Getting paid ! Construction industry.

[miket]

I dont have any sage advice, but I deal with the same thing in my business (machine shop ). Some pay on time, others draw it out as long as possible. My second biggest customer likes to wait 180 plus days. Terms ( for them ) is NET60. They have literally never paid on time. Ever. In the office, they dont care. I finally quit quoting jobs and told the buyer why, and we went through all the promises etc. Of course promises made by a buyer mean nothing to the beancounters. They literally begged me to keep working for them and I told them I just couldnt. (its hard to find a quick responsive shop that does good work on time around here )

I did finally get all my money so I guess it worked out

 

[Customweld]

I am a civil PE and work for a private consulting firm doing land development design. We write into our contracts that invoices must be paid within 30 days and late payments will be subject to 12% annual interest. If no money comes in after several months, we stop work. There are several milestone EOR signoffs for site construction that are required for the building occupancy permit. If the missed payments are stacking up, I will hold off on executing these signoffs and tell the client that I need the invoices to be paid up first. This is very powerful leverage. If you let the developer/contractor/etc. receive the full and complete work that allows him to get paid before you are paid, he will often argue the charges and try to negotiate a lower fee citing whatever excuse he can. Developers are the worst. For some reason they seem to think that the AEC teams can serve as a bank that offers interest free loans.

The relationship between design engineers and developers is always humorous to me. As a former development pipe superintendent, it sucked being stuck between the two. Agreed that developers are the worst! In addition to wanting design work done cheap, they want excavation done even cheaper. I always invoiced my materials as soon as the contract was signed and submitted pay requests every two weeks. It didn't take long for a missed payment to show up when you stopped work and started to mobe out .

 

[Weldor]

Local 86 here. They sure get pissed when I take the month of September off, but love this trade.

Still love the trade, retired local 933. Fortunately plenty of time off now while I can still enjoy it.

 

[elkguide]

As I tell my customers, "I love what I do for a living BUT ..... I'm in it for the money!"

I quit working for large contractors many years ago and fortunately have more work than I can do so I never work again for anyone that has left me hanging for more than 45 days. Most of my contract's state that I require 60% of the contract to begin work with the remaining due upon completion.

 

[WCB]

Crook #3 might be seen as a crook, I think he is. I did a lot of finish work for him - turned out his family is in the bar business, and bars get sued a lot, so they are very good at being judgement proof. Building was leased from one corporation, construction tools and equipment were leased from another, and operating capital was handled by another corporation. The strangest feeling to wait at the bank until wages were deposited and we rushed the drive through - sometimes the guy at the end wasn’t fast enough and someone with a judgement against the company garnished all the money and the carpenter had to wait for more money to be deposited. If you get screwed by this guy, good luck trying to get any money out of him. I worked on his attorney’s house and the attorney explained how it all worked - his specialty was setting up multiple corps for high risk companies.

Besides the not paying people i've found it relatively standard for an owner to arrange businesses like this. Our family flooring company had different LLCs or corporations for the building, Union/commercial installations, 2 different non-union installations (one had employed installers the other used all subs), and binding/custom rug department. The main entity did the payroll for all the other companies which were all under the same roof.

 

[TaperPin]

I must have grown up under a rock - an innocent, naive rock where street smarts weren’t taught.

A fairly large commercial GC with a professional full time sales staff found out we are friends with a number of decision makers at large properties and have offered us all sorts of crazy stuff over the years from new granite counter tops, new roof, new flooring, Hawaii vacation, Las Vegas vacation, drugs, hookers, and cash. We did let someone trim our trees for free one time, seemed innocent, but nothing is free. I can only imagine how widespread this must be if tiny people like us get these kinds of offers. Nothing about Clarance Thomas or Samuel Alito being bought and paid for surprises me - only that it has been hidden for so long.

Commercial construction and big business has made me loose a little faith in humanity.

