Surety Bond Quarterly - Summer 2017 - 29

will be used throughout the project to
price changes and claims. FAR 31.109.
The contractor should attempt to
reach an agreement on these items as
early as possible to avoid disputes on
changes and claims later in the project. In the early stages, the contractor
and government are working together
and agreement on rates generally is
not difficult. Once disputes arise,
the relationship between the parties
may have changed, and agreement
may be more difficult. In addition,
FAR 31.109(b) states that advance
agreements may be negotiated either
before or during a contract but should
be negotiated before incurrence of
the costs involved.
In negotiating an advance agreement, the contractor will have to
provide cost and pricing information
to the government. The contractor,
therefore, must present accurate data
to the government representative and
push to reach an agreement.
Federal construction contracts
generally require the submission
and approval of a preliminary and
baseline schedule prior to starting
work, and the contractor's failure to
provide the schedule can be a basis
for withholding payment. One of
the main reasons for a delay in payment at the beginning of the job is
the contractor's failure to submit the
baseline schedule in a timely manner.
The contractor needs to complete the
baseline schedule as quickly as it can
without sacrificing accuracy and thoroughness. The effort to expedite the
schedule should not result in a bad
or incomplete schedule, because a
bad baseline schedule will haunt the
contractor for the entire job, particularly if there is a delay claim.
The Payment Application
Understanding the payment application process is critical to ensure
timely payment because the government will not pay the contractor
without a proper payment application. Progress payments on a fixedpriced federal contract generally are
made on a percentage-of-completion
basis through monthly progress payment applications. In preparing the

payment application, the contractor
must timely collect the data, including the data from subcontractors,
and arrange for an early meeting with
the government each month to reach
an agreement on the quantity of work
properly performed. The contractor
needs to be fully prepared with accurate information for this meeting. It is
important for the contractor to push
back when the government seeks to
cut an application without a good
reason. On the other hand, the contractor needs to avoid pushing the
envelope too far and seeking payment for more work than the contractor has properly performed, which
can result in a false claim allegation
by the government.
The payment application must
include the following information:
* An itemization of the amounts
requested, related to the various
elements of work required by the
contract covered by the payment
requested;
* A listing of the amount included
for work performed by each subcontractor under the contract;
* A listing of the total amount of each
subcontract under the contract;
* A listing of the amounts previously
paid to each such subcontractor
under the contract; and
* Any additional supporting data in
a form and detail required by the
contracting officer.
FAR 52.232-5(b)(1).
For the contractor to receive payment, its representative must certify
that to his or her best knowledge:
* The amounts requested are only
for performance in accordance with
the specifications, terms, and conditions of the contract;
* All payments due to subcontractors and suppliers from previous
payments received under the contract have been made, and timely
payments will be made from the
proceeds of the payment covered
by the certification, in accordance
with subcontract agreements and
the requirements of 31 U.S.C.
Chapter 39;
* The request for progress payments
does not include any amounts that

the contractor intends to withhold or
retain from a subcontractor or supplier in accordance with the terms
and conditions of the subcontract.
FAR 52.232-5(c).
If the certification is knowingly
inaccurate, the contractor may be
liable for a false claim, which can
have draconian results, including the
forfeiture of payment, civil penalties,
a poor performance rating, and possibly suspension or debarment. The
cost of defense of a false claim can be
substantial, and the relationship with
the government may be permanently
injured. It is, therefore, extremely
important that the certification of the
payment application be accurate. At
a minimum, whoever is signing the
payment application must verify that
the percentage of work being billed
for is accurate, that subcontractors
have been timely paid from previous progress payments, and that the
contractor is not billing for money it
does not intend to pay a subcontractor or supplier.
The contractor is entitled to interest
on the government's failure to pay a
proper invoice within the specified
time. A proper invoice must contain:
* Name and address of the contractor;
* Invoice date and number;
* Contract number or other authorization for supplies delivered or
services performed (including
order number and contract line
item number);
* Description of the work or services
performed;
* Delivery and payment terms (such
as any discount for prompt payment terms);
* Name and address of contractor
official to whom payment is to be
sent (this must be the same as that
in the contract or in a proper notice
of assignment);
* Name (where practicable), title,
phone number, and mailing address
of the person to be notified in event
of a defective invoice;
* Taxpayer Identification Number
(TIN) if required by the contract;
* Electronic funds transfer banking
information if required by the contract; and

