Blog_General Contractors Not Paying Subcontractors

Here are some examples of General Contractors Not Paying Subcontractors for Their Hard Work

Sadly, there is big business around subcontractors not getting paid. Think of all the lawyers, consultants, liens and bonds. All of these people and entities exist because time and time again subcontractors do not receive payment. Such instances of general contractors not paying subcontractors occur all the time. This damages the livelihood of many subcontractors and even worse has forced them out of business. Let’s take a look at recent nightmare stories and examples in 2017:

$11 Million Owed to Contractors at Astros / Nationals Ballpark

Many subcontractors in Palm Beach did not provide their congratulations to the Houston Astros when they won the world series. They had no reason to celebrate since they are owed thousands of dollars on work completed on team’s spring training complex.

The Astros and the Nationals who share the ballpark are involved in a payment dispute with the general contractor Hunt Construction Group. Unfortunately, this payment disputes trickles down into the non-payment for more than a dozen subcontractors and suppliers. Many of these firms completed the work more than one year ago. Due to nonpayment, they have laid off workers, gone out of business, maxed out their personal credit cards, and some may lose their home.

The project was financed with money by tax revenue from Palm Beach County and the state of Florida with the teams picking up a third of the cost plus additional cost overruns. The general contractor has received payment from owners. However, the teams have complained about the quality of work which is preventing payment to the subcontractors and their suppliers.

Subcontractors awaiting payment from the General Contractor include:

— Davco Electrical: $6 million

— Mancils Tractor Service: $4 million

— MIK Construction: $500,000

— South Florida Grading: $200,000

— Xpert Elevator: $200,000

— Sammet Pools: $80,000

$11 Million Owed to Contractors in Kings’ Downtown Hotel Project

Another project tied to a professional sports team has not paid their subcontractors for work completed. The Sacramento Kings embarked on a downtown revitalization project around its arena which include several hotels, restaurants, and entertainment facilities. Subcontractors filed claims around the recent work completed on the hotel tower which includes 45 condominium units. The subcontractors have filed liens against the property which could affect the close of the remaining condominiums for sale.

Subcontractors awaiting payment from the General Contractor include:

— Pacific Structures: $6 Million

— Coffey Building Group: $2.66 Million

— Siemens Industries: $1.4 Million

— NMI Industrial: $638,000

$1 Million Owed to Contractors in Omaha Cemetery Work

This contractor’s battle is a little different because the owner of the project is the federal government. In most projects, contractors can file a lien against the property. However, it is not possible to file a lien on a federal project. In such instances, the contractor has filed a lawsuit against the general contractor and insurance company to receive payment.

The contractor Seedorff Masonry provided $3,163,947 in labor and materials in the construction of the Omaha National Cemetery. However, the General Contractor Archer Western Construction has only paid $1,908,037.

Subcontractors awaiting payment from the General Contractor include:

— Seedorff Masonry: $1.25 Million

How subcontractors can mitigate risk and avoid claims

Unfortunately, stories like the ones above are commonplace among subcontractors because of verbal favors or undocumented work. So, subcontractors must protect themselves from these situations with precise document control and project management best practices.

Many general contractors provide their subcontractors with a user license into their project management software platform. In fact, we’ve heard that some general contractors even mandate that their subcontractors utilize their project management tool and will no longer respond to email communications. This is not an acceptable arrangement.

When the subcontractor enters Daily Reports, RFIs, Photos, Issues or Change Orders into the general contractor’s project management solution, the general contractor owns all the valuable documentation and information. In the event of a claim or dispute, the General Contractor can and will likely revoke access to the subcontractor. If this happens, will the subcontractor have backup documentation to support their claim? If duplicate entry into two project management platforms is required for a project, so be it. You’re still protecting your construction business and avoiding expensive financial pitfalls.

The workflow of a subcontractor and business model drastically differs from that of general contractors. A large majority of construction project management solutions are geared toward general contractors.

In closing, subcontractors must utilize a solution that enables them to track their labor productivity on projects, provide documentation control to mitigate risk and avoid claims, and manage all their projects holistically to ensure growth and profitability. In this regard, eSUB offers a cloud-based electrical project management software that allows you to easily keep track of productivity and day-to-day activities.