 

[KsRancher]

I think it's pretty common in construction. I work for a small (owner and 2 employees) construction company doing dirt/rock type work. My employer does some wind farm work. He says it's common for them to take 60-180 days to pay. They can't hardly find anyone local to work for them anymore. They have people mobilizing from 1000miles away to do rock/road work. When he calls in to try and get paid it's always some hag on the other end that doesn't give the least little shit about you getting your money. But I would guarantee if she had to wait 6 months on a paycheck she would think it's a BIG deal.

 

[Wiley coyote]

I have been in the construction industry for all of my life. Owning my own business for around 15 years. I do business with general contractors, home owners and property Mangement. Home owners are always quick to pay. The others take their sweet time to pay. I have a GC I have worked with for 10 years. Last check took 78 days to show up. After years of this I decided a 30% price increase is reasonable for waiting. Property management is always slow to pay because they wait for the owner to pay them. I don’t have a contract with the owners, I have a contract with the property maintenance. How are guys dealing with this? Generally these are not huge sums of money. 5-20k I can’t afford to tell them to find someone else but they are killing my cash flow. I have heard of people charging interest but that seems hard to enforce.

Charge more. Eventually you'll have a pool of money big enough to buffer these jerks. I am in very high demand, and it seems people flock to me because my work is very good, and so is my price ( compared to most others) so in response I have bumped up my prices a little because clearly I'm not charging enough.

 

[Rich M]

Not sure if anyone else said this but mark your price up a little and give them a DISCOUNT for paying early.

We have a primary subcontractor and pay them immediately cause we get a 10% discount to do so.

Meanwhile we are at the whims of billing cycles and such for our work. We have some clients that only bill their client 4 times a year. So minimum 120 days to get paid. We will get paid, just next quarter.

 

[Colterw]

I work with a GC and usually our pay terms with subcontractors are pay when paid. We do a lot of public work and our billings to the municipalities have to go through council for approval and typically take 30-45 days to be paid. When we are paid, our subs get paid the next Friday. We can pay subcontractors early in a case by case basis, but we are not in a position to bankroll our subcontractors when we aren't getting paid.

 

[KsRancher]

I work with a GC and usually our pay terms with subcontractors are pay when paid. We do a lot of public work and our billings to the municipalities have to go through council for approval and typically take 30-45 days to be paid. When we are paid, our subs get paid the next Friday. We can pay subcontractors early in a case by case basis, but we are not in a position to bankroll our subcontractors when we aren't getting paid.

Not to sound like an ass. But your post describes the gripe. The GC can't or isn't willing to bankroll their own job. But expect the subs to bankroll it for them. I don't see why the subs should have to wait on payment for work they have completed for the person that hired them. Shouldn't matter if the GC gets paid or not. No different than a sub contractor that has employees on that job site. I can guarantee you that they wouldn't stick around if their boss waited to pay them until the owner paid the GC then the GC payed the sub then he could pay his employees.

 

[Colterw]

Not to sound like an ass. But your post describes the gripe. The GC can't or isn't willing to bankroll their own job. But expect the subs to bankroll it for them. I don't see why the subs should have to wait on payment for work they have completed for the person that hired them. Shouldn't matter if the GC gets paid or not. No different than a sub contractor that has employees on that job site. I can guarantee you that they wouldn't stick around if their boss waited to pay them until the owner paid the GC then the GC payed the sub then he could pay his employees.

Understandable. I have released payment early when subcontractors have requested it. I work with several small companies - 2-4 employees and I understand that they have less operating budget than the company I work for. When they are up front about it, we can give them a draw or early payment - no issues there.

 

[def90]

I do commercial low voltage work and this is how most GCs operate.

