WINSTON-SALEM HOLDS CONTRACTORS ACCOUNTABLE
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The city of Winston-Salem is taking steps to increase the level of accountability for general contractors when it comes to paying their subcontractors. The city’s general government committee approved changes to the city code at its meeting on Jan. 13 that gave the city the authority to disqualify contractors from bidding on construction or repair projects if they did not follow through with their original plans or failed to pay subcontractors in a timely manner.
“We’re trying to say if you don’t pay your subcontractors timely as required, and you have a pattern of doing that then we’ll disqualify you as a general contract bidder,” city manager Lee Garrity said.
There are currently 21 criteria laid out in the code that if the contractor does not meet, they could be disqualified. This includes things like not completing a project on time, lack of insurance coverage or failure to fulfill MWBE requirements in the case of minority-owned businesses. Garrity said the past few years have warranted more oversight of general contractors.
“From time to time, particularly as the economy’s been tough, we’ve had subcontractors approach the city claiming that they weren’t getting paid by the general contractor, the prime contractor,” he said.
Jerry Bates, the city’s purchasing director, said the operations of contractors are mostly done behind the scenes. His office handles bidding for both the city and Forsyth County utilities. Bates said he is not aware of any specific projects that have been delayed due to a lack of on time payment to subcontractors but said some smaller subcontractors have complained, prompting the ordinance change.
“What we chose to do here as a city, is that we’ve taken some action within the legal limits that we have to try to beef up some of our own city ordinances in regards to actions that we may be able to take in evidence that general contractors are not paying subcontractors in a timely manner,” he said.
Bates said about once a month he receives a certified letter from a law firm asking for copies of the payment bonds made out by the contractor. The city requires payment bonds to be made in projects costing more than $300,000.
“If a subcontractor feels they are not getting paid in a timely manner and they’ve exhausted all the avenues that they have then sometimes they seek an attorney, sometimes they call me directly. Really all I can do is give them copies of the payment bonds that are a part of the contract.”
Forsyth County Construction Manager Gary Key said the number of vendors and subcontractors has become so large that it has become very difficult for his office to check on them.
“Unless we feel there’s a reason to withhold the payment, that’s something that we don’t do,” he said of contractors.
Key said in rare instances if there are disagreements between the county and the contractor, the county might step in and withhold a pay application or ask a contractor to correct something.
“If everything looks kosher we get those things across the desk right away, so why anybody would not pay their subcontractors, I don’t understand it,” he said.
Key said typically a contractor will submit a detailed work plan, known as a schedule of values, to an architect who will then send it on to him. Key said there is little reason to question this.
“You go through all of that and they say how much of a percentage they feel like they’ve completed during that pay period and how much is remaining and all that good stuff, and that’s how they come up with what they feel like they’re owed for that pay period that’s usually every month,” he said.
Key added that he would like to see more transparency in this part of the process.
“We basically go by whatever the general contractor says, but he is also supposed to be able to submit forms periodically and say he has paid all of his subcontractors off, so I don’t think that’s always truthful either,” he said.
One project that did not go smoothly was the opening of the public safety center, which was delayed when there was a sprinkler system failure in March 2013 that resulted in damages to the building. The five subcontractors’ insurance companies ended up paying more than $67,000 in damages to the county, which paid New Atlantic Contracting in order to compensate vendors that sustained losses. Key said the county almost went to mediation over the issue and added that one subcontractor he spoke with almost filed for bankruptcy and had to dissolve his company.
“We filed liquidated damages against them, then they came back and said we were asking for stuff in change orders,” he said. “It was just a mess.”
Key said there have been other projects at the county level where subcontractors pulled out because they were not paid.
“We don’t know the reasons behind any of that because they don’t normally come back to us unless they say we lost a sub and we haven’t hired another one, there may be a delay in the process,” he said. “One thing I hate to see is to have a subcontractor fulfill his obligations and do a good job at it and not get paid for it or not get rewarded for it.”
Key thinks one possible solution to the lack of transparency with contractors and subcontractors is to require contractors to sign a form acknowledging that they were paid each month.
He said he thinks the city of Winston- Salem is making a wise move.
“I don’t think it’s entirely unreasonable at all to require that or to state that but you’ve got to also weigh out every situation because you don’t know why it’s happening like it is,” he said.
Key said he recognizes that there may be some cases where the general contractor had a reason for not paying on time.
“There’s always two sides to every story, and he could be not paying his subs because he wasn’t happy with the quality,” he said. !