PAY! QUICK PRIMER

PAYMENT TIMING

     INTRODUCTION

• Progress payments are the pre-determined amount of money paid to subcontractors throughout the course of a job.
• Did you know that by accepting progress payments a subcontractor becomes a creditor?
• Unfortunately, progress payments are often late.
• Payment delays harm your business.  The loss of liquidity may delay payments to your suppliers and staff.
• All widely recognized industry documents, from AIA A401 [American Institute of Architects], to the AGC 650 [Associated General Contractors of America] contain provisions relating to the timing of project payments, as well as ASA's generic Subcontract Addendum.

ASA INVOLVEMENT

• 2003 is PAY!, Payment Advocacy Year.
• PAY! is a year-long program that is designed to educate subcontractors on different payment issues.
• The April section of the PAY! program - Payment Timing- educates ASA members on ways to assure timely payment.
• ASA is working with legislatures across the country to curb the abuse of progress payments.
• Visit www.asaonline.com/pay.htm.

WHAT ARE THE SOLUTIONS?

• EDUCATION! The more you understand - the safer your business.
• An educated subcontractor negotiates better contracts.
• In your contracts establish a specific date for payment, for example the 17th of every month, and stick by it.
  • You can include a condition on your bid such as the use of the AIA A401, which sets forth solid schedules for receipt of progress payments.
• You can avoid many disputes by ensuring that your applications for payment are drawn up per the contract specifications.
• Establish the contractual right to suspend work so you are not obligated to continue working if payments have been improperly delayed.
• Consider incorporating appropriate penalties in your contract.  Be sure to include:
  • Interest on amounts improperly delayed.
  • Any de- or re-mobilization costs.
  • Ability to recover attorneys' fees in case of disputes.
• When negotiating a contract always be aware of the prompt payment laws within the state where you are doing business.
• The generic Subcontract Addendum is available in the Members-Only section of the ASA Web site.
• Another valuable service for researching the payment practices of potential clients is the ASAC Business Practices Interchange found on this web site and the National Business Practices Interchange found on the ASA Web site at www.assaonline.com

CONCLUSION

• Late payment is unfortunately part of our business but subcontractors can cover themselves from financial dangers by taking certain steps.