Section 2 - Contract Oversight and Management

7.8. Monitoring Progress. In accordance with FAR 36.515, for projects exceeding the simplified acquisition threshold and greater than 60 days, the contractor must submit a progress schedule to the contracting officer.

7.8.1. The AF IMT 3064, Progress Schedules may be used. Contracting Officers should review the schedule for the following:

7.8.1.1. reflects dates representing significant events throughout the project such as commencement, substantial completion, and final completion.

7.8.1.2. identifies major events associated with the project, to include coordination of the project work with others, acquiring materials, plant, and equipment.

7.8.1.3. provides a progress chart of each phase of construction and occupancy.

7.8.1.4. contains enough information to support progress payments

7.8.1.5. provides enough detail to support delay analysis, if applicable

7.8.2. The contracting officer determines if a revised schedule is appropriate when time extensions are approved.

7.8.3. Progress Reports and Schedules. The AF IMT 3065 may be used to maintain a record of contract progress. Reports are received from both the contractor and the inspector, usually on a weekly basis, with a calculation of the percentage of each element of work completion, and the cumulative percentage of the work completed to date. This information is used for computing progress payments, and for monitoring the progress against the stated progress on the contractor's schedule.

7.8.4. The contractor shall perform the work of the project in accordance with the sequences shown in the approved schedule or give timely notice and identify the need to deviate from the planned work sequence.

7.8.5. In accordance with FAR 52.236-1, the contractor identifies the percentage of work they will perform on the site, with its own organization.

7.9. Quality Management. Obtaining quality construction is a combined responsibility of the construction contractor and government personnel. The mutual goal must be a quality end product conforming to the contract requirements. The following construction clauses aid in insuring the government receives a quality product.

7.9.1. Specifications and Drawings for Construction. FAR 52.236-21 requires the contractor to keep specifications and drawings on site. The contractor is responsible for coordinating, reviewing and approving shop drawings prior to submittal. The CO approves or disapproves the drawings; however, approval does not relieve the contractor of responsibility for conformance. Variations from contract requirements must be identified; approval of variations may include a deductive modification after discussions with the contractor.

7.9.2. Material and Workmanship. FAR 52.236-5 requires that all materials and articles incorporated into the project shall be new and the most suitable grade for the purpose intended. Paragraph 7.5 above provides further detail.

7.9.3. A Construction Quality Management System allows the Government and the Contractor to plan and schedule work for the project by defining various phases for controlling quality during the life of the project. Although every construction project must have a quality management program, the program is designed based upon the cost and complexity of the construction project. The three phases of a well defined Construction Quality Management System are identified below:

7.9.3.1. Preparatory Phase. This phase applies to pre-construction activities-those actions that are performed before any physical work begins. Types of preparatory actions include physical checks of onsite material and equipment for contract compliance, and approval of shop drawings, test reports, and mix designs. It is the responsibility of government personnel to make sure the contractor has satisfied all preparatory requirements before beginning construction. A preparatory phase conference for each definable feature of work is a method that will assist government personnel in meeting that objective. This conference should occur before any construction activity begins.

7.9.3.2. Initial Phase. The initial phase occurs at the beginning of the construction project and is intended to get the actual work properly underway. It is workmanship oriented, and is the point in the process where workmanship standards are established. The safety program and risk assessments associated with the project are also addressed in this phase. For example contractors working on sites that have been certified as Voluntary Protection Program (VPP) will be required to meet the enhanced construction standards for those sites. The local safety office is responsible for establishing the standards for performance at VPP sites. This phase is of such importance that if the contractor should, at any time, change the onsite supervisor an initial phase conference should be scheduled to ensure all parties have a clear understanding of the required workmanship standards.

7.9.3.3. Follow-Up Phase. The follow-up phase is a continuous action throughout the construction project. Follow-up involves routine checks to ensure that previously established guidelines are being followed. If preceded by thorough Preparatory and Initial Phases, this phase is more effective and productive.

7.9.4. Quality Control Plan (QCP). The contractor's QCP is the foundation upon which quality work is based. The complexity, criticality and dollar value of the project should be considered when determining if a plan is required. When required, the QCP is received, reviewed and formally accepted by the Contracting Officer before any construction begins. The plan should be comprehensive, detailed and logical if the contractor's quality control program is to be effective. The plan must demonstrate that the contractor has fully considered the specific contract requirements and special factors peculiar to the project. If changes to the plan are necessary, the changes must be made before the plan can be accepted. The Government reserves the right to require necessary changes in the plan and in contractor operations to obtain the specified level of quality. If the contractor wants to make changes during construction the Government must be notified in writing, and the changes accepted by the Contracting Officer, prior to the contractor implementing the changes. The Quality Control Plan identifies:

7.9.4.1. the contractor's Quality Control organization. The contractor should provide sufficient quality control personnel to satisfy all contract requirements during any given time.

