Effective with the August 1999 contract lettings, the NCDOT has included a Project Special Provisions titled Retainage and Prompt Payment in both federally funded and state funded contracts. The provision provides that all levels of contractors - prime, subcontractor, or second tier subcontractor - must make payment to the obligee (subcontractor, second tier subcontractor or material supplier) within seven days of knowledgeable receipt of payment for work performed or services rendered during the time for which a partial payment was made by the Department. Failure of any level of contractor to make prompt payment as described in the provision can result in withholding future payments until the issue is resolved and removal of an approved contractor from the prequalified bidder’s list.

If obligee contacts the Resident Engineer, contending he has not been fully compensated for work performed or services rendered, the Resident Engineer should follow the procedures listed below.

If the contract does not include a prompt payment provision, the Resident Engineer should advise the obligee that a remedy is available through the prime contractor or the surety for the contract payment bond. The Resident Engineer should offer to provide a copy of the contract payment bond.

If the contract does include a prompt payment provision, the Resident Engineer should advise the obligee of the prompt payment provision included in the project special provisions and the sanctions to be imposed if a contractor does not comply with the prompt pay requirements:

1. Advise the obligee that before the Department will consider taking action, obligee is to submit a list of services/materials provided, the date the services/materials were provided, the total amount due for the services/materials, and the amount of payment previously received for the services/materials.
   
2. After receipt of the information stated above, the Resident Engineer will determine if the Department has made payment for the services/materials rendered.
3. If the Department has not made payment for the services/materials rendered, the Resident Engineer will notify the obligee that the Department has not compensated the Prime Contractor for the work.
4. If the Department has made payment for the services/materials in question, the Resident Engineer will notify the Prime Contractor of the alleged failure to meet prompt payment requirements and request that he advise the Department within seven days as to why the payments have not been made.
5. Upon response from the Prime Contractor, the Resident Engineer should evaluate all information and determine the if payment should be withheld. The evaluation of the contractor’s response should take into consideration the contractor’s right to withhold anticipated liquidated damages, retainage as provided by the provisions or anticipated "back charges," such as anticipated price reductions for work performed or materials not meeting the specifications or are not within close conformity. If the Resident Engineer determines that payments are to be withheld, the amount withheld on a partial payment should be for work performed by the contractor that failed to make prompt payments in accordance with the provision.
6. If a contractor continues to not make payment in accordance with the Prompt Payment Provision, the Resident Engineer should provide the State Construction Engineer the history of the contractor’s failure to meet the requirements of the provision and a summary of the contractor’s documentation stating why sanctions should not be imposed.