Letter

Date: January 31, 2023

Subject: 2023 Assessment of Prompt Payment Complaints

The Federal Aviation Administration (FAA) Reauthorization Act of 2018 (Public Law No: 115-

254), signed into law on October 5, 2018, requires the FAA to analyze and assess prompt

payment complaints reported by airport sponsors, and to create a report describing the results

including a plan to respond to such results. The following comprises the report described by the

Act.

Background:

Section 157 of the 2018 FAA reauthorization requires airport sponsors to track and report the

number of complaints received from subcontractors regarding alleged non-compliance with the

prompt payment requirements, including the timely return of retainage by prime contractors to

the FAA.

Section 157 also requires the FAA to assess and improve airport sponsor compliance with

prompt payment requirements, including:

i. whether requirements relating to the inclusion of prompt payment language in contracts

are being satisfied;

ii. whether and how airport sponsors are enforcing prompt payment requirements;

iii. the processes by which covered complaints are received and resolved by airport sponsors;

iv. whether improvements need to be made to better track and resolve covered complaints;

v. whether changes to prime contractor specifications need to be made to ensure prompt

payments to subcontractors; and,

vi. whether changes to prime contractor specifications need to be made to ensure prompt

payment of retainage to subcontractors.

To meet these requirements, the FAA created an online reporting tool for airport sponsors to

report covered complaints to the FAA during November 2018. On February 11, 2019, the FAA

Office of Civil Rights issued a letter notifying airport sponsors of the new requirements.

Reminder notifications were sent to airports sponsors on March 13 and August 7, 2019 to

reiterate the requirements. The FAA provided prompt payment training, including a review of

reporting requirements and how to report, during four conference trainings/webinars between

December 2019 and August 2020. During FY2021 the FAA replaced the original stand-alone

online reporting tool with a new module for the online system airport sponsors already use for

other FAA Civil Rights compliance and reporting needs. Airport sponsors were notified of the

new reporting module in March 2021 via email, and the electronic user guide for the system was

updated with instructions on how to report covered prompt payment complaints.

Office of the Assistant Administrator for Civil Rights

800 Independence Ave. S.W.

Suite 1030

Washington, DC 20591

Emails were sent in October and November 2022 reminding airport sponsors to report covered

complaints through the new module and requesting affirmation that all covered prompt payment

complaints for FY2022 had been reported.

Data Review:

A total of five (5) complaints for FY2022 were reported as of December 21, 2022. A review of

the complaints received showed:

• There was a total of five (5) individual complaints reported for FY2022.

• Of the roughly 1,230 airport sponsors that received grants in FY2022, a total of three (3)

unique airports reported covered prompt payment complaints, representing approximately

0.2% of all FY2022 grant recipients.

• All five (5) of the complaints reported were “covered complaints” within the meaning of

Section 157.

• Three (3) of the five (5) covered complaints were attributable to the same project with the

same prime contractor. One (1) of these complaints was resolved when airport sponsor

informed the prime contractor that progress payments would be withheld until the

subcontractor was paid. The other two (2) complaints were not resolved until the prime

contractor’s bond company stepped in and appointed a third-party company that received

payments directly from the airport sponsor and then distributed funds to the prime and

subcontractors on an independent basis.

• One (1) of the five (5) covered complaints was self-reported to the airport sponsor by the

prime contractor. The late payment was attributed to employee illness that delayed

processing of the payment to the subcontractor.

• One (1) of the five (5) covered complaints was resolved between the prime and the

subcontractor before the airport sponsor had been notified of the delayed payment. The

prime contractor was reminded of its obligation to report payment information timely, in

addition to the basic requirement to promptly pay subcontractors.

While the actual number of covered complaints reported is comparatively low, anecdotal reports

regularly communicated to the FAA suggest that several factors could be at work that may

depress the number of covered complaints. These factors may include:

• Airport sponsors may not be properly reporting covered complaints to the FAA.

