Contributed by Eric D. Lussier
On July 26th, my company finished installing a flooring project that sparked a trilogy of blog posts, "Not Quite Ready Yet", "Project Compaction: Not Just for Soil" and (I thought) concluding with “It’s Just a Matter of Time” on July 29th.
This was a non-prevailing wage, privately funded project in one of the Boroughs of Manhattan where our standard credit terms were negotiated with us by the General Contractor. We typically request a 50% deposit at the time of the contract award, a 30% balance due on the day materials arrive on the project and then collect the 20% balance on the final day on site. On this particular project, they agreed to our 50% deposit, but asked to pay us down to 10% retainage within 30 days of completion. We reluctantly agreed and even though it was change ordered immediately, we didn’t insist on collecting additional money up front on the change order work. We eventually collected our 50% deposit on the base bid, despite it taking multiple payments to tally.
I won’t rehash many of the particulars that were outlined in my previous three posts, but this project did not go smoothly from award. We fought tooth and nail to have the space ready, then to have it solely to ourselves, to not have our in-place work damaged (by workers, inspectors or Acts of God) and then to complete within their requested window. The final brush stroke was on Friday, July 26th. I submitted all billing and paperwork in a timely fashion, and we did what many do to receive payment on a construction project: we waited.
At about a week before our Net 30 term approached, I started reminding the contractor that our money was due. We received immediate pushback from the GC that they had not been funded by the owner. Our response was easy: our payment terms were not paid when paid, as per your negotiation.
Back and forth we went. We waited. More back and forth. More waiting. As day 60 approached with no further money received, we decided to protect ourselves the best we could by filing a mechanic’s lien on the project.
So, why add onto this trilogy and create a quadrilogy? Because as of the date of this article, we are at DAY 95 and are still owed 65% of the total contract value. We’ve dotted our I’s and crossed our T’s. We had ZERO punch list items on 6,500 square feet of sport and dance flooring installed. We’ve pleaded our case. We’re just in the queue and fully susceptible to the whims of the paying parties.
How can a small business stay afloat when cash flow is everything? While I can’t say 95 days is the new norm to be paid on a project, it seems that payments are harder to obtain without leaving ourselves some sort of leverage to receive the check, such as additional requested work to be completed.
Original payroll forms in triplicate? Check. Copies of payroll checks proving prevailing wages were paid? Check. Copies of OSHA cards? Check. Lien waivers? Check. We’ve had to do them all before in order to receive payment for work performed. Retainage? Forget about it. It takes an Act of Congress to get that out of someone. One would think that by being one of the very last trades on a jobsite that our retainage would come down the line within 60 days, but we’re typically 6 to 12 months out on receiving our retainage payment, if not longer.
Our friends at PaintSquare recently posted an article quoting a report which “found that slow payments in the construction industry are costing general contractors and subcontractors about $64 billion a year.” 64 BILLION DOLLARS on an average of a 51-day payment turnaround.
We now yearn for the days of a true Net 30 payment on a project and I’m unsure what additional steps we can take to ensure them. Relationship, performance and paperwork aside, we’re in the cue along with the rest of the contractors on the job.
We’re not anxious to line up to work with this contractor again, despite having a contract pending for an additional project in the Boroughs. Fool us once, shame on you; fool us twice....
10/29/2019 12:28:46 pm
We just got paid for a project we did in 2016. Why the delay? Because Phase II of the building had poor roof details and caused a delay. Yet me, the flooring guy in Phase I had to wait 3 YEARS to get paid because of an architectural mistake on the plans. It is outrageous. Every time I read a general conditions post I realize these are written to make sure Subs don't get paid. GC's always get paid, but subs are always low man on totem pole. General conditions have become SO complicated, so long, they make sure to over complicate so the small unsophisticated subs get treated poorly by the mega GC and mega end-user.
11/6/2019 11:18:28 am
Is the GC working for a private or public owner? That makes a difference. If it's public, there are often ways you find out if the GC has been paid. In a previous job, I worked at a trade association with close ties to the state DOT. We couldn't interfere in payment issues between GCs and subs, but we were able to confirm whether and when the GC had been paid.
10/5/2020 10:31:45 am
This has been a constant problem for our firm. As stated in the article it gets worse each year. I found this article by trying to find a community of sub-contractors which does not seem to exist. I think subs need to ba able to call out slow paying and non-paying GC's to each other. Our firm has time and time again taken payment settlement agreements for much less than owed and quite a few projects have simply never paid us. If a GC owes someone 20-50k they know its on the dge of whether hiring an attorney and spending time collecting might outweigh the time simply spent bidding future work. If anyone figures out how to handle this please let us know.
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