At the end of every month you supply them with a request for payment, this request for payment can only include work that has been performed up to that point as well as material that has been installed or is stored on site. They put all of the requests for payment from their subs together in order to put together their own request for payment or draw from the ownership group. This usually entails meetings with the ownership group as well as the bankers if there are any. Once the accounting all adds up and it is verified that every thing that is in the request for payment is up to snuff then the GC receives the draw from the bank or from the ownership group. The GC then turns around and issues checks to the subs based on their requests for payment.

Most GC's I've worked with over the years have a 30-45 day turnaround time from when you submit your request for payment to the day when they issue your check. I've done some work for a few that have stretched it out to 60 days and am currently working a project for a large firm that has offices in Denver, Chicago, Nashville, Dallas and a few other cities and these fuckers are running 90 days on issuing checks.

Either way, every project I've worked on spells out the payment process and timelines in the contract.

 

[Oldrifle]

Unfortunately, this is a game of leverage, and it appears that they have the advantage. You can add whatever terms you want in your contract before you begin the work.

 

[actionshooter]

Not to sound like an ass. But your post describes the gripe. The GC can't or isn't willing to bankroll their own job. But expect the subs to bankroll it for them. I don't see why the subs should have to wait on payment for work they have completed for the person that hired them. Shouldn't matter if the GC gets paid or not. No different than a sub contractor that has employees on that job site. I can guarantee you that they wouldn't stick around if their boss waited to pay them until the owner paid the GC then the GC payed the sub then he could pay his employees.

Everything in this discussion is totally dependent on the type of project being built... If you are building a house, the above is valid. What Colterw described is 100% standard procedure for large scale construction projects.... there isn't a contractor in the country that would bankroll a public project like this.... you are talking anywhere from a small $10M to massive projects, they are all "pay when payed"

 

[KsRancher]

Everything in this discussion is totally dependent on the type of project being built... If you are building a house, the above is valid. What Colterw described is 100% standard procedure for large scale construction projects.... there isn't a contractor in the country that would bankroll a public project like this.... you are talking anywhere from a small $10M to massive projects, they are all "pay when payed"

I get what your saying and understand that's how the industry is. I just don't agree with it. I do have a question though. What happens if the project gets completed and the owner fails to pay the GC. Do they go out and borrow the money to pay all the subs? Or is it still a "you get paid when I get paid type of tning?"

 

[HuntHarder]

Usually turns into multiple law suits and subs suffer...

 

[schmalzy]

I get what your saying and understand that's how the industry is. I just don't agree with it. I do have a question though. What happens if the project gets completed and the owner fails to pay the GC. Do they go out and borrow the money to pay all the subs? Or is it still a "you get paid when I get paid type of tning?"

Contract will stipulate terms. In practice you should only be out your retainage. If someone owes a significant amount at final inspections we will hold off on getting them signed off on until current.

It’s a risky game and I question my sanity some days. Multi billion dollar corporations get free 60-90 financing from subs. Then give you the privilege of marking up change order work 10%.


Sent from my iPhone using Tapatalk

 

[def90]

I get what your saying and understand that's how the industry is. I just don't agree with it. I do have a question though. What happens if the project gets completed and the owner fails to pay the GC. Do they go out and borrow the money to pay all the subs? Or is it still a "you get paid when I get paid type of tning?"

You get ****** just like the GC.

I lost money in the 2008 housing collapse. Had a fair amount (way more than I should have allowed but things were good at the time) of money out on projects that ended up going broke. A lot of subs got burned. The banks were bailed out and got their money though.

 

[actionshooter]

I get what your saying and understand that's how the industry is. I just don't agree with it. I do have a question though. What happens if the project gets completed and the owner fails to pay the GC. Do they go out and borrow the money to pay all the subs? Or is it still a "you get paid when I get paid type of tning?"

It's still a paid when paid situation, but as posted, it's typically retainage (5% is normal).... but the risk goes WAY down when the project is public. The contractors I work with on a regular basis are solid and I don't hesitate to lien those who aren't.

The thing with this industry is it can be risky... but the reward is there also, you just have to play the game smart.