2025 Updates to the MN Department of Transportation Standard Specifications for Construction
Category | Briefing Papers
By Hugh D. Brown & Zachary E. Coppola
Hugh Brown and Zachary Coppola are members of the firm’s Construction Law Department. Hugh can be reached at 612.359.7663 or Hbrown@fwhtlaw.com. Zach can be reached at 612.359.7667 or ZCoppola@fwhtlaw.com.
The Minnesota Department of Transportation (“MnDOT”) has updated its Standard Specifications for Construction (the “Specifications”). The Specifications are used in many government projects, even at the municipal level, thus contractors should be aware of the notable changes MnDOT has made regarding obtaining contracts, receiving payment, and scheduling work for projects. Moving forward, MnDOT will now provide updates to the Specifications on a five-year cycle, with the next update to occur in 2030. Below is an overview of some of the most important amendments to the Specifications in this year’s update, as well as commentary on the impact they may have to contractors.
- Section 1206.3, Responsible Contractor
Section 1206.3 is a new provision that implements certain pre-bidding requirements a Contractor must meet to be deemed eligible for a contract award in excess of $50,000:
The Department cannot award a construction Contract in excess of $50,000 unless the Bidder is a “Responsible Contractor” as defined in Minnesota Statutes, section 16C.285, subdivision 3.
A Bidder must verify it meets the minimum criteria detailed in the law. A Bidder must submit its verification electronically by completing the “Responsible Contractor” section in the “Officers and Acknowledgements” Folder within the Electronic Bid File. A company officer must certify statements in that section. Bidders only need to complete the electronic verification; DO NOT email, fax, or send paper forms to the Department. The Department will not accept emailed, faxed, or other paper submissions and will only accept electronic verifications.
A Bidder must obtain verification from each Subcontractor it will have a direct contractual relationship with. At the Department’s request, a Bidder must submit signed Subcontractor verifications. A Contractor or Subcontractor must obtain annual verification from each motor carrier with which it has a direct contractual relationship. A motor carrier must give immediate written notice if it no longer meets the minimum responsible Contractor criteria. The requirement for Subcontractor verifications does not apply to:
(1) Design professionals licensed under Minnesota Statutes, section 326.06; and
(2) A business or person that supplies Materials, Equipment, or supplies to a Subcontractor on the Project, including performing delivering and unloading services in connection with the supply of Materials, Equipment, and supplies. But, a business or person must submit a verification if it delivers mineral Aggregate such as sand, Gravel, or stone that will be incorporated into the Work by depositing the Material substantially in place, directly or through spreaders, from the transporting vehicle.
A Bidder or Subcontractor who does not meet the minimum criteria specified in the statute, or who fails to verify compliance with the criteria, is not a “Responsible Contractor” and is ineligible to be awarded the Contract for this Project or to Work on this Project. Submitting a false verification makes the Bidder or Subcontractor ineligible to be awarded a construction Contract for this Project. Additionally, submitting a false statement may lead to Contract termination. If only one Bidder submits a bid, the Department may, but is not required to, award a Contract even if that Bidder does not meet the minimum criteria for Contracts not exceeding $50,000.
Commentary: Here, this update largely reflects the same substantive requirements already required under Minnesota Statutes, section 16C.285. The only primary difference is that the Specifications now require Contractors to submit their verifications through an enumerated procedure not contained in the statutory text. Specifically, Contractors must submit their verifications electronically by completing the “Responsible Contractor” section in the “Officers and Acknowledgements” Folder within the Electronic Bid File. Moreover, the Specifications now expressly bar the submission of verifications through other methods such as email, fax, and hard-copies that are not expressly precluded under the statute. Although this is only a minor procedural change from the substantive law that Contractors are already familiar with, Contractors should closely scrutinize their own compliance with these procedures in addition to the substantive requirements due to the serve repercussions that can arise from the failure to do so.
- Section 1701.5B, Prompt Payment and Retainage
Section 1701.5B, which governs prompt payment and retainage requirements for projects receiving federal aid, added the following language:
For purposes of paying out retainage, a Subcontractor’s Work is satisfactorily completed when all the tasks called for in the subcontract have been accomplished and final documentation is received. Final documentation includes certified payrolls, Material certifications, haul road releases, pit releases, warranties, operating manuals, product literature, verification of final quantities, and Contractor Affidavit (Form IC134). When the Department has made an incremental acceptance of a portion of the prime Contract, the Work of a Subcontractor covered by that acceptance is deemed to be satisfactorily completed.
Commentary: In the previous versions, Subcontractors on federally funded projects would have varying requirements for final documentation to receive retainage depending on the contract. The update moved towards standardizing the requirements for receiving retainage. While the update does provide some clarity on the necessary documentation required, the use of “includes” in the language of the text leaves open the possibility that other forms of documentation may be necessary on certain contracts. Accordingly, Subcontractors should be proactive in determining what documentation is required, if any, beyond that enumerated in this section before starting Work on a Project to avoid delays in receiving full payment. Additionally, Subcontractors should be sure to coordinate the submission of all such documentation with Contractors.
