In my experience, payment processing success is directly proportionate to the efficiency of the management systems I put in place. And, when working with public agencies who also embrace consistent and efficient documentation maintenance practices, I notice they’re more likely to foster strong contractor relationships and proper fiscal accountability.

So, how can you garner the same results? One important area that you can audit immediately, is your Construction Pay Request Review process. Public agencies who see consistent results within their payment processing structure have streamlined their protocol, focusing on areas that: reduce payment disputes, maintain accurate records, and protect public interests. It’s really that simple!

Let's walk through this detailed process from the ground up. Keep in mind, the outline that follows is one that I have found to be most effective in: maintaining proper fiscal control while also meeting the agency’s prompt payment obligations.

Continue reading to learn about the Pay Request Review Process and how you can streamline your system from the ground up.

Establish Clear Payment Procedures

• Set clear expectations before construction begins: 

• • Include specific payment procedures in contract documents; include the following in your up-front specifications:
    • Required forms and formats
    • Submission deadlines 
    • Review timelines
    • Documentation requirements
    • Payment processing schedule
    • Special funding source requirements and forms
    • Retention requirements
    • Progress reporting requirements

• Define clear roles and responsibilities; this can be done at the preconstruction conference very quickly. Identify exactly whose role is responsible for these critical items:
   
  • Who submits the quantities (Contractor or Inspector?)
  • Who verifies quantities (Inspector, Resident Engineer, Project Manager?)
  • Who provides documentation (Typically the Inspector)
  • Who reviews the quantities, documentation, and makes recommendations for payment?
  • Who approves payments?
  • Who ensures compliance with special funding requirements?
  • Who maintains required certifications and forms?

Verify Quantities Collaboratively

• Build agreement through the Daily Coordination:
   
  • Inspector and foreman review quantities
  • Document agreed-upon measurements in the Inspection
  • Note any discrepancies immediately, in writing, to the Engineer
  • Photograph critical measurements
  • Note special circumstances affecting measurement that would not be easily understood by someone not involved in the day to day of the project
  • Maintain detailed quantity logs
  • Document any special requirements for quantity verification required by funding sources

Maintain Thorough Documentation

• Support all payment decisions with: 
   
  • Sufficient Documentation: * 
    • Daily reports showing work completed
    • Quantity calculations and measurements
    • Material delivery tickets
    • Quality control test results
    • Progress photos
    • Required funding source forms and certifications
    • Labor compliance documentation
    • Environmental compliance records
    • DBE/MBE/WBE participation documentation (if applicable)
      

               * Note Special Circumstances:

• • Material certificates; this can be certificates of compliance, delivery tickets, or any other backup item to support method of payment
  • Stored material documentation, if materials on hand are agreed to be paid
  •  Change order approvals – note if an item is going to be paid in a subsequent pay request if it is waiting for approval in an official change order
  • Time and materials records – if work is paid by force account or time and materials, make sure to show backup for appropriate rates and markups, along with receipts and other Contractor supplied records
  • Special funding source compliance documentation
  • Progress reporting required by funding agencies
    
    
• Keep records organized by:
   
  • Bid item number or Schedule of Values designation
  • Location of work
  • Date performed
  • Funding source requirements

Special Funding Considerations

• Review and maintain compliance with specific requirements for:
   
  •  Federal funding documentation and forms
  • State grant requirements
  • Local agency specific requirements
  • DBE/MBE/WBE participation goals and reporting
  • Labor compliance requirements
  • Environmental compliance documentation
  • Buy America provisions (if applicable)
  • Progress reporting requirements

Understanding that when you manage your construction payments via a streamlined Pay Request Review Process, you will be better equipped to balance prompt processing with proper verification and documentation. Even more importantly, public agencies will be able to fulfill both their legal obligation to process payments in a timely manner AND their fiduciary responsibility to maintain accurate records of public fund expenditures.

And finally, to better help agencies implement best practices, we’ve created a comprehensive Construction Pay Request Review Checklist that can be downloaded below:

Download Your Free BridgeDoc Resource Here

This checklist covers all critical aspects of payment processing, including special funding requirements and documentation needs.