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29


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Table of Contents for the Digital Edition of Surety Bond Quarterly - Summer 2017

NASBP Upcoming Meetings & Events
2017–2018 Executive Committee
From the CEO: Bringing Summer Heat: A Rundown of “Hot” Stuff in the Evolving World Surrounding Surety
Howard Cowan—Building on a Solid Foundation
Mitigating the Hidden Risks in the “New Normal” Construction Environment
Acting Director of the U.S. SBA Office of Surety Guarantees
Drones Take Flight in the Construction Industry
2017 AIA Contract Documents: Selected Key Changes
NASBP to Release Continuing Education Course: Joint Ventures in Construction
How Can Construction Contractors Expedite Payment on Federal Contracts?
Insurtech for Surety: The Future Is Closer than You Think!
Index to Advertisers
Surety Bond Quarterly - Summer 2017 - Intro
Surety Bond Quarterly - Summer 2017 - cover1
Surety Bond Quarterly - Summer 2017 - cover2
Surety Bond Quarterly - Summer 2017 - 3
Surety Bond Quarterly - Summer 2017 - 4
Surety Bond Quarterly - Summer 2017 - 5
Surety Bond Quarterly - Summer 2017 - 6
Surety Bond Quarterly - Summer 2017 - 2017–2018 Executive Committee
Surety Bond Quarterly - Summer 2017 - 8
Surety Bond Quarterly - Summer 2017 - From the CEO: Bringing Summer Heat: A Rundown of “Hot” Stuff in the Evolving World Surrounding Surety
Surety Bond Quarterly - Summer 2017 - Howard Cowan—Building on a Solid Foundation
Surety Bond Quarterly - Summer 2017 - 11
Surety Bond Quarterly - Summer 2017 - Mitigating the Hidden Risks in the “New Normal” Construction Environment
Surety Bond Quarterly - Summer 2017 - 13
Surety Bond Quarterly - Summer 2017 - 14
Surety Bond Quarterly - Summer 2017 - 15
Surety Bond Quarterly - Summer 2017 - 16
Surety Bond Quarterly - Summer 2017 - 17
Surety Bond Quarterly - Summer 2017 - 18
Surety Bond Quarterly - Summer 2017 - 19
Surety Bond Quarterly - Summer 2017 - Acting Director of the U.S. SBA Office of Surety Guarantees
Surety Bond Quarterly - Summer 2017 - 21
Surety Bond Quarterly - Summer 2017 - Drones Take Flight in the Construction Industry
Surety Bond Quarterly - Summer 2017 - 23
Surety Bond Quarterly - Summer 2017 - 2017 AIA Contract Documents: Selected Key Changes
Surety Bond Quarterly - Summer 2017 - 25
Surety Bond Quarterly - Summer 2017 - 26
Surety Bond Quarterly - Summer 2017 - NASBP to Release Continuing Education Course: Joint Ventures in Construction
Surety Bond Quarterly - Summer 2017 - How Can Construction Contractors Expedite Payment on Federal Contracts?
Surety Bond Quarterly - Summer 2017 - 29
Surety Bond Quarterly - Summer 2017 - 30
Surety Bond Quarterly - Summer 2017 - 31
Surety Bond Quarterly - Summer 2017 - Insurtech for Surety: The Future Is Closer than You Think!
Surety Bond Quarterly - Summer 2017 - 33
Surety Bond Quarterly - Summer 2017 - Index to Advertisers
Surety Bond Quarterly - Summer 2017 - cover3
Surety Bond Quarterly - Summer 2017 - cover4
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