Levels of Contracting

There are different levels of contracting within the N.C. Department of Transportation. As the levels increase, so does the risk as it relates to the contractor.

NCDOT is committed to helping to develop contractors, which is the reason for these levels to exist.

Contractors are encouraged to take the time to understand the different levels as well as the risks involved with each.

Level I: Fully Operated Rental Equipment Contracts

• Fully Operated Rental Equipment Contracts is the lowest level of risk to a contractor.
• NCDOT routinely supplements its own equipment complement with privately owned equipment for emergency responses, force account construction or specialty equipment needs.
• To be considered by NCDOT, a contractor must complete a FORE proposal (Form RE-1) and submit competitive prices. If accepted, a purchase order is issued and the contractor is considered “on call.”
• This type of contract does not guarantee work to the contractor.
• Each district and county maintenance office maintains its own list of FORE contractors and can share, upon request, with other field offices or interested contractors.
  
• No further prequalification or certification is needed to be considered for a FORE contract.

Level II: Subcontractor

• Subcontractor is the second level of risk for a contractor.
• A contractor can perform as a subcontractor on a Purchase Order Contract project let out of a field office or a larger State Transportation Improvement Program project centrally let out of Raleigh.
• To be qualified as a subcontractor on either type of contract, the contractor must fill out a prequalification application relevant to subcontractors. The application can be found here.
• Subcontractors must be prequalified prior to starting work on a project and do not require any bonding. All bonding requirements, if required, fall on the prime contractor.

Level III: Prime Contractor on Purchase Order Contracts Less Than $500,000

• At this level, contractors will be the prime on small division let.
• To be qualified to be a prime contractor for NCDOT projects, the contractor must fill out an application, which can be found here.
• Purchase Order Contracts are prepared, let and awarded through NCDOT's 14 division offices and specific central units, in accordance with N.C. G.S. 136-28.1, and are not to exceed $5 million.
  
• Division-let POCs require at least three informal bids that shall be solicited. The term "informal bids" is defined as bids in writing, received pursuant to a written request, without public advertising.
  
• All such contracts shall be awarded to the lowest responsible bidder.
  
• A proper contractor’s license, as issued by the N.C. Licensing Board for General Contractors, is required in order to submit a bid on any non-federal aid project where the contract is $30,000 or more.
• Contractors at this level will be responsible for the construction of the project in accordance with the plans and specifications that might include such criteria as erosion and sedimentation control and traffic control. Most of the contracts are self-performed, but if the contractor wishes to subcontract out any portion of the work, it must be approved by the engineer. The subcontractor must also be prequalified as a subcontractor (see Level II).
  
• The contractor will be responsible for following NCDOT's prompt payment policy to subcontractors and meeting the contract Minority, Woman or Disadvantaged project-specific goal(s).
• Some examples of POCs include but are not limited to: paving and resurfacing projects, bridge repair, traffic signal installation, pavement markings and markers, curb and gutter installation, stone placement, drainage improvements and seeding and mulching.

Level IV: Small Business Enterprise Contract

• The Small Business Enterprise Program was developed to provide contract opportunities for firms that meet the eligibility criteria, to compete against others that are comparably positioned in their industries and markets.
• This program gives smaller businesses with annual gross incomes up to $1.5 million, excluding materials, the opportunity to participate in the highway contracting industry. The goal of the program is for the contractor to gain experience and expand their knowledge base and opportunities.
• For more information on the SBE Program reference the program guidelines available here.

• The Small Business Enterprise program was created by N.C. G.S. 136-28.10 (Highway Fund and Highway Trust Fund Small Project Bidding) as follows:

a. Notwithstanding the provisions of G.S. 136-28.4(b), for Highway Fund or Highway Trust Fund projects of five hundred thousand dollars ($500,000) or less, the Board of Transportation may, after soliciting at least three informal bids in writing from Small Business Enterprises, award contracts to the lowest responsible bidder. The Department of Transportation may identify projects likely to attract increased participation by Small Business Enterprises, and restrict the solicitation and award to those bidders. The Board of Transportation may delegate full authority to award contracts, adopt necessary rules, and administer the provisions of this section to the Secretary of Transportation.

b. The letting of contracts under this section is not subject to any of the provisions of G.S. 136-28.1 relating to the letting of contracts. The Department may waive the bonding requirements of Chapter 44A of the General Statutes and the licensing requirements of Chapter 87 for contracts awarded under this section.

c. The Secretary of Transportation shall report quarterly to the Joint Legislative Transportation Oversight Committee on the implementation of this section. (1993, c. 561, s. 65; 1999-25, s.1)

• There is no prequalification for SBE contracts other than being certified as a small business. The Small Business Enterprise Form is required to being completed and notarized. The form can be found here.
• Typical work that may be let under the SBE program include, but are not limited to: grubbing, clearing and grading; hauling stone and other materials; erosion control; paint striping; drainage (pipe, curb and gutter, catch basin, etc.); signal installation; landscape planting; fencing and guardrail.

Level V: Prime Contractor on Purchase Order Contract up to $5M

• At this level, contractors will be the prime on division let POCs up to the $5 million threshold, as identified in N.C. G.S. 136-28.1.
  
• To be qualified as a prime contractor for NCDOT projects, the contractor must fill out an application.
• Purchase Order Contracts are prepared, let and awarded at NCDOT's 14 division offices and specific central units, and are not to exceed $5 million.
• POCs require at least three informal bids that shall be solicited. The term "informal bids" is defined as "bids in writing, received pursuant to a written request, without public advertising." 
• All such contracts shall be awarded to the lowest responsible bidder.
  
• When the total amount of a division let POC exceeds $500,000, a performance and payment bond is required of the prime contractor.
  
• NCDOT may require payment and performance bonds on any contract, regardless of value.
  
• A Performance Bond in the amount of 100 percent of the construction contract amount is conditioned upon the faithful performance of the contract in accordance with the plans, specifications and conditions of the contract. Such bond shall be solely for the protection of the contracting body which awarded the contract.
• A Payment Bond in the amount of 100 percent of the construction contract amount is conditioned upon the prompt payment for all labor or materials for which a contractor or subcontractor is liable. The payment bond shall be solely for the protection of the persons furnishing materials or performing labor for which a contractor or subcontractor is liable. Bid Bonds are not required.
• Contractors at this level will be responsible for the construction of the project in accordance with the plans and specifications, which may include such criteria as erosion and siltation control on the project.
  
• The contractor will also be responsible for following NCDOT's prompt payment policy to subcontractors, and meeting the contract Minority, Woman or Disadvantaged goals or doing a good-faith effort.

Level VI: Prime Contractor on Centrally Let Contracts

• Centrally let projects have no limit on the value of the project and carries the most risk of all the contracts.
• Typically, these projects have many subcontractors doing different items of the work, and may have second- or third-tier subcontractors on the job and require bonding.
  
• To be a prime contractor on a centrally let project requires a greater level of review. Therefore, the prequalification application is specifically designed for this type of prime and is not considered in the application.
  
• These projects include State Transportation Improvement Projects and contracting resurfacing and may be major intersection or interchange upgrades, bridge replacement, safety projects, new location, or widening projects.