Subcontractors are experiencing longer payment delays from general contractors and project owners, according to a survey. The average delay is now 36.4 days, up from previous years. Some subcontractors report over 60% of their payments are late. Late payments have become a standard business practice for some owners and contractors seeking to improve their own cash flow. Subcontractors have developed strategies like adding fees for late payers or filing liens to ensure they receive payment.

1. RlSK
EN R Survey: Subcontractor
Payment Delays Grow Longer
Slow-Pay Misery
Average days past dus report€d by subcontractors in k6y statas
Flori& Califomia New York Texas Pennsylvania
Source: ENR Top 600 Specidty Contractors suney, October 2015; minimum 30 frms rasponding per state
The delays have puzzled Heyward, who
notes tlat, with interest rates still at rock-
bottom levels, there is not a lot to be gained
by someone else holding onto the money
owed to his company.
"I am just confounded by it all," he says.
Jim SlackJr., president of Houston-based
Slack & Co. Contracting Inc., sala his aver-
age payment is now 86 days past due. He is
convinced the delays are part ofa conscious
and growing effort by general contractors
and ovrners to improve their own cash-flow
situation at the expense oftheir subs.
Project owners cerainly can collect in-
terest on funds that are owed while the
money sits in their bank accounts, notes
Slac( whose company performs excavation
and grading.
Further, owners and geieral contractors
can avoid paying interest on late palrnents
on their own debts bywithholding funds
due to others.
"We are further down the food chain,"
Slack says. "In my opinion, it is a conscious
effort by those parties to improve their
cash flow." Regarding the late-payment
trend, he says, "It's getting worse."
StrategiesforGollecting I
When it comes to ensuring they are paid
what they are owed, subcontractors have
developed different strategies.
Heyward has tried to weed out the bad
apples while adding a percenage or two to
his bid ifhe has reason to believe that pay-
mens will be delayed.
"We have actually quit quoting some
customers who, in our opinion, have been
abusive in howtheyhave paid their zubcon-
tractors," he says.
By contrast, Slack takes ful1 advantage
of Texas' mechanics lien laws to make
sure his company gets paid what it is due.
F{e starts by sending project owners and
contractors an initial notice, signaling tris
intent to file a lien. If that doesnt shake
the payment loose, he follows the notice
up in 45 days by filing a mechanics lien
on the properry.
"I dont care if it's my mother, I will file
a lien on the project," he says. r
By Scott Van Voorbis
enr.com March21,2016 . EIIB . 13
ubcontractors say late payments take
longer to collect, even as the con-
struction market and the overall
economy show strong signs of improve-
ment. An ENR survey of 640 zubcontrac-
tors found drat more than 30% of payrnents
from general contractors are comingin late,
with an average delayof 36.4 days.
The problem, if anlthing, has grown
Morse over the past few years, say subcon-
tractors, as some owners and prime contrac-
tors have sandardized less-than-prompt
payment as a general business practice.
"It's terrible," says C. Carroll Hey-
ward Sr., chief executive of W.B. Guima-
rin and Co., an HVAC and plumbing
contractor based in Columbia, S.C. That
company's late payments now roll in
nearly 90 days overdue.
On average, only about one out oftlree
pal,rnens is late, the survey shows.
But for 83 subcontractors who re-
sponded to the ENR survey, the problem
is far worse, with more than six out of 10
payments past due. A toal of 168 subcon-
tractors reported to ENR that atleast40o/o
of their payments are late now.
FIow much state prompt-pay satutes
help isnt clear. All 50 states have prompt-
pay lar.ls, and some cover private construc-
tion as well as public works. Terms and
interest penalties vary as do the payment-
chain relationship covered by sute statutes:
oilner to prime, prime to sub, and sub to
Iower tiers. Collecting final pal,rnents can
drag on foryears.
The Alexandria, Va.-based American
Subcontractors Association has conducted
its own pal,rnent survels. ASAb most recent
data cited "slow final payment" as a very
serious issue for more than 72"/o of rhere-
spondens, with 27 o/o
calkng it"somewhat
serious."
"Ceruinly, there are owners and prime
contractors who are good payers or gener-
ally good payers," salzs Colette Nelson, the
ASAb chief advocary officer. "There are also
ownersand prime contractorswho are sim-
ply predators. It is really easy to be the low-
est bidder ifyou are not going to pay subs."
ForWB. Guimarin and Co., the prob-
lem of late payments has escalated dramat-
ically over the past couple ofyears, Heywaril
sap. Back in 2013, pal,rnents were coming
in, on average,49 dap late. That jumped up
to 82 days in 2014 and 120 days lastyear.