Chapter 5: Contract Administration, Section 2: Funds
- 5-201 General
- 5-202 Managing Funds
- 5-203 Obtaining Additional Funds
- 5-204 Segregation of Quantities for Fund Apportionment
Section 2 Funds
Caltrans aims to complete construction projects within the planned scope, allotted time, and projected budget. The project allotment includes a contingency fund for unforeseen expenses or unknown factors encountered during construction. Occasionally, the magnitude and cost of unforeseen expenses or unknown factors are greater than the budgeted amount. In such instances, the contract allotment may be supplemented with additional funds to complete the project as originally planned. The California Transportation Commission adopted resolutions G-11 and G-12 in 1978: G-11 to allocate funds for emergency contracts and G-12 to delegate authority for Caltrans to adjust project allocations and modify project descriptions. Those resolutions have been amended and superseded over the years. The processes are still referred to as G‑11 and G-12. This section explains the processes for managing project funds and obtaining additional project funds. Refer to the “Dir Orders Guidelines” link on following website for additional details on the G-11 and G-12 processes for additional funds on emergency contracts:
The resident engineer is responsible for managing the project construction costs within the current allotment, which includes item payments, Department-furnished materials, contingencies, and supplemental work. The resident engineer must track project expenditures, forecast future costs, determine the need for additional funds, and immediately notify the construction engineer of any apparent funding shortfalls. The resident engineer must not allow work to proceed that would require the encumbrance of additional funds before those funds have been approved and added to the project allotment.
The resident engineer must update the project contingency balance continuously as changes occur and whenever additional costs are initially identified. For example, payment for item overruns will come from the contingency fund, and extra money from item underruns will be returned to the contingency fund.
When the resident engineer determines that additional funds are needed, the resident engineer must consult with the construction engineer. Both engineers should discuss additional funds and potential alternatives to complete the project within budget.
An assessment of financial status must show that the existing contingency balance will prove insufficient to complete the project within the approved contract scope. Do not request additional funds to settle disputes that are not yet resolved.
The resident engineer and the construction engineer must next meet with the construction field coordinator and the project manager to discuss the funding need and alternatives. For emergency contracts or for maintenance funded contracts, include in the early discussions the district maintenance major damage coordinator or the district maintenance engineer respectively, and the funding program advisor.
If it is decided that the best alternative is to request additional funds, the construction engineer must then write a “Construction Phase Request for Supplemental G-12 Funds” memorandum to request additional funds and send it to the project manager. The memo must include sections titled “Potential Overrun Explanation, Justification, and Alternatives” and “Financial Status.” The “Potential Overrun Explanation, Justification, and Alternatives” section must contain a clear explanation of the reason for additional funds to complete the project within the scope indicated in the approved contract. The justification must answer the following questions:
- Why are additional funds needed?
- What work will be performed with the additional funds?
- What alternatives have been considered to mitigate the unforeseen expenses?
The construction engineer ensures that informational copies of the request are emailed to the construction field coordinator and the appropriate funding program advisor. For an example of the memorandum to Division of Budgets, refer to the Division of Construction intranet site at:
The project manager manages the project G-11 or G-12 funding capacity. The project manager completes the request for additional funds using the information in the request from the construction engineer. The project manager provides any additional information needed to complete the request, including any participation concurrence from other funding partners, and if applicable, an explanation of previously approved funding requests.
After the project manager coordinates getting the district signatures, the project manager emails the “Construction Phase Request for Supplemental G-12 Funds” or “Construction Phase Request for Supplemental G-11 Funds,” whichever is applicable, to the G‑11/G‑12 mailbox:
The budget analyst in the Division of Budgets reviews and processes the request. Upon concurrence, the budget analyst forwards it to the Division of Construction change order engineer and informs the appropriate funding program advisor as needed. Rejected G-12 memos are returned to the project manager for revision.
The change order engineer reviews each G-12 memo for completeness, signature authority, compliance with policy, and ensures that it addresses the following issues:
- Existing and projected financial status.
- Justification for the G-12 funding.
- Clearly defined scope of work.
- Consideration of sufficient alternatives.