7.9.4.2. the qualifications of individual quality control personnel. The name, classification and qualifications of each member of the contractor's quality control team must be submitted, together with assigned individual duties, responsibilities and authorities.

7.9.4.3. assigned quality control activities for performance by the prime contractor, subcontractor(s), off-site fabricators, and suppliers. If the contractor delegates certain responsibilities, the plan must indicate how the effectiveness of the quality control efforts of the subcontractor(s), off-site fabricators, or suppliers will be assured.

7.9.4.4. who will perform specific tests and their qualifications if technicians will be performing the tests? Specifics relative to test report submissions should be addressed, including guidelines on format, content and consistency of all documentation to be submitted to the Government. The plan should contain procedures to be followed in giving advance notice to the Government of the times when special tests will be conducted.

7.9.5. a single point of contact for quality control. The plan should contain a letter of direction to the contractor's quality control point of contact, specifying duties, responsibilities and authorities. A responsible officer of the contractor's firm should sign this letter that designates authority.

7.10. Value Engineering Change Proposals (VECP). There are times when contractors find less expensive ways to perform work than the methods called for in the contract documents. Since most contract changes that reduce the cost of performance have a potential to lead to a reduction in the contractor's total profit, contractors must be incentivized to propose such changes. The Value Engineering Clause at FAR 52.248-3 provides this incentive by allowing the contractor to share in the savings. However, value engineering sharing does not apply to incentive-type construction contracts.

7.10.1. Savings. There are two types of savings for which a contractor can be compensated; instant savings and collateral savings.

7.10.1.1. Instant savings represent the contract cost reduction realized by adopting the contractor's proposal, less the cost of development and implementation of the new method. This clause gives the government 45% instant savings on fixed price contracts and 75% on cost-reimbursement contracts.

7.10.1.2. The second type of savings is collateral savings. This represents the Government's reduced cost of future operations as a result of adopting the proposed change. The contractor's share of collateral savings is 20% of the estimated annual savings, not to exceed the contract price or $100,000, whichever is greater.

7.10.2. Value Engineering Clause Application. This clause applies to changes to the specifications that the contractor makes to save the government money. The changes must be directly tied to changes in the specifications, or apply to work that was originally specified as part of the contract.

7.10.3. Instructions for the preparing a VECP are identified in the clause at FAR 52.248-3(c).

7.10.4. VECP Submission. In accordance with FAR 52.248-3(d) the contractor submits the VECP to the Resident Engineer at the worksite, with a copy to the Contracting Officer.

7.10.5. Government Action. The contracting officer will provide status on the VECP within 45 calendar days after receiving their copy of the VECP. If delays occur in processing the VECP, the CO shall notify the contractor within the 45 day period and identify the delay, and the expected date of the decision.

7.10.5.1. The AF is responsible for evaluating and processing the VECP in a timely manner; however, AF is not liable for any delays in acting upon the VECP. If the VECP is not accepted the CO will notify the contractor in writing, explaining the reasons for rejection.

7.10.5.2. The CO accepts the VECP either by issuing a modification to the contract or by issuing a notice to proceed with the change. The CO accepts the VECP, in whole or in part, when a modification is completed. The VECP clause is the authority for the modification. The CO may also accept the VECP, even though an agreement on price reduction has not been reached, by issuing the contractor a notice to proceed with the change. The contractor is obligated to perform to the existing contract until the CO either issues a modification accepting the VECP or a letter to proceed.

7.10.6. Disputes. The amount of collateral savings generated by a value engineering change proposal is determined by the Contracting Officer, and cannot be appealed under the Contract Disputes Act. The contractor can file an appeal if the Contracting Officer miscalculates the contractor's share in the savings. The contractor can also appeal if the government uses their proposal without providing for any savings to be shared. This clause also applies even if the proposed change is minor or constitutes a correction of errors in the specifications.

7.11 Payments. The FAR Clause 52.232-5, Payment under Fixed-Price Construction Contracts, authorizes the Contracting Officer to approve progress payments monthly as the work proceeds. This authorization includes authorizing the Government to make payments based upon estimates of work accomplished which meets the standards of quality established under the contract, as approved by the CO. The clause lists specific requirements a contractors request must include. For example, it requires contractors to support the payment amount they are requesting using itemized listings of work items completed, and it must identify the work performed by each subcontractor. The contractor is obligated to refund AF for unearned amounts. The clause also allows the CO to retain funds in the event satisfactory progress is not made (retainage). All material and work covered by progress payments becomes the sole property of the AF. Upon final completion of the work, retained amounts of progress payments not previously released to the contractor shall be included in the final payment to the contractor.

