TITLE 44: GOVERNMENT CONTRACTS, GRANTMAKING, PROCUREMENT AND PROPERTY MANAGEMENT
SUBTITLE B: SUPPLEMENTAL PROCUREMENT RULES
CHAPTER IX: DEPARTMENT OF TRANSPORTATION
PART 650 PREQUALIFICATION OF CONTRACTORS, AUTHORIZATION TO BID, AND SUBCONTRACTOR REGISTRATION
SECTION 650.190 OTHER FACTORS CONSIDERED IN DETERMINING FINANCIAL RATINGS
Section 650.190 Other Factors Considered in Determining Financial Ratings
a) Notes and Accounts
1) Long term notes and accounts payable to stockholders, officers, directors, employees, parent, subsidiaries and affiliates will not be considered a liability if subordinated. A subordination is not permitted if it takes place more than one year from the date of the financial statement. Long term notes that are not subordinated will be considered as current liabilities. Subordinations that are not honored will not be considered on subsequent financial statements.
2) Long term notes (that are in the company's name) payable to banks or other financial institutions when secured by the personal assets of the owners, officers or directors will be considered as additional working capital if properly subordinated. If not subordinated, they will be considered as liabilities against current assets.
3) Notes payable due within one year from the financial statement date are considered current liabilities. Installments on notes due beyond one year are considered deferred liabilities.
4) When notes payable are secured by all assets of a firm, the amount of the loan is deducted from the value of fixed assets (against equipment first, then real estate) in determining the financial rating. No excess of encumbrance will be charged against working capital. When notes payable are unsecured, there will be no deductions from the value of fixed assets with the exception of Section 650.180(a)(1)(D).
5) The reduction of long term notes before their due date will cause a reduction in the computed financial rating. In the event of long term debt reduction, the contractor shall furnish in writing the details of the transaction. This information shall be verified by a certified public accountant for those contractor's who have an audited status.
6) Any long term unsecured notes payable shall be accompanied by a signed statement from the lending agency and the contractor indicating that a decrease in the unsecured borrowing shall be reported to the Department immediately. In addition, the contractor shall provide a copy of the loan agreement that shall disclose the date of the loan, the termination date, the terms of payment, a statement that the loan is free of conditions and whether it is interest or noninterest bearing. Any unsecured note payable not accompanied by such a statement and loan agreement shall be considered a current liability for prequalification rating purposes.
b) Income Taxes
The Department shall utilize the maximum corporate tax rate as stipulated by the Internal Revenue Code to reclassify deferred taxes as a current liability. This situation occurs when an applicant reports its income to the Internal Revenue Service on the cash or completed contract method, but submits such to the Department on the accrual method, thus deferring 100 percent of any income taxes due on its receivables. When deferred taxes are represented as a long term asset, the asset will be given no credit.
Where dividends of the applicant, declared or proposed, have neither been paid nor included as a current liability in the submitted application for prequalification, the Department shall establish reserve distributions equal to the unpaid portion.
d) Treasury Stock
If debentures have been issued, or, if long term obligations have been assumed by an applicant for repurchase of treasury stock, the Department will not consider the long term portion of these obligations as long as the applicant has provided for repayment of any current portion.
e) Related Companies
1) Applicants may be related to other concerns or companies by virtue of a parent, subsidiary or affiliate connection. Also, two or more concerns or companies may operate in a coordinated manner to maintain a single set of ratings. Applicants seeking a prequalification financial rating based upon the financial strength of the applicant and a related company or seeking a financial rating in conjunction with the financial strength of a group of related companies will be evaluated and issued ratings based upon an assessment of the financial statements submitted in accordance with this subsection (e) provided that the operational roles of the related companies in the business activity of the applicant are consistent with the work ratings applied for pursuant to this Part.
2) A consolidated financial statement from a parent corporation may be used to prequalify a subsidiary corporation or group of subsidiary corporations. A Guaranty Agreement must be submitted with the financial statement. If more than one subsidiary is identified by a holding company for bidding purposes, the Department will establish the bidding identity for each subsidiary.
3) The Department may request a consolidated financial statement from the parent corporation of a subsidiary requesting prequalification. The Department will deny credit for assets of a subsidiary that are unduly burdened or otherwise heavily encumbered, or are not available because of the financial condition of the parent corporation.
4) A combining financial statement may be used to prequalify an affiliated company or group of affiliated companies. Separate financial statements may be used to prequalify two or more related companies that provide the material production and construction capability necessary to support a work rating classification. An applicant seeking a financial rating for a group of affiliated companies based upon the combined affiliate data presented in a combining financial statement or separate financial statements shall present a full description of the businesses' operations and interdependencies. A Guaranty Agreement will be required. The Department will not credit assets between affiliates for purposes of individual affiliate financial ratings without a Guaranty Agreement and any necessary lease agreements in accordance with Section 650.260(b)(2) of this Part. In all instances, if more than one affiliate is identified for bidding purposes, the Department will establish the bidding identity for each affiliate.
f) Letters of Credit
Bank letters or letters of credit will not be considered in the computation of the financial rating.
(Source: Amended at 32 Ill. Reg. 7989, effective May 8, 2008)