SUBCONTRACTORS - Special Topic AP-11

With the subcontractor feature in Costpoint, you can track insurance, bond, and lien information at the vendor level.

When we use the word "subcontractor," we are not identifying all workers that are independent contractors or temporary workers. We are identifying only those workers who are performing work for your company where part of their obligation as a vendor is to obtain and maintain certain insurance and/or bond status. In addition, some vendors may need to prove their work is free of any liens (legal claims) before payment is released.

Before you activate a vendor as a subcontractor, you need to meet with your company's contract administrator or project manager to discuss the vendor's status for liens, insurance, and bonds. When you activate the subcontractor function, the system makes extra validations before payment can be released, but makes an exception for manual checks. Costpoint assumes that you are entering the check information after you have written and sent the check; therefore, it is impossible to hold a payment that has already been made.

If you activate the subcontractor function for vendors that do not require it, you could unnecessarily delay processing of your payables. For vendors who will have both subcontractor status and normal vendor status, we recommend creating two separate vendor accounts.

When reviewing subcontractor information, please remember that the voucher vendor, rather than the pay vendor, will be compared before payment is allowed.

Liens

A lien is a legal claim against another's property. Business liens are often for construction or other large projects.

For example: Bigg Company needs a new office and is using C Construction Company to build the office. C Construction needs lighting fixtures and goes to S Supplies. S Supplies allows C Construction to take a large quantity of supplies with the understanding that C Construction will pay as soon as the job is finished. If C Construction does not pay, in some circumstances S Supplies would be allowed to place a lien against Bigg's new office. True, C Construction promised to make payment to S Supplies for the supplies, but Bigg has possession of, and is enjoying the use of, the light fixtures. This lien means that Bigg does not completely own its new office; S Supplies, since it is still owed payment, owns part of the office.

If a lien has been placed against one of your company's projects, your contract administrator or project manager will be notified. With the information you obtain from your contract administrator or project manager, enter the information on the Maintain Subcontractor Liens screen. In the Effective Date column you will enter the first date of lien enactment. The Released column will default to "N' for not released. This information will not allow payments to be made while this lien is in effect for the specific vendor/project combination.

For liens only, Costpoint will allow only one form of vendor/project combination. Once you have used a vendor with any portion of a project number, either at a lower level (more specific project) or at a higher level (more general project), you cannot reuse it. Example: Vendor AAA and Project 1000. Once AAA is matched with 1000.001.002 on a lien, you can never pair AAA with any other form of project 1000 for lien purposes.

Before payment is released, Costpoint will look to information in the Maintain Subcontractor Liens screen. To release payments for a vendor/project combination, change the Released column from "N" to a "Y." Next, enter the date you have received from your contract administrator or project manager in the Released Date column.

Before payment is released, Costpoint will first validate any liens, and will then validate insurance and bonds.

Checklist - Liens

Using the information you have received from your contract administrator or project manager, complete the following information in Costpoint:

  1. Identify the vendor as a subcontractor on the Subcontractor Payment Control subtask of the Maintain Vendors screen (Vendor Info menu). You can select any one of the radio buttons (Invoice, Invoice Period of Performance, or Payment Selection). Comparison dates will not be used for liens. If a vendor has a lien currently in effect, payments will be held.

  2. In the Maintain Subcontractor Liens screen in the Vendor Info menu, use Query to review any existing vendor and project lien links. To create a new link, use lookup to select a vendor and project on this screen.

  3. In the Maintain Subcontractor Liens screen, use the New Line button on the toolbar to complete the data for the Lien Information table.

  4. When your contract administrator or project manager alerts you that the lien has been released, return to the Maintain Subcontractor Liens screen. Using Query, retrieve the vendor and project. Change the Released field to "Y," enter the effective Released Date, and save the screen to update your system.

Insurance

Depending on the type of product or service you are buying, your subcontractor may be required to obtain insurance coverage. Five types of insurance have already been loaded into Costpoint: Automobile, Excess Liability, General Liability, Umbrella, and Worker's Compensation.

