When you’re a sub-contractor, sub-sub-contractor, or material supplier to a sub on a construction project, it can sometimes be challenging to ensure you get paid on time. In some cases, however, you can negotiate with your client to put you in a position where you and they agree to work together as a team, both on the project itself and in those annoying situations where someone further up the “food chain,” such as an owner or general contractor, delays paying for work you’ve both done or materials you’ve provided.
Benefits of Teaming Up
Everybody working on a construction project is taking on some risk. When the owner – or typically the owner’s lender – controls the disbursement of project funds, those “downstream” must often wait to get paid until whoever is ahead of them receives payment. When you’re a sub-contractor, or a sub-sub-contractor or supplier, you may be several steps removed from the general contractor. And your risk of not getting paid increases with each level that separates you from the owner or GC.
If you agree with your client to share the risk associated with a particular project, you move yourself up a level in this pecking order. This helps reduce the risk you take when you agree to do work or supply materials for a project before getting paid for that work or those materials.
Teaming up also can benefit your client – the general idea being that there is strength in numbers, and where you have a written agreement in place, it makes it more difficult for an owner or GC to go around your client and work directly with you. It can also strengthen a subcontractor’s bid by showing that it has a solid working relationship with its own sub-contractors and material suppliers.
When to Team Up
While you may want to introduce the idea of a written cooperation agreement when you first negotiate your contract with your customer, you can also bring up the idea during the project, particularly if you are in a situation where everybody’s payments appear to be in jeopardy. Approaching an owner or GC with a unified front gives everybody greater bargaining power and makes it more likely that your payment issues will be taken seriously.
Emalfarb Law LLC and National Lien & Bond Can Help
If you have questions about how to structure a teaming relationship with your client, contact Emalfarb Law LLC and National Lien & Bond to learn how we can help.