Presently, 23 CFR 635.122 allows for payment of stockpiled materials under certain conditions. Information from a 1993 American Institute of Steel Construction (AISC) survey and 1998 survey conducted by the Bridge Division (now Office of Bridge Technology) of the Federal Highway Administration (FHWA) indicates that the trend is that more States are allowing partial payment of stockpiled steel plates and shapes prior to fabrication. Such payment on Federal-aid projects in these States has been judged by the FHWA Division Offices to be eligible for participation with Federal-aid Funds.

We find that it is in the best interest of the public, as well as the industry, to allow payment for stockpiled steel plates and shapes prior to fabrication. This finding is based on the results of the surveys, and provided that there are adequate control and accountability for stockpiled steel plates and shapes received at the fabrication shop so that the conditions of 23 CFR 635.122 are met.

Effective the date of this memorandum, partial payment for stockpiled steel plates and shapes prior to fabrication shall be eligible for participation with Federal-aid-Funds.

Attachment

ISSUE: PAYMENT FOR STOCKPILED MATERIAL?STEEL PLATES AND SHAPES

Steel fabricators order steel plates and shapes to meet specified size, type, grade, strength, and toughness for structural members for specific bridge projects. The mill orders are developed based on "State Construction Plans and Specifications" and subsequently tied directly to the shop drawings or shop bills of materials. Plates and shapes are marked either by die stamping or paint stenciling at the producing mill with heat number, material specification and unique item numbers prior to shipment. Plates may also be color coded at the mill prior to shipping to the steel fabricator.

The steel fabricator and the State highway agency (SHA) inspectors verify receipt of and markings on plates and ensure that they meet the contractual requirements. The fabricator ensures that appropriate project numbers, State and Federal contract numbers are also marked on the material and carried over on cut plates/shapes as required by the SHA in order to maintain complete traceability of the materials. A complete record on each piece is also maintained by both the fabricator and the State. In addition, except for secondary members, each piece from receipt in the yard through the fabrication process is destined to an exact location in the member. The received material is generally stacked by specific project in order to avoid mix?up and also maintain flow and traceability of the material.

After receipt and storage of the mill material, the fabricator cuts, burns, drills, welds, cleans and paints the material to produce the finished bridge members. Depending on a number of circumstances, the finished bridge member is stored at the fabricator's plant or shipped and stored off site or at the bridge site.

Information from a 1993 American Institute of Steel Construction (AISC) survey (see Attachment A) indicates that at that time 8 SHA's allowed partial payment for stockpiled plates and shapes received at the fabrication shop but not yet fabricated. Presently more States indicate that they are doing this, based on a 1998 survey conducted by the Bridge Division (now Office of Bridge Technology) of the Federal Highway Administration. Payment on Federal-aid projects in these States has been judged by the FHWA Division Offices to be eligible for participation with Federal-aid Funds.

The attached 1994 Region-3 SCEF Guide Specifications for Payment of Stockpiled Materials (.pdf, 289 kb) were developed by Region 3 States in conjunction with FHWA and industry.

Presently, 23 CFR 635.122 allows for payment of stockpiled materials under certain conditions.

• There have been requests and inquiries from the field offices as well as from industry with regard to the permissible timing and methods of payments for stockpiled steel plates and shapes and for fabricated steel bridge members.

• Steel plates and shapes represent a considerable sum of money that a fabricator must invest in order to receive the material and maintain an efficient steel fabrication operation. On large projects significant quantities are ordered and the material received is stored for weeks and sometimes months before it is fabricated and shipped to the job site. Additionally, problems at job sites often occur further delaying shipment to the site.

• If the material is paid for only after fabrication or after it is received at the job site, the fabricator must allow for the lost interest on the capital investment or the cost of borrowing money to pay for the material and shop payroll. This affects the fabricator's cash flow and in some cases, adversely affects the business and may contribute to fabrication plant shut-downs.

• The majority of States do not currently allow for payment of stockpiled material prior to fabrication and several States will not pay for material prior to the receipt of the fabricated structural member at the job site.

The Federal payment regulations for stockpiled materials are contained in 23 CFR 635.122. Federal funds will participate in payment for stockpiled materials when the following conditions are met:

• The contract provisions must provide for payment for stockpiled materials.

• The stockpiled material must conform with the requirements of the plans and specifications.

• The stockpiled material must be supported by a paid invoice or a receipt for delivery of materials. If supported by a receipt of delivery of materials, the contractor must furnish the paid invoice within a reasonable time after receiving payment from the SHA.

• The quantity of a stockpiled material eligible for Federal participation in any case shall not exceed the total estimated quantity required to complete the project. The value of the stockpiled material shall not exceed the appropriate portion of the value of the contract item or items in which such materials are to be incorporated.

• The materials may be stockpiled by the contractor at a location not in the vicinity of the project, if the SHA determines that because of required fabrication at an off-site location, it is not feasible or practicable to stockpile the materials in the vicinity of the project.

Information from a 1993 AISC survey indicates that at that time eight DOT's allowed partial payment for stockpiled plates and shapes received at the fabrication shop but not yet fabricated. Presently more States indicate that they are doing this, based on a 1998 survey conducted by the Bridge Division (now Office of Bridge Technology) of the Federal Highway Administration.

We believe, as discussed in the "Background" section, there can be adequate control and accountability made for stockpiled steel plates and shapes received at the fabrication shop so that the conditions of 23 CFR 635.122 can be met. We further believe, that when SHA's procedures are such as to provide controls, accountability and assurance that the regulatory conditions are met, that it is in the best interest of the public, as well as the industry, to allow that payment for such stockpiled steel plates and shapes prior to fabrication.

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