For subcontractors, change in order
For years, construction subcontractors have felt like the nail beneath the four-pound hammer of their general contractor employers.
Now, they have a tool to claw back ”“ in Connecticut, anyway.
Under a new state law, subcontractors can bog down change orders that are made midway through large projects if they have already completed some work without getting paid for their efforts. The law would apply to New York subcontractors and general contractors doing business in the Nutmeg State.
The law applies to commercial projects valued at $25,000, and public works with billings in excess of $100,000. It was enacted after growing frustration among subcontractors over charges on change orders midway through large projects, according to Martin Onorato, an attorney in the Hartford, Conn., office of Robinson & Cole L.L.P.
Subcontractors saw as exploitive a system that required them to complete mid-project changes at the command of general contractors or their clients, according to Onorato, yet were barred from billing for that work until it was completed.
Enough of such change orders on large projects, subcontractors carped, and they can be buried in the red early on into a project with no prospect of payment for months.
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Paul Dinto, whose Paul Dinto Electrical Contractors in Middlebury has 150 employees, testified on the bill this spring, terming the old rules a “sickness” within the industry. At one point last spring, his company had $700,000 worth of change orders on 11 projects that were at least three months old, for which he could not send invoices.
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The original bill had included a provision that would have allowed subcontractors to refuse change orders if the unpaid balance on such orders reached 5 percent of the total contract value. That was shot down by the Connecticut Senate, but legislators pushed through a new rule requiring a status check on all outstanding change orders when a new one is submitted, in theory discouraging the accumulation of change orders.
“You may have construction managers who get a percentage back from the entity if they can save money or keep the project under budget,” said Bill Flynn, president of the Connecticut Subcontractors Association.
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“They”™re motivated to disguise a lot of this stuff from the owner because they don”™t want him to know that his project not only is going to be under budget, it may be over budget. You may have owners who have financial difficulties ”¦ but they don”™t know how they”™re going to pay for it. Well they disguise that fact by extending us on and on and on as their bank, until we get to the end of the job.”
Cesar Majia, executive director for the Hartford-based Minority Construction Council, said the new rules should help everyone in the food chain by removing a key source of uncertainty over who is responsible for project costs.
“When you”™ve got the general contractor signing a contract; when you got the subcontractor or prime contractor signing another contract; and you”™ve got the sub to that sub to that sub signing all the contracts; at some point in time there is an issue having to do with work performed and who pays for it,” Majia said. “Let”™s solve it right now ”“ not, you know, two or three years down the road or when ”¦ we got to go to arbitration or got to go to litigation.”