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Thread: Late payments plaguing industry.... (?)

  1. #1
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    Late payments plaguing industry.... (?)

    I know there are many companies that are doing things right but hypothetically:

    EC vs. GC
    electrical contractor versus general contractor

    Please feel free to share your story if any of this sounds familiar. My electrical contracting business is currently suing a client who is a general contractor for outstanding payments despite completion of projects. 10% holdbacks are past the lien expiry period as well progress payments have not been received in full. The damages AND outstanding amounts are in the hundreds of thousands.
    As I would also like to see how the trial unfolds in the court of public opinion, I've reached out to media outlets to expose how some general contractors are witholding payments to their subcontractors mostly because they're operating with revenues rather than by turning profits or having healthy margins on their jobs. The only leverage I can sometimes use on them is when I threaten the progress of the job or cite delayed material because of non payments. However once projects are complete or 90% complete I am still typically owed about 45% of the contract value. And then I am expected to complete all 'deficiencies' and 'closeout documents'. (Kind of hard to do when your efforts are never quite rewarded in the timely manner as would be expected).
    Especially considering that many GCs get a deposit upon receipt of a purchase order which does not ever go through to the other trades under the prime contract. Despite my companies payment and invoice terms and conditions, I still receive first payment on a job after 50 to 60 days even if the project is only expected to take for example 2 months. Regardless of size I finance and /or pay, for all the labour and material up to and including, and then past this point.
    As far as I'm concerned, many of these (general contracting) companies seem to be running a form of ponzi scheme: take new money to pay for old debt, receive payments as fast as possible and pay out as slowly as possible.
    What I hope to gain other than my overdue, fair compensation, is some legislative change that would stipulate: that all trades, contractors and even consultants involved (architect, engineer etc) get paid on the same date for progress payments. And within 2 weeks of project completion date be paid to 90%.
    If this were to happen projects would close out sooner and it could weed out the contractors who can not sustain their current system and/or at least force them to operate at a level that is more manageable and efficient and profitable. This could wreak havoc to some companies at first but in the long run better pricing and budgeting would also result which would have deeper benefits to the whole industry and maybe more.

  2. #2
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    I can sympathize with you but only on a small scale. I'm a small contractor and not that well capitalized to do work in the $100K area. Having said that I hope you had signed contracts for all the work and extras you've done for this GC. When you get to court that's the only leverage you'll have. If you have any verbal or implied contracts you'll get hung out to dry for those payments.

    Sorry, wish I had better advice.

  3. #3
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    I'm only asking for the contract amount and holdback. I know I will get it and better late than never but if it takes that long it's like not getting paid or worse.. I no longer participate in tenders with too much competition as it's nothing but a race to the bottom.

    Sent from my SM-G900W8 using Tapatalk

  4. #4
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    Only GC's I heard of getting "down payments" are like home remodelers, small commercial tenant work.
    It doesn't happen on large commercial jobs I've ever been on. There are usually AIA schedule of values (or similar), whereby every sub makes scheduled draws based on completion/storage, etc
    GC's on those jobs can only draw based on these pre-approved schedules, just like the subs

    Did you contract/schedule of values require a 10% retainage ?

    As far as I'm concerned, many of these (general contracting) companies seem to be running a form of ponzi scheme: take new money to pay for old debt, receive payments as fast as possible and pay out as slowly as possible.
    a classic sign of a GC in trouble

    The damages AND outstanding amounts are in the hundreds of thousands
    this job definitely gone south on the GC, and has gone over the schedule for any number of reasons (terrible scheduling/coordination, bad subs, awarding the job to subs that can't perform, awarding jobs to subs knowing they can't do the job for that price, paying subs/vendors from the last job)

    they are now not paying anyone due to the lawsuits, and they have to figure out what subs/vendors are liable for the job delays, overruns, that they can spread the liquidated damage charges to....including you

    I've gone through this many times where after months and months of court....the GC goes belly up. Then you stand in line to see if you get any crumbs

  5. #5
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    It's been an issue since I first started and that was 40 years ago. General's would drive around in these nice trucks and pull in with the boat, with the matching paint job, on Fridays and I would think the guy was making a bundle, usually it was robbing Peter to pay Paul. You couldn't get paid, because they were waiting for a check, but the check they were waiting for was from the job we just finished.

    Even as an inspector I can usually tell when someone is just trying to get a draw, by when they call us out.
    I can build anything you want if you draw a picture of it on the back of a big enough check.

    There's no substitute for hard work....but that doesn't mean I'm going to give up trying to find one.

    John Childress
    Electrical Inspector
    IAEI / CEI / C10
    Certified Electrical Inspector

  6. #6
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    It's not like this is exactly a new problem. It's been around as long as there have been contractors.
    Bob

  7. #7
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    Quote Originally Posted by petersonra View Post
    It's not like this is exactly a new problem. It's been around as long as there have been contractors.
    That's the worst part, is that new ideas don't spur positive changes/solve old stupid problems fast enough. I'm still (kinda) young, energetic, optimistic and I'm determined to be part of the solution. Hopefully not through a court case though.

    Sent from my SM-G900W8 using Tapatalk

  8. #8
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    I've been around here long enough to read many of these stories about GC's not paying, performing, cheating, lying, etc.......

    It's definitely different based on the type of work you do.

    It's my opinion that it's more prevalent in small commercial, retail (which is full of carpet bagger GC's), and residential.

    My specialty was always in medium to large commercial.

    All of the GC's I worked for, I have worked for many years. I trust bidding to them, I trust them to get the job done, I trust the other trades they hire to keep the job moving'

    and I trust them to pay me. And they trust me mutually...

    al of this takes years...

    Bottom line is......vet your GC's...and if you get the feeling he's not vetting you, and he's real anxious for you to bid him, or he's anxios to sign you up....run!

  9. #9
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    Quote Originally Posted by cdslotz View Post
    Bottom line is......vet your GC's...and if you get the feeling he's not vetting you, and he's real anxious for you to bid him, or he's anxious to sign you up....run!
    Best advice yet. Every once in awhile I'll get a GC (that I don't know) asking me to give him a price on a job. Sometimes you have a tendency to let your guard down because you can really use the work. But, the first question you have to ask is "What happened to the electrician you regularly use "? Then, you'll usually get answers like :
    • He's too busy
    • He doesn't want to travel this far to do the job
    • I'm not satisfied with his work
    • He always shows up late
    • He's not reliable
    • I left him messages but he doesn't return my calls
    • His voice mail is full
    • I'm just getting other prices

    In many cases these are waving red flags indicating "I DON'T PAY MY BILLS'

  10. #10
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    Quote Originally Posted by cdslotz View Post
    and I trust them to pay me. And they trust me mutually...

    all of this takes years...
    yep. i was talking with one of the GC's i do work for, and....
    they were talking about an electrical sub they have to unsaddle,
    and how now, they can't get lein releases on the electrical material
    for the jobs.... lots of small jobs.... $5~7k material cost per job.
    no releases.

    only means one thing.... the wholesale house hasn't been paid.

    there is a financial responsibility backed up by a bond in most
    states contract licensing. everyone with a license has a bond.
    in calif. it's only $15k, but on most small jobs, that's enough
    to get someone's attention. it means a sub can get a claim in
    on a general who doesn't pay. it also means a general can claim
    a subs bond to pay a wholesale house bill. that $15k is per JOB.

    but.... general and sub contractors all suffer from a common
    problem. they recruit from the human race.
    ~New signature under construction.~
    ~~~~Please excuse the mess.~~~~

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