• Subcontractors not advising airports of prompt payment complaints for fear of retaliation

by prime contractors or airport sponsors themselves

• Scenarios where payments are delayed but the delay is not a violation of the prompt

payment requirements; these cases are not considered covered complaints. Examples

include:

o Airports take extended periods of time to pay prime contractors, which delays the

prime contractor’s payment to subcontractors

o Subcontractors are several tiers down and each prior tier needs to receive payment

first

o Prime contractors do not include subcontractor work on an invoice and therefore

have not been paid for the work yet

o Prime contractors fail to invoice the airports timely and measures to require and

enforce timely invoicing are either unavailable or not implemented

Analysis and Assessment:

Although the total complaint number remains very low, it is still possible to map the responses

received into the areas of analysis identified in Section 157 of the Act:

i. whether requirements relating to the inclusion of prompt payment language in contracts

are being satisfied;

o All respondents stated that their contracts included prompt payment and retainage

return language from FAA Advisory Circular 150/5370-10H

ii. whether and how airport sponsors are enforcing prompt payment requirements;

o Of the three (3) unique airport sponsors that reported receiving complaints, two

(2) indicated the complaints were resolved without any actions by the airport

sponsor.

o One (1) airport sponsor withheld payment to the prime contractor until the

subcontractor’s past due payment was released. This same airport sponsor is the

location where the prime contractor’s bonding company brought in a third-party

funds control firm to ensure payments were made to subcontractors.

iii. the processes by which covered complaints are received and resolved by airport

sponsors;

o Complaints were received through various means, including e-mail, formal letter,

and by responses entered in automated prompt payment tracking systems

o Complaint resolutions were effected by various means, including consultations

with prime contractors to remind them of contractual payment obligations,

withholding payment to a prime contractor, and a third-party funds control

company receiving payments from the sponsor and making direct, independent

payment to prime and subcontractors

iv. whether improvements need to be made to better track and resolve covered complaints;

o Despite significant efforts devoted to educating airport sponsors on the prompt

payment complaint reporting requirements, since FY2019, total reported

complaints remain extremely low in proportion to the number of active projects.

o In FY2021, the FAA integrated a prompt payment complaint reporting feature

into the existing airport-facing FAA Office of Civil Rights software platform in

an effort to improve airports’ compliance with complaint reporting requirements.

Reported complaint numbers have still remained very small in comparison to the

anecdotal concerns raised by stakeholders on a regular basis.

o While the FAA does not have direct oversight over prime contractors and

subcontractors, the FAA has provided and will continue to provide training and

other resources to help airport sponsors understand their obligations and options

for resolving and reporting prompt payment complaints in a timely manner.

v. whether changes to prime contractor specifications need to be made to ensure prompt

payments to subcontractors;

o The sufficiency of contractor specifications regarding prompt payment and return

of retainage was not a common theme in regard to the reported complaints.

Anecdotal reports the FAA receives outside the context of the present analysis

suggest that improvements to requirements and enforcement measures for prime

contractors to invoice timely and accurately as well as an improvement to the

requirements for airport sponsors to timely pay prime contractor invoices may be

of value. Furthermore, invoicing and paperwork requirements of prime

contractors have been implicated in delays in payment to subcontractors while

documentation disputes are resolved. However, because delays in subcontractor

payments stemming from invoicing procedures are not currently violations of the

prompt payment requirements of 49 CFR Part 26.29, any complaints arising from

these issues are not covered complaints within the meaning of Section 157.

Therefore, there is currently no standard method to track or analyze the timeliness

with which prime contractors invoice airports, the timeliness with which airports

pay prime contractors, or the myriad ways in which invoicing practices may

impact subcontractors.

vi. whether changes to prime contractor specifications need to be made to ensure prompt

payment of retainage to subcontractors.

o As noted in regard to the previous item, the sufficiency of contractor

specifications regarding prompt payment and return of retainage was not a

common theme in regard to the reported complaints.

Results and Plan:

This is the fourth year the FAA has systematically gathered and analyzed information relating to

prompt payment complaints at airports nationwide. The FAA continues to receive only a very

limited number of reported complaints, and only a subset of these are covered complaints within

the meaning of Section 157. Data received so far is not of sufficient quantity to properly evaluate

broad trends or suggest specific policy changes that would have a significant measurable impact.