Your contract administrator or project manager will have copies of your subcontractor's insurance information. From this information, you can complete the Maintain Insurance Carrier Information and Maintain Subcontractor Insurance screens. When you select the Required for Payment checkbox in the Maintain Subcontractor Insurance screen and Costpoint finds that the system (today's) date falls within the required start date and required end date, the system will not release a vendor payment unless the system (today's) date falls within the insurance effective date and expiration date.

While not all fields are required, we urge you to store as much information as possible on these policies.

Subcontractor Checklist - Insurance

Using the information you have received from your contract administrator or project manager, complete the following information in Costpoint:

  1. Identify the vendor as a subcontractor in the Subcontractor Payment Control subtask of the Maintain Vendors screen. Choose which date(s) will be used when comparing insurance coverage.

  2. Create or use an existing insurance carrier ID in the Maintain Insurance Carrier Information screen.

  3. Link the vendor, project, and type of insurance required in the Maintain Subcontractor Insurance screen. If the type of insurance required is not among the five already loaded into Costpoint (Automobile, Excess Liability, General Liability, Umbrella, and Worker's Compensation), create the insurance type in the Maintain Subcontractor Insurance Types screen.

  4. Include the policy requirement dates in the Maintain Subcontractor Insurance screen. Using the Required for Payment checkbox, choose whether or not to hold vendor payments if insurance coverage is not maintained. Selecting this checkbox will activate all the validation steps when you pay this vendor.

Bonds

Two types of bonds have already been loaded into Costpoint: Bid and Performance. While an insurance policy promises reimbursement if something goes wrong, a bond promises reimbursement if an agreement is not fulfilled or a promised payment is not made.

For instance, in our previous example, a bond would probably exist for the construction of the new Bigg office; if C Construction Company was unable to complete the work, the bond would have covered Bigg's cost of a broken agreement for office construction.

Your contract administrator or project manager will have copies of your subcontractor's bond status. From this information, you can complete the Maintain Subcontractor Bonds screen. When you select the Required for Payment checkbox in the Maintain Subcontractor Bonds screen and Costpoint finds that the system (today's) date falls within the required start date and required end date, the system will not release a vendor payment unless the system (today's) date falls within the bond effective date and expiration date.

While not all fields are required, we urge you to store as much information as possible on any subcontractor bonds.

Subcontractor Checklist - Bonds

Using the information you have received from your contract administrator or project manager, complete the following information in Costpoint:

  1. Identify the vendor as a subcontractor in the Subcontractor Payment Control subtask of the Maintain Vendors screen. Choose which date(s) will be used when comparing bond coverage.

  2. Link the vendor, project, and type of bond required in the Maintain Subcontractor Bonds screen. If the type of bond required is not among the two already loaded into Costpoint (Bid or Performance), you can create the bond type in the Maintain Subcontractor Bond Types screen.

  3. Include the bond requirement dates in the Maintain Subcontractor Bonds screen. Using the Required for Payment checkbox, choose whether or not to hold vendor payments if bond coverage is not maintained. Selecting this checkbox activates all the validation steps when you pay this vendor.

Projects and Subcontractors

Bonds and insurance are tracked by voucher vendor (created in Costpoint Accounts Payable) and project name (created in the Projects folder). The different combinations of voucher vendor, project, and insurance policy type can exist in only one screen. If you have a new insurance policy to enter, simply insert a new line. Also, the different combinations of voucher vendor, project, and bond type can exist only on one screen. If you have a new bond to enter for a vendor/project, simply insert a new line.

When you select the Required for Payment checkbox in the Maintain Subcontractor Bonds screen, further validations will be performed to ensure that the project's sublevels maintain insurance and/or bonds. The validations will never look at project levels above the selected level, only below.

For example: Your vendor is C Construction and your project number is 100.222.333. If you select the Required for Payment checkbox, all numbers above this level will NOT require insurance and/or bonds (e.g., 100.222.332 and 100.221.333).

When you select the Required for Payment checkbox, all numbers equal to or below this level will require coverage (e.g., 100.222.334 and 100.222.333.1).

For liens only, Costpoint will allow only one form of vendor/project combination. Once you have used a vendor with any portion of a project number, either at a lower level (more specific project) or at a higher level (more general project), you cannot reuse it. Example: Vendor AAA and Project 1000. Once you have matched AAA with 1000.001.002 on a lien, you can never pair AAA with any other form of project 1000 for lien purposes.