Federal construction contract compliance checklist
Federal construction compliance comes down to a predictable list: registration and bonds before work, wage rates and weekly certified payrolls during it, prompt payment and flow-downs for subs, domestic materials, and records kept for three years after.
A federal construction contract brings a fixed set of compliance duties: keep your SAM registration active, furnish bonds before work starts, pay Davis-Bacon rates weekly and submit certified payroll every week, follow overtime and E-Verify rules, pay subs within 7 days of being paid, use domestic construction materials, flow the clauses down, and keep payroll records for three years. The checklist below follows the job from bid to closeout.
The contract itself is the final word. Clauses are incorporated by reference, thresholds change, and agencies can use deviations. Use this list to know what to look for, then check each item against your actual contract.
Key federal thresholds at a glance
| Requirement | Applies when | FAR reference |
|---|---|---|
| Davis-Bacon wage rates | Construction contracts over $2,000 | 22.403-1 |
| Performance and payment bonds | Construction contracts over $150,000 | 28.102-1 |
| Alternative payment protections | Over $35,000 up to $150,000 | 28.102-1(b) |
| Overtime clause (Contract Work Hours and Safety Standards) | Contracts over $200,000 involving laborers or mechanics | 22.305 |
| E-Verify clause | Contracts over $150,000 with 120 days or more of performance | 22.1803 |
| Small business subcontracting plan | Construction over $2 million with subcontracting possibilities, for other than small primes | 19.702 |
Two things change the list for your company in particular. First, whether the job is a set-aside, which brings the limitations on subcontracting into play. Second, whether you are a large or small business, which decides whether a subcontracting plan is needed at all. Note both on the job setup sheet the day you win.
Phase 1: before you bid
- Confirm your SAM registration is active and your representations are current (FAR 4.1102).
- Check your size against the NAICS code in the solicitation if it is a set-aside.
- Pull the wage determination and every modification named in the solicitation.
- Confirm the bid guarantee type and amount, and get the bid bond from your surety.
- If it is a small business set-aside, check the limitations on subcontracting before you plan heavy subcontracting (see below).
- Read the Buy American clause and identify any material you may need a foreign exception for, which must be requested with your offer.
Phase 2: at award, before notice to proceed
- Deliver performance and payment bonds or the selected payment protection. FAR 28.102-1(c) says you furnish them before receiving notice to proceed or starting work.
- Set up the job in payroll with each classification and rate from the wage determination.
- Post the wage determination and the WH-1321 Davis-Bacon poster at the site where workers can see them (FAR 52.222-6).
- Enroll in E-Verify for the contract if the clause is in it, and plan which employees must be verified.
- Issue subcontracts with the required flow-down clauses: labor standards, payment and interest terms, E-Verify where it applies, and Buy American.
Phase 3: during the work
Wages and payroll
- Pay laborers and mechanics unconditionally and at least once a week (29 CFR 5.5).
- Submit a certified payroll every week work is performed. The certification on Optional Form WH-347 satisfies the statement of compliance (FAR 52.222-8).
- Collect lower-tier subcontractor payrolls each week. See how to collect certified payroll from subcontractors.
- Pay time and a half for hours over 40 in a workweek when the overtime clause applies (FAR 52.222-4).
- Use only classifications on the wage determination, or request a conformance before the work is done.
Subcontractors and payment
- Pay subs for satisfactory work no later than 7 days after you receive payment from the government (FAR 52.232-27(c)).
- If you withhold from a sub, send the written withholding notice to the sub and a copy to the contracting officer.
- Track self-performance against the limitations on subcontracting on set-aside jobs: no more than 85 percent of the amount paid, excluding materials, to non-similarly situated subs on general construction, or 75 percent for special trade construction (FAR 52.219-14).
- If you have a subcontracting plan, report against it as the contract requires.
Materials
- Use domestic construction material unless an exception is listed in the contract. For manufactured items delivered in calendar years 2024 through 2028, domestic components must exceed 65 percent of component cost, rising to 75 percent starting in 2029 (FAR 25.003).
- Keep submittals and manufacturer certifications that show origin. See Buy American and Build America rules.
Phase 4: billing, closeout, and records
- Submit proper invoices with every element the payment clause requires, or the billing office can return them.
