completed and the amount
payable except as affected by any claims or as specified in sections 5-1.27, 5-1.47, and 9-1.21.”
Your promptness in returning the signed copies, indicating your approval, will expedite payment of
the final estimate. Alternatively, a signed qualified approval by reason of a written statement of claims
will expedite payment of a semifinal estimate. A statement of claims must include a signed
declaration containing the language required in Section 9-1.17D(2)(c), “Declaration,” of the Standard
Specifications.
If claims are submitted in connection with this contract, you will be expected to comply fully with
Section 9-1.17D(2), “Claim Statement,” of the Standard Specifications. The Engineer will base their
determination of claims upon the investigation of your statement, in which you are expected to
present your position fully as to the contractual basis of the claim; compliance with contract
requirements such as Sections 5-1.43, “Potential Claims and Dispute Resolution,” subsections A
through D; and 9-1.17D, “Final Payment and Claims,” of the Standard Specifications, if applicable; a
breakdown of the total amount claimed; and all other information you consider to be in support of
your claim.
As further provided in Section 9-1.17D(1), “General,” of the Standard Specifications, in case neither
approval nor a statement of claims is received, postmarked or hand delivered, before the 31st day,
a final estimate in the amount of this proposed final estimate will be issued. Your date of receipt of
this proposed final estimate establishes the beginning of the specified 30 days.
You are reminded that failure to comply with the contractual claim procedures, including specified
timeframes thereto, is a bar to arbitration under Public Contract Code Section 10240.2.
Sincerely,
District Construction Office
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Page 3-9.44 Payment
Example 3-9.3. Acceptance Statement Form
Subject: Acceptance Statement
Attachment to Proposed Final Estimate transmittal letter
Dated
Contract
Identification
I have examined the quantities of bid items and amounts indicated as payment for
extra work and the deductions on the proposed final estimate dated __________. I
agree to accept the total of $______________ as indicated, as the total amount
earned for all work performed on this contract, unless described as an exception.
Contractor
Exceptions (check 1)
By
[ ] None
[ ] As indicated in
the
attached letter
dated ________
Title
Date
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Example 3
-9.4. Sample of the Proposed Final Estimate
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Page 3-9.46 Payment
Example 3-9.5. Schedule of Extra Work
Example 3-9.6. Schedule of Deductions
