A 2020 report on worldwide construction claims states that the global average value of a construction delay dispute is $30.7 million. The report also says it takes an average of 15 months to reconcile the dispute.
In fact, there are 4 types of schedule delays in construction:
- Critical delays: A delay that affects an important milestone on the project or the project’s completion date.
- Excusable delays: A delay that can’t be controlled.
- Compensable delays: A delay that affects a party and that party has nothing to do with causing the delay. If a delay is excusable, it’s likely compensable too. If it’s inexcusable, it’s probably not compensable.
- Concurrent delays: Two or more delays occur on a project.
Construction delays happen when there are payment discrepancies, equipment failures, labor shortages, or even bad weather. Delayed payments are one of the biggest challenges in construction.
Construction Payment Delays
Delayed payments to construction contractors put a direct and negative impact on the project schedule. Because preparing and gathering all the documents in a payment application is a time-consuming process, a simple slip-up could lead to late payments and stalled projects.
95% of general contractors understand the value of paying their subs on time, and 75% of them say they pay more frequently than once a month.
If you’re looking for the big secret to on-time payments and on-time project completions, the first step is to perfect your pay application process. Here are the biggest issues that interrupt your subcontractor payment process:
Pay Application Mistakes to Avoid
[1] No Communication
If any of the required documents are inaccurate, misplaced, or missing then payment won’t be released on time. Make sure your subs are familiar with your contract terms too.
💻 ACTION: Clearly communicate with your subcontractor partners to avoid delays.
[2] Misplaced Lien Waivers
We hear it all the time, “Our subs submitted their pay application without their waiver!” And while a lien waiver might seem complicated, it’s really a standard document that releases certain rights. Make sure to that all subs and suppliers submit their lien waivers with the correct amount and work period … and that you get it on time.
💻 ACTION: You can make lien waivers a requirement in GCPay so that you’re guaranteed to get the lien waiver. Plus, generate custom lien waiver templates with 80+ data points pulled from the system.
[3] Ignored Change Orders
When it comes to change orders (CO), costs need to be negotiated, authorization needs to be cleared, and schedule adjustments need to be made. Ignored CO requests lead to a backlog of change order work or can require costly rework to accommodate the changes.
💻 ACTION: Keep track of change orders! Pay applications should show any additions or deductions from the contract and price plus reference and include all CO requests and associated invoices.
[4] Missing Notarization
Getting AFPs notarized can be laborious. One GCPay subcontractor user explains, “When I needed lien waivers notarized, I would go to the bank to see if a notary was available. Since many times no one was there to help, I’d drive 30 minutes to another notary to get documents authenticated.”
💻 ACTION: Subcontractors can notarize waivers online with GCPay’s integration with notarize.com. It’s legal in all 50 states and is available 24/7 with a video connection.
[5] Inaccurate Schedule of Values
Some contractors might frontload the SOVs to get more money earlier in the project (😮💨 overbilling). So, if a payment issue arises, you can’t reason why the value on the SOV doesn’t match with the payment schedule.
💻 ACTION: A copy of the schedule of values (SOV) should be a clear reference for pay app evaluation. The pay app amounts should match up with the cost of each line item and the corresponding progress percentage.
Conclusion
A report from Levelset says that 70% of contractors blame poor jobsite coordination for schedule delays… which means that many delays are avoidable. Process automation is one way to avoid manual mistakes. Save all project and pay app information in one place, to make it easier to manage and review.
CASE STUDY
Bloom Construction
Prior to using the notary feature in GCPay, notarizing documents was time-consuming.
When applications and lien waivers needed notarized, the team would go to the bank to see if a notary was available. Many times, no one was there, so they’d drive 30 minutes each way to another notary to get the documents authenticated. Covid made it even more difficult to quickly find a notary.
But, once they learned about the digital notary option in GCPay, they knew they had to try it!
