What Should I Do if a Project Goes Belly Up?
Dear YouDig?
In 2016, we defeated several of our competitors to win the bid to be the general contractor on a large strip center project in Ohio. Several big box tenants are involved. We popped the champagne as the project seemed to be a huge win and very lucrative for us.
For several months the pay application and change order process went on without a hitch. Then suddenly in the fall of 2016, we started to get the old-fashioned run around. Payments became slow and then stopped. Our attempts to get change orders signed were delayed or ignored altogether. Our chummy relationship with the owners became tense and then radio silence. Clearly, we are receiving the cold shoulder.
Numerous subcontractors and material suppliers are on the project awaiting payment and instructions. We can’t get intelligence from the owner or its bank.
-Gotta Go!
Dear Gotta Go,
You Gotta’ Go! But… YOU CAN’T GO! Nothing worse. Unless, that is, your contract allows it. Gotta Go… c’mon you know that once you are deep in the project you are married. Due diligence before bidding is a great idea. For Example: Are they financially sound? Have they successfully completed projects of a similar scope in recent years? Is the source of capital in place trustworthy and committed? If you’ve done your due diligence and answered yes to these questions, then Congrats, GG! You won the courtship.
Now, begging your pardon, what’s it like living with this beast of a project? Walking off a job invites a cascade of problems for you and all who counted on you. Non-payment, delay damages, claims of sub-contractors, loss of your bonding capacity and just good ‘ol plain shame, to name a few. If you want to “go when you gotta go,” you can avoid these problems when you win the bid by protecting against losing your shirt later through a well-crafted contract. Have the tough talk up-front before signing anything. Here are a few ideas to get you started:
- Slow payment? Penalties and interest.
- No Payment? Add a 7-day walk-away.
- Reasonable concerns? Right to adequate assurances.
- No approvals of completed work or change orders? Prompt and efficient dispute resolution provisions to get to the bottom of things quickly.
Now GG, I gotta go.
–YouDig?