It takes timely money to make a project go

A project owner was feeling frustrated that the contractor, who was doing work of good quality, was not going fast enough. Considering the contractor’s monthly application for payment, the owner decided to not pay the contractor for the previous month’s work in the hopes that the decision would cause the contractor to work faster. Instead, the contractor’s work slowed to a crawl as the contractor’s employees and subcontractors stayed away from the project. Subsequently, the contractor submitted a delay claim against the owner. The owner also heard that work on another project in the area had sped up during the same period of time.

A different owner on a different project was not satisfied with the quality of part of the work done by the project’s contractor, but chose to pay the contractor for that work anyway, hoping the contractor would correct it. Instead, the contractor proceeded with other work, making correction of the unsatisfactory work less practical and more costly. When the owner complained to the contractor about the contractor’s failure to correct the unsatisfactory work, the contractor pointed out that the owner had paid for it, so the contractor considered it complete and thought the owner did, too. The following month, the owner withheld part of the contractor’s payment to cover the cost of correcting the previous unsatisfactory work. Then construction progress was slowed by a delay in delivery of materials of approximately the same value as the payment amount withheld by the owner. The material supplier had furnished similar materials for several other projects done by the same contractor, and delivery for this project was contingent on the supplier’s receipt of payment for a previous project.

During a very busy construction boom, a project owner decided to make advance payment to the project’s contractor as an incentive to get construction started on his project. Then several weeks passed without any construction activity on the project. When the owner complained about the situation to a friend who had been a project owner during a previous recession, the friend told him he had done the same thing to help a contractor get that project started during the recession – and the result was the same.

It takes money to make a project go, but payment at the wrong time can be counterproductive.

Posted in Construction Administration, Project Administration, Project Management

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