GCs Not Always to Blame When Subs Feel Snubbed

It does not take long for coffee shop talk among subcontractors to turn to slow- and no-paying “GCs.” It often takes subs more than a year to get paid for their work and that could cause a cash crunch for any business.

Sometimes project owners run short of cash and the GC doesn’t even receive payment for an extended period. Harsh weather, design mistakes and contract disputes are other factors that can cause a sub’s account to hit a snag.

State law allows parties that have fulfilled their agreement for commercial contracted labor to seek a lien against delinquent customers after 75 days. When the subs’ work involves residential construction, the grace period goes up to 120 days.

Dennis Tune, president Tune Concrete Co., does about $14 million worth of subcontract concrete work annually across Northwest Arkansas and in the Dallas and West Memphis areas.

“Usually, if you just threaten to file a lien, they’ll go ahead and produce the money so the owner won’t find out the office has been slow,” Tune said. “Then there are some outfits where, their office will say they wish you would file a lien so that it might light a fire under the owner’s butt.”

Most of the area’s larger GCs, Tune said, will go ahead and float payments to their subs even if the GCs themselves have yet to be paid. Problems arise a lot more frequently with independent homebuilders who get squeezed when juggling several projects at once.

Tune said only about 3 to 4 percent of his business requires extra collection effort. But when subs are living on 2 to 3 percent margins, he said, delinquencies can create a tightrope.

“The point is about 98 percent of the GCs out there are good for it,” Tune said. “There are businesses here that are big now, but years ago they struggled. They never forget the times we helped them out a little bit. It’s not worth $1,000 to lose a long-term customer.”

Bob Killion, executive vice-president and general manager Marrs Electric Inc. in Springdale, is the electrical subcontractor for the $60 million, 350,000-SF Washington Regional Hospital facility going up on Millsap Road in Fayetteville.

Killion has in recent years also tackled large-scale sub work at The Jones Center for Families in Springdale, the Northwest Arkansas Mall in Fayetteville and St. Mary’s Hospital. Electrical sub work typically can cost from 10 to 15 percent of a total project.

Killion said prolonged account settlements are frequently the fault of the subs themselves.

Reading contracts completely, meeting deadlines and submitting invoices properly and in a timely fashion, Killion said, will make a difference.

“You hear horror stories sometimes,” Killion said. “But typically when people run into pitfalls it’s because they didn’t get their invoices or documentation done in a timely fashion. We’ve found that most GCs are very reasonable good people.

“We’re not perfect, but we seldom have problems because we just take care of business.”

Doug Bonds is the Washington Regional project manager for mega GC Centex Rodgers Inc. of Nashville, Tenn. The company is a subsidiary of publicly traded Centex Corp. of Dallas which for fiscal 2001 grossed about $7 billion in revenue.

Bonds’ company works with subcontractors all over the nation and is dealing with 35 local outfits on the Fayetteville hospital project alone. He said Centex doesn’t always go with the lowest bidder, but the one that best understands the scope of a project’s design.

“We take a team approach,” Bond said. “We help our subs anyway we can and never beat them up. We’re only as good as our worst subcontractor.”