When the change order engineer concurs with the G-12 memo, it is sent to the construction field coordinator and the project management coordinator for review and approval. After the coordinators approve the request, a copy of the fully executed request is kept in the change order engineer files and a copy is returned to the Division of Budgets. The budget analyst in the Division of Budgets adjusts the project allocation by supplementing the expenditure authorization, notifies the Division of Accounting to update AMS Advantage, and notifies the district construction office to update the contract administration system. When the updates are complete, the resident engineer can authorize performance of the work contemplated by the G-12 memo.
If rejected by the change order engineer, the budget analyst, or one of the coordinators, the change order engineer notifies the project manager of the rejection so that the district can consider alternatives. The project manager should work with the district construction staff, the construction coordinator, and the project management coordinator to develop a new funding strategy; or the project manager can appeal to the supplemental funds request (SFR) executive committee. The project manager ensures that preparation of the appeal follows district policy and emails it to the SFR executive committee at the G-11/G-12 mailbox.
Appeals for G-12 funds are directed to the Division of Financial Programming, which facilitates the monthly SFR executive committee meeting. The SFR executive committee considers each G-12 funds request appeal. The district project manager and the construction and project management coordinators present their positions to the SFR executive committee. If the SFR executive committee approves the appeal, the Division of Budgets processes the G-12 funds request. If the SFR executive committee denies the G-12 funds request appeal, the project manager works with the district construction staff and construction field coordinator to develop a new project completion strategy.
If G-12 authority is insufficient to cover the work contemplated, a California Transportation Commission vote will be necessary to obtain any additional funding.
The procedure for obtaining approval from the California Transportation Commission is described in Appendix A-2 of the funds request instructions on the Division of Financial Programming internet site under Funds Request Forms & Instructions.
The recording of total quantities of materials used on a project determines the final payment to contractors. However, this recording does not complete the data necessary to prepare the final billing when projects involve several different funding sources independent of state highway funds. Therefore, resident engineers must review the expenditure authorization for each project before work begins and be alert to the necessity for segregating quantities for fund apportionment. Details about cost segregation are covered in Sections 9-1, “Construction Contract Administration for Projects Sponsored by Others,” and 5-309, “Federal Segregation Determination on Change Orders,” of this manual.
Construction projects may be funded from many different fund sources. These include the following state-administered sources:
- The Interregional Transportation Improvement Program
- The Regional Transportation Improvement Program
- The State Highway Operation and Protection Program and Minor Program
Other funding sources for construction projects include the following:
- Federal Demonstration Funds
- Local tax measure funds
- Local developer fees
- State and local partnership funds, or private funds
The project funding may come from a single source or from a combination of the above sources. The arrangements for multiple funding sources may involve each party paying a percentage of the project or each party paying for specific items or locations of work.
It is essential that the resident engineer understand the project’s funding make-up and understand the agreement that establishes the funding and payment arrangements. This knowledge is important in the maintenance of records throughout the project, including records for quantities, cost increases, change orders, and final apportionment. The resident engineer may need to notify, and get concurrence from, the appropriate funding source when the work changes. The project manager should make this funding information available to the resident engineer, who should then establish a contact with the funding source.
Following are the requirements for specific funding types:
Segregate the costs for federal participation only for major change orders as defined in Section 5-311A, “Division of Construction Approval,” of this manual, maintenance work, and work financed by others. Refer to Section 5-3, “Change Orders,” of this manual for details about cost segregation. Quantity or cost segregation for all other planned work is handled on a percentage basis according to the detail estimate. No special reporting is required by the field personnel.
Segregate the quantities and costs between various funds for all local assistance projects.
Quantities must be segregated for the report of expenditures and for the final billing to contributing agencies. The resident engineer must submit to the Accounts Receivable and Program Accounting Unit of the Division of Accounting a final statement of all quantities or costs incurred as a result of agreements with contributing agencies. Segregate in sufficient detail the quantities and costs, whether covered by change order or resulting from normal variations, so that an accurate final breakdown can be made and the proper costs applied to each funding agency. The report should reference the original and subsequent funding agreements and any change orders or other items that altered the work.
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