[Code of Federal Regulations]
[Title 49, Volume 1]
[Revised as of October 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 49CFR26.29]

[Page 270-271]
 
                        TITLE 49--TRANSPORTATION
 
          Subtitle A--Office of the Secretary of Transportation
 
PART 26_PARTICIPATION BY DISADVANTAGED BUSINESS ENTERPRISES IN DEPARTMENT 
OF TRANSPORTATION FINANCIAL ASSISTANCE PROGRAMS--Table of Contents
 
  Subpart B_Administrative Requirements for DBE Programs for Federally-
                          Assisted Contracting
 
Sec. 26.29  What prompt payment mechanisms must recipients have?

    (a) You must establish, as part of your DBE program, a contract 
clause to require prime contractors to pay subcontractors for 
satisfactory performance of their contracts no later than 30 days from 
receipt of each payment you make to the prime contractor.
    (b) You must ensure prompt and full payment of retainage from the 
prime contractor to the subcontractor within 30 days after the 
subcontractor's work is satisfactorily completed. You must use one of 
the following methods to comply with this requirement:
    (1) You may decline to hold retainage from prime contractors and 
prohibit prime contractors from holding retainage from subcontractors.
    (2) You may decline to hold retainage from prime contractors and 
require a contract clause obligating prime contractors to make prompt 
and full payment of any retainage kept by prime contractor to the 
subcontractor within

[[Page 271]]

30 days after the subcontractor's work is satisfactorily completed.
    (3) You may hold retainage from prime contractors and provide for 
prompt and regular incremental acceptances of portions of the prime 
contract, pay retainage to prime contractors based on these acceptances, 
and require a contract clause obligating the prime contractor to pay all 
retainage owed to the subcontractor for satisfactory completion of the 
accepted work within 30 days after your payment to the prime contractor.
    (c) For purposes of this section, a subcontractor's work is 
satisfactorily completed when all the tasks called for in the 
subcontract have been accomplished and documented as required by the 
recipient. When a recipient has made an incremental acceptance of a 
portion of a prime contract, the work of a subcontractor covered by that 
acceptance is deemed to be satisfactorily completed.
    (d) Your DBE program must provide appropriate means to enforce the 
requirements of this section. These means may include appropriate 
penalties for failure to comply, the terms and conditions of which you 
set. Your program may also provide that any delay or postponement of 
payment among the parties may take place only for good cause, with your 
prior written approval.
    (e) You may also establish, as part of your DBE program, any of the 
following additional mechanisms to ensure prompt payment:
    (1) A contract clause that requires prime contractors to include in 
their subcontracts language providing that prime contractors and 
subcontractors will use appropriate alternative dispute resolution 
mechanisms to resolve payment disputes. You may specify the nature of 
such mechanisms.
    (2) A contract clause providing that the prime contractor will not 
be reimbursed for work performed by subcontractors unless and until the 
prime contractor ensures that the subcontractors are promptly paid for 
the work they have performed.
    (3) Other mechanisms, consistent with this part and applicable state 
and local law, to ensure that DBEs and other contractors are fully and 
promptly paid.

[68 FR 35553, June 16, 2003]