Who asks and gets deposit on large projects with GC's ?

What is your experience?

We always get a deposit from the GC and we run a credit check. But most important the contract binds the Owner, not the GC. The story the GC tells is nobody does business that way. If you are new to the business you may belive him.

If a company can't handle the expenses until it gets a first draw, it's probably not solvent enough to be taking on a project of that magnitude...S

[This message has been edited by electure (edited 08-10-2003).]

I try not to work for GC's that are shakey enough to require a deposit. I agree with electure, if you don't have enough operating capital to make it to the first draw, you shouldn't bid the job.

On large project the GC should have a payment bond that will pay if it doesn't. If they don't have a payment bond, you might not want the job.


[This message has been edited by Electric Eagle (edited 08-10-2003).]

Eagle, Good advice, your point about, if you need a deposit your already in trouble. We found the big GC's doing production work usually, can never find that final payment, and by the time you take action, suprise they are under another company. Good contract with progress payments are your best protection. If payments stop we stop.
We are not in the banking business.

[This message has been edited by LK (edited 08-10-2003).]

We take a deposit in an escrow account, sort of a good faith down pahyment, the money can't be touched until BOTH parties sign off on it.

OUCH!

*Absolutely convinced to shut the biz down now...

Most large jobs I deal with are billed under AIA standards, forms G702 & G703. This is progress billing broke down into a "schedule of values". I always have line items for mobilization, temporary service, & bonds which can be billed immediately upon starting the job. With a good "schedule of values" you can "front load" your billing and never be behind the 8 ball.

Roger

Front loading sounds good...

How do you front load a light fixture package or gear package that is worth about 1/2 of the project? Under most contracts, you cannot bill for schedule of value line items, until they are installed or properly stored. Storage is not always allowed.

Typically you can be looking at delays on the job that will prevent you from billing items for months sometimes.

Will you play bank for that long..

What about the suppliers?.. How many of them will deal with the " You get paid when I get paid if I get paid" terms?

Old-timers always brag that that's the way it has been since bread was a nickel.

Any tricks to take the bite out of very large material packages by including Deposit style line items on the schedule?

Does that fly.. or are we really more in the banking business than the Construction Business?

I have witnessed large Jobs with well known GC's and End-user Clients where there was no cash flow for 3+ months after starting a project. Yet many people still appear to agree to this type of abuse.

Sparkey, Nice to see you post, missed your input. Dave noted he has the money in an escrow account. Our bank holds the escrow money, that is the deposit. Then the progress payments go to the bank, much safer way to operate. If the GC will not go along with that, He has no intention of paying.
We remember the line, I have plenty of work for you. I my area alone, I have seen more contractors put out of business and put in personal debt by these operators.

[This message has been edited by LK (edited 08-11-2003).]

Fredmeister,
Sorry about the <threadjack>

sparky66wv,
Good to hear from you again. Even if you close your business, keep that internet line hooked up. We miss your comments and insight here. Hopefully everything will work out for you. Keep your chin up. But duck when neccessary!!

Donnie

Team up with a good national supply, they will have a rep meet with you and set up just in time or on time delivery for some of the material, if you meet with the supplier first, and have everything scheduled along with proper contract language for delays then the supplier and bank will usually work with you. It takes a little planning upfront to make it work but, Rodger said it best.

If the GC or Owner does not want to pay a down payment or place the money in an escrow account, I tell them to call in the next higher bidder. I also tell them that I am NOT thier bank.
I always account for thier deposit in monthly statements.
I have seen too many of these thieves who use the AIA system to delay and try for months to deny payment for any specious reason they can dream up. One GC told me seven time that they did not have a copy of my insurance, after having signed for it twice by registered mail.
If they do not pay on time, you do not need them.

Here in CA, storage requires the use of a bonded warehouse.
Our State laws prohibit the collection of more than $1000, or 10% of the contract total (whichever is the lesser) from the owner on any residential project before the commencement of work.
The GC has to get their money from the owner, and they aren't there to bankroll your job, either.
Setting up your progress payments (as Roger says) is the easiest way to get money soon.
By the same token as the EC not biting off more than they can chew, neither should the supplier. If they want to "middleman" and get their $%, they should be able to bear their share of the burden also.

Virgil, DON'T shut it down. Good to hear from you! Hope alls OK...S

Fredmiester,
I'd go along with LK on this one,
For the majority of Large contracts that I have been involved with, the Progress Payment system is the one that I am most used to, it is a "Standard" here in NZ.