Masonry Magazine February 2001 Page. 43
COMPLEX CLIENT
Sources say tough museum job had slow closeout.
Some general contractors understand that retainage is a double-edged sword. It can help "leverage subcontractors" so that punchlist work is completed and projects can be finished," says Jeff Mertz, a project manager with Russell Construction, a general contractor in Bettendorf, lowa. "But retainage can hurt if owners use it to keep a general contractor's project manager on a job when another project has already started," he says. "Less time worrying about payment means more time managing a project."
Russell Construction itself sometimes has to skirmish with owners who lag on payments, even shutting down a job, although this is rare. The contractor also tries to hold the line against owners who want aggressive payment terms in their favor. On one project last year, an owner made a last-minute effort to stick the contracting team with 90-day payments and 15% retainage. But Russell held out for 45 days and 5%. "We also raised the price of the project to compensate ourselves and the subcontractors for the time value of the money," says Mertz.
Prime contractors say they are sensitive to subs' complaints, but primes can also be short-changed or put at risk. "I know some primes hold retention on subs, even early ones, until the end of very long contracts," says Phil George, a senior engineer with Stimpel-Wiebelhaus Associates, a highway and heavy contractor based in Redding, Calif. Nevertheless, "I do not favor limiting sub retention by the percentage held on the prime." Why? A prime contractor may be 95% done with a large project, which may reduce retention to 1% or 2%. To George, that means he can only withhold 1% or 2% on the landscape contractor even though that company is just beginning and could be behind schedule or performing faulty work. "I wish they would adopt the reduction based upon the percentage complete of the subcontracted work," he says. "The owner feels justified holding 10% until we are half done. What is wrong with holding subs to the same standard?"
Nothing, answer some subcontractors. In fact, one of the most important requests that a subcontractor can make of a prime contractor is to review the prime contractor's agreement with the owner. By knowing the terms of payment between owner and prime, a subcontractor can request the same terms. Yet many smaller subcontractors are too timid and feel that is a bad business practice. Such reluctance can be a fatal oversight, giving the prime contractor the right to sit on money it has already collected.
The new determination to stand up to pay abuses registers in other ways. Some small specialty contractors had made a practice of granting discounts to prime contractors for timely payment, but no more. Bigger, more sophisticated subcontractors treat those kinds of offers as jokes. "We were asked once, and we just laughed," says Don W. Hiatt, comptroller of Tri-State Drywall Inc., Rockville, Md.
The best method of discouraging pay abuse is to never bid to bad contractors or owners. One New York City area subcontractor was invited to bid by a large national building contractor. When the subcontractor told the general contractor's chief estimator that the sub wasn't going to bid because the sub hadn't been paid for the last work it had done for that company, the estimator told others at his company. A check was issued to that subcontractor the next day. That kind of action - quick payment to extract a new bid - hardens the cynicism of subcontractors.
Once a subcontractor is on a job where the payments are slow, the focus often shifts to documenting work rather than performing it. "When someone holds more than is due, we want to make sure we put our efforts on documenting and getting liens ready," says one subcontractor. "We tell them we're too busy protecting our rights on the money you owe us to worry about your problems. The work slows down."
LONG TIME COMING
School subcontractor claims $15,000 is owed.
MASONRY FEBRUARY, 2001 43