Non-Payment to Subcontractors and Employees

1. US Army Corps of Engineers Afghanistan Engineer District-North Non-Payment to Subcontractors and Employees Prepared by the Contract Administration Section, AEN How-to-Instructions Current copy is located on AED Sharepoint Engineering & Construction Department Construction web page Created: 5 Nov 09; 1

2. INITIAL PROCEDURESubcontractor Payment Disputes When payment disputes between the prime contractor and subcontractor or any tier of subcontractors is brought to your attention, you shall request a detailed information letter from the disputing company. This letter shall be signed by the company officer, who signed the contract in dispute, and must include the following information: • AED Contract Number • Copy of the subcontract (Signed copy is preferred.) • Complete description of contracted work activities • Copy of all invoices and all payments • Subcontract Price • % physically complete • Amount & % invoiced • Amount & % paid • Amount & % in dispute

3. INITIAL PROCEDUREEmployee Payment Disputes When nonpayment of a prime contractor, subcontractor, or any tier subcontractor employee is brought to your attention, you shall request a signed information letter from the disputing employee or conduct an employee interview to ascertain the following information: • AED Contract Number • Copy of any employment agreement • Complete description of work activities • Hourly or daily wage rate • Hours/Days worked • Hours/Days paid • Rate paid • Copy of the employee’s most recent pay statement or paycheck if available • Amount in dispute

4. Important Note “The prime contractor has a responsibility, by contract, to ensure payment to his suppliers, subcontractors, their subcontractors, and all onsite employees associated with this project. However, the Government has no privity of contract between the prime contractor and his subcontractor(s) or their employees. Please do not make commitments to subcontractors or employees that their issues will be resolved.”

5. Follow-Up Procedure If compelling evidence of nonpayment is presented to the Government. The following procedures shall be followed: • Ensure that the Government has paid the prime contractor for the work and payments in dispute. • Confirm that the prime contractor signed the prompt payment certificate for all disputed payments • Confirm that the Prime Contractor does not have any exceptions to payments listed on his Prompt Payment Certificate. • For employee payment disputes confirm that the employee is listed on the Contractor’s employee register and attempt to verify the work activities, duration hours/days worked, wage rate, and amount paid.

6. Final Action If it appears that a subcontractor or employee has not been properly paid, send the appropriate attached letter and meet with the contractor to explain the payment disputes. This meeting should be documented in RMS. If the contractor submits a properly certified invoice and the nonpayment issues are not resolved, the nonpayment issue must be referred to the Contract Administration Section for guidance and resolution.

7. Sample Letter to Prime Contractorfor Subcontractor Nonpayment It has come to my attention that you have failed to pay the subcontractors on your project in accordance with your prompt payment certification and our contract clause 52.232-27. Without proof of payment to your subcontractors I will be invoking the terms of Contract Clause 52.232-5, subparagraph (d), Refund of unearned amounts. Under that subparagraph, payments in the amount necessary to compensate the unpaid subcontractors will be withheld from your next payment estimate along with appropriate interest. You have 4 calendar days from receipt of this letter to provide proof of proper subcontractor payments to avoid withholding of payment and assessment of interest. This proof may take the form of cancelled checks, evidence of Electronic Fund Deposits or sworn statements from the subcontractors that they have received payment. If you have any questions concerning this matter, please contact...

8. Sample Letter to Prime Contractorfor Employee Nonpayment It has come to my attention that numerous employees have not been paid in over 30 days. You are required to assure that all workers on your project, whether employed by your firm, or subcontractors at any tier, are paid. Contract Clause 52.232-5, Payments under Fixed-Price Construction Contracts, contains a certification by your firm that payments requested are “only for performance in accordance with the specifications, terms and conditions of the contract.” Your contract also contains a clause entitled “Compliance With Laws and Regulations” that states “The Contractor shall comply with, and ensure that its employees and its subcontractors and their employees, at all tiers, are aware of and obey all…Host Nation laws.” The country of Afghanistan has labor laws that address when payment is required of workers. Chapter 5 of those labor laws provides that wages are to be paid to workers weekly, bi-monthly or monthly, but that payment may not be delayed from one month to the next (unless by agreement with the worker). Given that I have received information that workers on your project have not been paid for over 30 calendar days, you have failed to perform in accordance with the terms and conditions of the contract. Please note that without proof of current payment to workers performing on your contract (whether employed by your firm or any subcontractor at any tier), I will be invoking the terms of Contract Clause 52.232-5, subparagraph (d), Refund of unearned amounts. Under that subparagraph, payments in the amount necessary to compensate the workers who I have verified as not being timely paid, will be withheld from your next payment estimate, along with appropriate interest. You have 4 calendar days from receipt of this letter to provide proof of proper payment to the workers on your project to avoid withholding of payment and assessment of interest. This proof may take the form of proof of cancelled checks, evidence of Electronic Fund Deposits to the employees, or sworn statements from the employees that they have received payment. If you have any questions concerning this matter, please contact …

9. Sample Paragraph to be Included at Pre-Construction Minutes Please be reminded that you are required to pay your subcontractors and employees for all work that is performed within the requirements contract. You are also required to ensure the you subcontractors have paid their lower-tier subcontractors and employees. Should we notified of a non-payment issue by you or any of your subcontractor’s, we will invoke FAR Clause, 52.232-27; Prompt Payment Certification. This clause gives the Government the right to withhold payment to compensate either unpaid party.

10. Labor Standard Interview Top of Standard Form 1445 http://www.gsa.gov/Portal/gsa/ep/formslibrary.do?formId=12BF5D0E2DC4484685256CBC0062F375&viewType=DETAIL

11. Labor Standard Interview Bottom of Standard Form 1445