Masonry Magazine February 2001 Page. 40
Reprinted from Engineering News Record, September 11, 2000,
Copyright The McGraw-Hill Companies, Inc. All rights reserved.
Other People's Money
As unpaid invoices pile up, some contractors are determined to put an end to pay abuses.
Project Manager Thom Molloy thinks he did a good job installing insulated steel panels on the interior of the lobby of the graceful new masonry buildings at the Horace Mann School, a private institution in The Bronx in New York City. His work was hardly mentioned, he says, when the building's final punchlist was issued last December.
One day soon, Molloy hopes his company, All Season's Siding Inc., Hicksville, N.Y., will see some of the $15,000 to $20,000 he claims is still unpaid on the $60,000 contract. The project's construction manager has been stalling for months, Molloy claims, and he's tired of lip service about how everything possible is being done. "This is a perfect example of how the industry in general treats subcontractors," says Molloy.
The current construction boom contains a perplexing irony for many contractors and in particular subcontractors. Work volumes are growing but so are the piles of unpaid invoices. That has exposed contractors to more risk than they took on during the slow years. Although prompt-pay rules have been adopted in many states, the timeliness of payment for work not in dispute appears to be eroding. It now takes specialty contractors 66 days to collect on average, more than seven days longer than in 1996, according to the newest survey of the Construction Financial Management Association, Princeton, N.J. "Our best general contractors average 69 days," says Michael Boyd, President of MKB Construction, a wall, plaster and paint contractor in Phoenix, Ariz. Closeouts on projects with big change orders are stretching past a year and in many cases longer.
Not surprisingly, subcontractors feel the most abused and say they are being manipulated into providing a large portion of a project's working capital. And to a greater degree than in the past, subcontractors say they are standing up to pay abuses by taking a more hard-nosed approach to parsimonious owners and prime contractors and refusing to submit bids to companies that have burned them. Some general contractors who are sensitive to pay abuses- and who depend on quality relationships to smooth their own projects are going out of their way to treat subs respectfully and pay them promptly. One general contractor, Hitt Contracting Inc., Fairfax, Va., has a fulltime subcontractor relations coordinator. But many general contractors say the subs complain too much and that primes are themselves skirmishing with owners on payment in ways they never would have a few years ago.