However, with four years of reported complaint data the FAA has identified some positive

tendencies. In the first year of reporting, three (3) airport sponsors indicated that they did not

have correct prompt payment and return of retainage clauses in their contracts. Since that first

year, no airport sponsors have indicated the prompt payment language was missing. Airport

sponsors have also been increasingly accurate in reporting only covered complaints. FY2022 is

the first year where all reported complaints were covered complaints. There were fewer

complaints in FY2022 compared to all previous years, and fewer complaints as a percentage of

all grant recipients.

The lack of overwhelming quantitative data does not mean that the FAA cannot take action

based on what has been received to date and from anecdotal information the FAA obtained

during airport compliance reviews and FAA-led training sessions. The possibility remains that

airport sponsors may not be monitoring for prompt payment and/or not complying with the

legislative requirement to report prompt payment complaints. However, since reporting

requirements went into effect the FAA has provided numerous training sessions on prompt

payment monitoring and reporting. These sessions were attended and viewed by hundreds of

airport sponsors, and there has been no appreciable increase the number of prompt payment

complaint reports. The FAA also notes that anecdotal concerns often involve issues related to

billing and invoicing, where the prime contractor has not been paid and therefore is not in

violation of prompt payment requirements.

Given the anecdotal information the FAA receives on a regular basis, the greater visibility

surrounding prompt payment requirements, the rollout of the new prompt payment complaint

reporting module for airport sponsors, and the regular training the FAA provides on prompt

payment and the complaint reporting requirements, an increase in reported complaints was

anticipated but did not occur in FY2022. In fact, reports decreased compared to FY2021,

whereas an increase had been anticipated for that year, as well. A larger data set will be critical

to the success of any future action the FAA might take or propose regarding prompt payment

requirements, because the actions could then be properly targeted to have the most useful impact.

The Infrastructure Investment and Jobs Act, also known as the Bipartisan Infrastructure Law,

created additional opportunities for airport sponsors to obtain federal funding for projects that

would be subject to federal requirements, including the prompt payment monitoring and

reporting requirement. Presently there is no expectation that a major shift will take place in the

prevalence of reported complaints as a percentage of total grant recipients, but if total project

volume increases then an attendant increase in the number of reported prompt payment

complaints is anticipated. We have identified the following areas of emphasis where we may be

able to positively impact prompt payment compliance and complaint reporting through continued

proactive approaches.

The FAA’s Office of Civil Rights will take the following actions during fiscal year 2023:

• Encourage airport sponsors to require prime contractors clearly explain invoicing

requirements before subcontractors begin work

• Continue to educate airport sponsors on the benefits of proactively monitoring prompt

payment and reporting all covered prompt payment complaints to the FAA

• Continue to focus on prompt payment compliance during all onsite and online

compliance assessments including ensuring that contracting documents contain the

required language and enforcement provisions and the airport sponsors are proactively

monitoring for prompt payment and the timely return of retainage

• Continue to incorporate prompt payment requirements in training provided to airport

sponsors, and provide updated training specifically focused on prompt payment,

including reporting requirements

• Continue to collaborate with other FAA Lines of Business and Staff Offices to ensure

that prime contractor specifications address prompt payment of subcontractors including

the timely return of retainage as well as the inclusion of contractual enforcement

mechanisms

• Explore additional options to further streamline, standardize, and improve the manner in

which airports report prompt payment complaints to the FAA pursuant to Section 157 as

well as to provide other supportive services to help airports understand their obligations

and options for reporting and resolving prompt payment complaints in a timely manner

The FAA continues to support full and effective implementation and monitoring of all DBE

program requirements, including prompt payment, at airports nationwide. We look forward to

implementing the above actions to ensure that contractors working on FAA funded projects are

paid timely including the timely release of retainage.

Sincerely,

John P. Benison

Assistant Administrator for Civil Rights