Certified M/W/SBE Subcontracting Agreement Terms

MinorityOwned (M), WomenOwned (W), and Small Business Enterprises (SBE) play a critical role in fostering diversity, innovation, and economic growth in public and privatesector construction projects. When a prime contractor enters into a subcontracting relationship with a certified M/W/SBE, specific contractual terms must be incorporated to protect the interests of the subcontractor, ensure compliance with governmentmandated goals, and provide a transparent framework for project execution.

1. Definitions and Scope

• Certified M/W/SBE: A business that has received official certification from a recognized agency (e.g., state department of transportation, SBAs 8(a) program, minority business council) confirming its status as a minorityowned, womenowned, or smallbusiness entity.
• Prime Contractor: The party holding the primary contract with the owner or agency and responsible for delivering the overall project.
• Subcontractor: The certified M/W/SBE that performs a defined portion of the work under the primes direction.
• Scope of Work: A detailed description of the tasks, deliverables, and performance standards the subcontractor must meet.

2. Certification Verification

The prime contractor must obtain and retain a current copy of the subcontractors certification. Verification steps include:

Step	Action	Responsibility
1	Request certification copy	Prime Contractor
2	Confirm validity with certifying agency	Prime Contractor
3	Store documents in project file	Project Administrator

3. Contract Language

3.1. Mandatory Clauses

• **Compliance with Federal/State Goals** The subcontract must state that the work performed contributes toward meeting the applicable M/W/SBE participation percentage.
• **Equal Opportunity** The subcontractor affirms that it will not discriminate against any protected class and will adhere to all relevant labor laws.
• **No PayAround Practices** Prohibit any arrangement where the prime routes payments through a noncertified entity to circumvent certification requirements.

3.2. Payment Terms

Payments shall be made on the same schedule and under the same conditions as comparable noncertified subcontractors, unless otherwise documented. Include:

• Prompt payment within 30 days of invoice receipt.
• Retention amount (typically 510%) held until final acceptance.
• Interest penalties for late payments per state law.

3.3. Changes and Claims

Any change order affecting the certified subcontractors scope must be processed through the same changeorder mechanism used for the prime contract. The subcontract shall include:

• Written notice of change within 5 business days.
• Adjusted price and schedule vetted by both parties.
• Right to submit a claim for additional costs within 30 days of the change.

4. Performance and Monitoring

4.1. Milestones

The agreement should delineate clear milestones with associated acceptance criteria. Example format:

Milestone	Deliverable	Due Date	Acceptance Method
1	Site Survey & Staking	20260715	Field inspection & signoff
2	Foundation Pours	20260901	Thirdparty testing report
3	Final Finish	20270228	Owner/Architect punch list

4.2. Reporting Requirements

• Weekly progress reports submitted to the primes project manager.
• Monthly costtocomplete updates.
• Immediate notification of any safety incidents or violations.

5. Dispute Resolution

To preserve the business relationship, the agreement should specify a tiered approach:

1. Negotiation: Direct discussion between the parties within 10 days of a dispute.
2. Mediation: If negotiation fails, a neutral mediator agreed upon by both parties will be engaged.
3. Arbitration: Binding arbitration under the rules of the American Arbitration Association, with the location set in the state where the project is performed.

6. Termination Provisions

Termination may occur for cause or convenience. Key elements include:

• For Cause: Material breach, failure to meet milestones, or violation of certification rules.
• For Convenience: The prime may terminate with 30 days written notice, provided the subcontractor is compensated for work performed and reasonable demobilization costs.
• Posttermination assistance to transition work to another qualified subcontractor.

7. RecordKeeping and Audits

Both parties agree to retain project records for a minimum of three years. The prime must allow the certifying agency or the owner to audit:

• Invoices and payment vouchers.
• Timecards and labor hour reports.
• Material receipts and subsubcontractor agreements.

8. Confidentiality and Intellectual Property

Any proprietary designs, processes, or data shared during the subcontract shall be treated as confidential. Ownership of intellectual property created by the subcontractor remains with the subcontractor unless a written assignment is executed.

9. Insurance and Bonds

The subcontractor must provide proof of:

• General liability insurance (minimum $1,000,000 per occurrence).
• Workers compensation as required by state law.
• Performance and payment bonds when the contract value exceeds the threshold set by the prime (commonly $500,000).

10. Governing Law

The agreement shall be governed by the laws of the state in which the project is located, without regard to conflictoflaw principles.

11. Signature Block

Both parties acknowledge that they have read, understood, and agree to be bound by the terms outlined above.

Prime Contractor Name: ________________________ Title: ________________________ Date: ________________________ Signature: ________________________

Certified M/W/SBE Subcontractor Name: ________________________ Title: ________________________ Date: ________________________ Signature: ________________________