7.11.1. Progress Payments and Wide-Area-Work Flow (WAWF). When progress payments are authorized, a monthly progress meeting is recommended to determine the appropriate completion estimates and that the payments are correct. The contractor should conduct the meetings, and address schedule, submittals, quality and safety, request for information/variance and modification status. The WAWF progress payment function is configured to accept progress payments on construction invoices; however, it does not accommodate the work percentage of completion process. The work percentage of completion process is accomplished outside of the WAWF process. The contractor submits the AF IMT 3065, Contract Progress Report to the CO. The CO is responsible for resolving any discrepancies related to percentage of progress between the government and contractor. Upon the resolution of any discrepancies the contractor submits an invoice through WAWF.

7.11.1.1. The inspector is responsible for producing and submitting the AF IMT 3065, and verifying and certifying the report to the Contracting Officer. The inspector assists the Contracting Officer in resolving government/contractor assessment disparities.

7.11.1.2. The Contracting Officer approves the final AF IMT 3065, Contract Progress Report. After notification from Wide Area Workflow of a pending invoice, the CO may accept, reject or elect to withhold any appropriate retainage. The CO then forwards the invoice to DFAS for payment. Contracting Officers should consult the on-line guidance at http://farsite.hill.af.mil/afcep/AFCEP-35.htm#P26328_907735 to review WAWF processing of construction invoices. The website also identifies issues associated with retainage withholding.

7.11.2. Other Construction Payments. FAR 52.232-5 also entitles the contractor to be reimbursed for bond premiums on payment and performance bonds, including coinsurance and reinsurance agreements, upon request. The contractor must furnish evidence of full payment to the surety with the payment request. Retainage is not applied to that portion of progress payments attributable to bond premiums.

7.11.3. Withholding. FAR 22.406-9 details withholding or suspending contractor payments due to contractor violations. The paragraphs below highlight specific instances when funds are required to be withheld from the contractor.

7.11.3.1. If the contractor fails to submit timely payrolls for employees and any subcontractors' employees, the Contracting Officer will withhold an amount large enough to cover both the Air Forces interests and the employees of the contractor or subcontractor. FAR 52.222-8 also allows the CO to "…take such action as may be necessary to cause the suspension of further payment…"

7.11.3.2. If the contractor fails to pay Department of Labor required wages, fringes, or overtime, the Contracting Officer will withhold an amount equal to the underpayment.

7.11.3.3. Liquidated damages must be withheld for any days, within the invoice period, beyond the contract completion date, considering all valid time extensions. If the construction project is phased, the contracting officer will verify separate liquidated damage rates for each phase.

7.11.3.4. FAR 52.232-5 requires the contractor to notify the Contracting Officer in writing if they discover payment has been received for work that does not conform to the requirements of the contract. The contractor is obligated to deduct from a subsequent invoice an amount equal to the total previously paid for the work, plus interest.

7.11.3.5. FAR 28.106-7(b) provides authority for the Contracting Officer, upon notification from the surety, to withhold final payment after completion of the contract work. The surety must guarantee that the Government is held harmless from liabilities resulting from withholding final payment. Final payment is made after notice from the surety of agreement between themselves and the prime contractor or by judicial judgment.

7.11.4. Non-Payment of Subcontractors. FAR 28.106-7(a) forbids Contracting Officers from withholding payments to contractors or assignees because subcontractors or suppliers have not been paid. Payment bonds were created to cover subcontractor and supplier non-payment. Contracting Officers should instruct subcontractors and suppliers to work directly with the bonding company for payment remedy. After providing this information, the Contracting Officer is responsible for ensuring the following:

7.11.4.1. cross reference the allegation to information contained in the invoice since the Payments clause requires certified information pertaining to payments to all subcontractors, the amounts, any retainage or withholding, and the time of payment.

7.11.4.2. notify the prime contractor if a discrepancy is noted, and encourage timely payment, if warranted.

7.11.4.3. if authorized by the Payments clause, reduce or suspend progress payments.

7.11.5. Retainage. FAR 52.232-5 authorizes the Contracting Officer to retain a maximum of 10% of the amount of a progress payment until satisfactory progress is achieved. However, retainage is not applicable to bond premiums. When the work is substantially complete, the amount to be retained should be enough to adequately protect the Air Force.