- Track government payment due dates. For progress payments under the prompt payment clause, the due date is 14 days after a proper request is received, and the government owes interest automatically when it pays late (FAR 52.232-27).
- Bill released retainage. If the contract is silent, the due date is 30 days after the contracting officer approves the release.
- Keep payrolls and basic records for 3 years after the work (FAR 52.222-8).
- Close out cleanly: as-builts, warranties, final payroll, and release documents. Past performance reviews are prepared on construction contracts of $900,000 or more (FAR 42.1502).
Worked example: a $1.4 million federal renovation
Say a general contractor wins a $1.4 million interior renovation at a federal office building, scheduled for eight months, as a small business set-aside. Run it through the table: Davis-Bacon applies, bonds are required, the overtime clause is in, and E-Verify applies because the contract is over $150,000 and longer than 120 days. As a small business, it does not need a subcontracting plan.
The GC plans to subcontract mechanical, electrical, and drywall, which together run $760,000 of labor and subcontract cost, excluding materials. The government will pay $1.4 million. The 85 percent general construction limit lets it pay up to $1,190,000 to non-similarly situated subs, so this plan fits. The more realistic risk is payroll: six subs each submitting weekly payrolls for 35 weeks is about 210 payroll reports to collect, check, and forward. The office sets a Monday deadline and holds pay applications from any sub with a missing week.
Mistakes that cause findings
- Paying a worker the laborer rate for electrician work. Classification must match the work actually performed.
- Taking fringe credit for benefits that do not qualify, or failing to annualize contributions.
- Forgetting that the 7-day sub payment clause must flow down to every tier.
- Letting a sub start before its subcontract has the required clauses.
- Throwing out payroll records after final payment instead of keeping them three years.
Templates, terms, and tools that help
Use the certified payroll template and subcontractor COI tracking template to keep weekly items on schedule. For the payroll details, follow how to do certified payroll step by step, and read what happens in a Davis-Bacon audit so you know what an investigator will ask for.
Smart Business Automator prepares certified payroll, tracks subcontractor compliance documents, and flags missing items on each federal job, which keeps the weekly checklist from living on a whiteboard. See certified payroll automation.
Frequently asked questions
How long do I keep certified payroll records on a federal job?
FAR 52.222-8 requires payrolls and basic records to be kept during the work and for 3 years after, for all laborers and mechanics at the site.
How fast do primes have to pay subcontractors on federal jobs?
The prompt payment clause at FAR 52.232-27 requires a subcontract clause obligating the prime to pay for satisfactory performance no later than 7 days after receiving payment, with interest on late payments, flowed to every tier.
Does E-Verify apply to every federal construction contract?
No. FAR 22.1803 puts the E-Verify clause in contracts over $150,000, with exceptions including a period of performance under 120 days. The clause flows down to construction subcontracts over $3,500 performed in the United States.
What is the difference between Davis-Bacon and the overtime clause?
Davis-Bacon sets minimum hourly wages and fringes by classification. The Contract Work Hours and Safety Standards clause requires time and a half for hours over 40 in a workweek on covered contracts over $200,000.
Sources
- eCFR: FAR 22.403-1, Construction Wage Rate Requirements statute
- eCFR: FAR 52.222-8, Payrolls and Basic Records
- eCFR: FAR 52.222-6, Construction Wage Rate Requirements
- eCFR: 29 CFR 5.5, Contract provisions and related matters
- eCFR: FAR 22.305 and 52.222-4, Contract Work Hours and Safety Standards overtime
- eCFR: FAR 22.1803 and 52.222-54, Employment Eligibility Verification
- eCFR: FAR 28.102-1, Bonds for construction
- eCFR: FAR 52.232-27, Prompt Payment for Construction Contracts
- eCFR: FAR 52.219-14, Limitations on Subcontracting
- eCFR: FAR 25.003, Definitions (domestic construction material)
- eCFR: FAR 19.702, Subcontracting plan requirements
- eCFR: 29 CFR 5.25, Rate of contribution or cost for fringe benefits
- eCFR: FAR 42.1502, Past performance evaluations
- eCFR: FAR 4.1102, SAM registration policy
