I enjoyed reading your editorial comment in the February issue of Concrete Construction. In response to the question of held retainage, pay-if-paid contracts, and owners that refuse to pay on change orders, I can offer our policy on these issues.
On bid day, whether it be to a long-standing client or a newcomer, our exhibit attachment clearly states that we respectfully request a reduction in retainage from 10% to 5% when project is 50% complete, and retainage in full 60 days after our contact is complete. If we are awarded the job and this presents a problem, we will agree to substitute a bond in lieu of retainage held. Nine times out of ten, the contractor will agree to reduce retainage at the 50% point, and pay retainage in full after 60 days.
Pay-when-paid contractors are a pain to everyone. We recently went through this aggravation with one contractor. He always bragged to everyone how his company was a $20 million a year company. After 60 days and no payment, we questioned the delay. We were told that the school district had not signed off on a draw, and he could not pay. We then asked for a partial payment due on our schedule of values. Again we were told it could not happen.
Our next question was simple—if you are such a big-time contractor doing $20 million a year, and we are a concrete sub doing $2 million a year, why should we be strung out with not even a good-faith payment? We explained that our work was approved by the districts' engineers, so therefore this could not be the delay. We also explained that our suppliers, subs, and employees had all been paid, and we would be contacting the school district about the delay.
Sure enough, after we contacted the school district and explained our position, the contractor somehow produced a check. Sometimes when in doubt, you need to call their bluff. Certain “big shots,” as we like to call them, hate to be embarrassed by these methods. Now that everyone is on the same page, we have not had a problem since.
Change orders are the hardest part of our business. It is very important to specify in your bid what your inclusions and exclusions are. It is also important to specify that no work beyond your scope will be performed without a signed change order request. It is also extremely important for your foreman to document all labor, material, and equipment used to perform the work, and for the contractor's liaison in the field to sign the tickets daily. We also suggest pictures of the extras being performed. The most important part is to treat the contractor as you want to be treated. This means charge exactly for the work that was performed, including a fair markup.
The biggest argument that contractors have is being overcharged. If you are fair, most likely they will be fair. If they refuse to pay, your biggest ally will be your field documents. It is extremely important to attach these to your invoices. When everything is in black and white, it's very hard to overlook.
An ounce of prevention with certain matters in this business is definitely worth a pound of cure.
— Lou Delloso, Greenville Concrete Contractors, Inc, Wilmington, Del. 19805