- Section 1701.7, Compliance with Tax Law Requirements
Section 1701.7 was added to the Specifications to implement certain requirements related to tac laws that Contractors must meet in order to receive final payment on a Project, as follows:
The Department cannot make final payment to the Contractor until the Contractor demonstrates that it and all its Subcontractors have complied with the Income Tax withholding requirements of Minnesota Statutes, section 290.92 and section 270C.66 for wages paid for Work performed under the Contract. To establish compliance, the Contractor must submit a “Contractor Affidavit” either online or in paper form (IC134) to the Minnesota Department of Revenue. The Contractor will receive a written certification of compliance when the Department of Revenue determines that all withholding tax returns have been filed and all withholding taxes attributable to the Work performed on the Contract have been paid. The Contractor must then provide this written certification to the Department to receive final payment.
Every Subcontractor working on the Project must submit an approved “Contractor Affidavit” from the Minnesota Department of Revenue to the Contractor before the Contractor can file its own Contractor Affidavit. The Contractor is advised to obtain the certification from each Subcontractor as soon as the Subcontractor completes Work on the Project.
The Department of Revenue, in association with the Department of Employment and Economic Development, offers a free seminar to help Contractors understand tax law requirements. The Department strongly urges the Contractor and all Subcontractors to attend the “Employment Taxes & Employer Responsibilities Seminar“ or similarly offered classes. You can find a schedule and more information on the Department of Revenue website (www.revenue.state.mn.us).
Complying with this requirement is considered part of the Work under this Contract. The Department will enforce this requirement equally with all other Contract requirements. The Contractor delay in complying with this requirement will cause the Department to delay final payment and Contract 1702 Minnesota 2025 Standard Specifications 61 Acceptance. The Department may also report non-compliance to the Department of Revenue, which may result in enforcement action by the Department of Revenue.
Contractor Affidavit requirements and Form IC134 can be found on the Department of Revenue website (www.revenue.state.mn.us).
Commentary: Contractors now must file their own Contractor Affidavit where the Contractor asserts they complied with all tax laws, specifically withholding taxes on employee wages. A Contractor cannot file their own affidavit, however, until the Contractor obtains approved affidavits from all of its Subcontractors. Subcontractors must submit their affidavits to the Department of Revenue, the Department of Revenue will then notify the Subcontractor that the Subcontractor is in compliance. Here, Contractors should actively coordinate with Subcontractors to ensure that there are no delays in getting this done. The Contractor then must obtain such approved affidavits from all Subcontractors before filing their own affidavit and then await the same approval from the Department of Revenue. Once approval is received from the Department of Revenue that the Contractor is in compliance, they may submit their approved affidavit for final payment to the Department of Transportation.
- Section 1707, Public Convenience and Safety
Section 1707, which addresses various public safety hazards and traffic related concerns, has been revised to add the following text:
The Contractor shall ensure that employees and Subcontractors do not display items such as, but not limited to, flags, banners, and symbols on the Project Site, that may disrupt the proper prosecution of the Work, impede public safety, or create a distraction for the traveling public.
Commentary: While it is unclear what flags, banners, or symbols Contractors are prevented from displaying, Contractors should take precaution to ensure its employees and Subcontractors refrain from placing any flags, banners, and symbols that may be considered controversial. Additional context may be found, however, under State law that requires MnDOT employees to remove any political or advertising signs located on the state highway right-of-way. In responding to risks that may arise from this update, Contractors should be sure to include provisions in all subcontracts that shift the risk onto Subcontractors, should a Subcontractor or its employee be responsible for any violation of this provision.
- Section 1708.1, Railroad Highway Provisions – General
Section 1708.1, which governs requirements for performing Work near railroads, added the following language, as follows:
The Contractor shall be responsible for damages from unscheduled delays of freight or passenger trains caused by the Contractor. If the Contractor’s operations cause the railroad company to perform extra work to maintain railroad traffic, the Contractor shall reimburse the railroad company for the cost of the extra work and damages associated with delays to trains.
The railroad company may inspect Work on the railroad Right-of-way at any time to ensure that the Work will not adversely impact train traffic or safety.
Commentary: Contractors should expect to take on additional risk when working on projects affecting railways. Although Contractors may have previously faced such risk under common law doctrines providing liability for causing foreseeable damages to a railroad (i.e., consequential or special damages), the risk of such damages has now increased due to the enshrinement of liability in the Specifications. Accordingly, Contractors should implement additional precautions when performing Work near railroads, and ensure that they have provisions in any subcontracts that shifts this risk onto Subcontractors should they cause any damage. Additionally, the broad language used in regard to the Contractor’s liability for its operations causing the railroad company to perform extra work is troubling, as it seems such liability may arise through no fault of the Contractor. On this point, it may be advisable for Contractors to enter into direct agreements with railroad companies that address this risk before a Project begins. Additionally, if a Project will require a substantial amount of Work to be performed near a railroad, Contractors should think about how to address the above risks in their bid prices.
- Section 1801, Subletting of Contract
Section 1801, which places certain restrictions on the amount and manner by which a Contractor may sublet, sell, transfer, delegate, or assign a contract, has been revised as follows:
The Contractor must not sublet, sell, transfer, delegate, or assign the Contract or any portion of the Contract without the Engineer’s consent. The Contractor may, with the Engineer’s consent, sublet a portion of the Contract as long as the Contractor self-performs Work amounting to at least 30 40 percent of the total original Contract Amount.
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Commentary: MnDOT reduced the amount of Work which may be sublet on their projects from 40% to 30%. Contractors who sublet significant portions of their projects must be prepared to reduce the amount they sublet on future projects, which may increase expected costs in an economic environment that has already seen a dramatic rise in the price of materials across the board due to inflation, tariffs, and lingering supply chain issues. Relatedly, Contractors should be sure to diligently maintain documentation detailing the amount of Work performed on a Project should any challenges under this Specification from MnDOT occur.
- Section 1802, Qualifications of Workers
Section 1802, which implements certain skill and experience requirements for workers, and gives the Engineer control to remove workers under certain conditions, revised to add the following text:
If any Subcontractor employed by the Contractor or any person employed by the Contractor or by a Subcontractor fails to perform assigned Work in a proper and skillful manner, or becomes intemperate, disorderly, abusive, or harassing, or shows signs of impairment from drug or alcohol use, the Contractor shall remove that Subcontractor or person from the Project as directed in writing by the Engineer. The Contractor shall not employ that Subcontractor or person again on any portion of the Project unless approved in writing by the Engineer. If the Contractor fails to remove a Subcontractor or person as directed by the Engineer, or fails to provide suitable and sufficient personnel for the proper prosecution of the Work, the Engineer may suspend the Work until the Contractor complies with the direction from the Engineer.
Commentary: The Engineer is now empowered to remove any employee from a project if they show signs of impairment from drug or alcohol use. Contractors are not given any recourse to challenge an employee’s removal. Contractors and Subcontractors must be aware of and prepared for possible removals by the Engineer for this reason given the severe repercussions that may arise from failing to follow the Engineer’s order. Further, Contractors and Subcontractors should be sure to have clear terms in any applicable employment policies that call for immediate termination should an employee show signs of impairment from drug or alcohol use while actively working on a Project.
- Section 1803B.2, Actual Weather Reporting
Section 1803B, which governs requirements for project schedules utilizing the bar chart method, received several updates, one of these was the addition of 1803B.2, which adds substantive requirements for reporting weather days, as follows:
The Contractor must document and obtain agreement with the Engineer for each weather day experienced at the time of each occurrence. The Contractor must include a list of the specific claimed actual weather days experienced and a brief description of the work affected on each weather day in the accompanying Narrative Report applicable to the period in which weather was experienced.
Commentary: For Contractors utilizing bar chart schedules, all weather days must be reported as they happen, approved, and then reported with a description in the Narrative Report for the relevant period. As Contractors who frequently work in Minnesota know, weather can often play a role in significantly delaying projects. Contractors utilizing bar chart schedules now must be prepared to document these delays in real time and ensure prompt communication with the Engineer should they wish to receive an extension to the Project schedule. Although this change does add some additional burdens on the front end, it may serve to benefit diligent Contractors in the long run, who will now have additional assurance that their delay claims for weather days will be easier to prove.
- Section 1902, Scope of Payment
Section 1902, which governs when a Contractor may receive full payment and who a Contractor may receive payment from, added the following language, as follows:
The Contractor will shall receive compensation provided for in the Contract as full payment for providing Materials and performing Work in accordance with the Contract requirements. This includes compensation for all risk, loss, damage, and expense incurred by the Contractor for performing the Work required by the Contract. Payment is subject to 1720, “No Waiver of Legal Rights.” The Department prohibits the Contractor from accepting payment from any other party for performing the Work required by the Contract, including any Incentive or bonus payment. The Department does not prohibit the following payments from third parties:
(1) Payments from sureties
(2) Quantity-based rebates or credits from suppliers
(3) Payments under another contract for excess material removed under this Contract
Commentary: This update was likely made to further transparency on public contracts, as the receipt of payment for performing the Work from third party sources leaves questions as to whether the Work was performed fully for the benefit of the public or, instead, some other interest. Accordingly, Contractors should ensure they decline any Incentive or bonus payment that may be offered by a third party. Notably, however, the update expressly enumerates certain circumstances where third party payments are allowable.
Announcements
Robert L. Smith is speaking at the upcoming National Business Insitutes’s seminar “Constructing Clarity: Legal Paths When Change Orders Are Refused” Friday, May 30th at 12:00 PM Central Time. For more information, including details and how to register, click here.
Fabyanske, Westra, Hart & Thomson, P.A. is pleased to announce the election of its new President and Executive Committee. The following six attorneys now comprise the Fabyanske Executive Committee: Jesse R. Orman (President), Katie A. Welsch, Jeffrey W. Jones, Matthew T. Collins, Rory O. Duggan and Robert L. Smith.