Fired GC having Subs call me for $

[Aaron Signer]

I released my general contractor a few weeks ago for failing to stick to his timeline and today I have been contacted by two of his sub contractors asking me for payment. I told them that they needed to speak with him as I had my contract with him and he had been paid for work rendered. 

I know that he was having cash flow issues and already had not been paying his people on other projects (hence the previous delays; I wouldn't work for someone who wasn't paying me either). What steps should I take to protect myself?

Appreciate any and all help/advice!

[Jerel Ehlert]

@Aaron Signer

Have 4-6 different GCs you work with.  If you don't spec out the job yourself, pay a GC to draw up a scope of work with the understanding that he/she is paid well up front and no chance to bid the job. Let the others bid.  Let all of the know that at some point each of them will be asked to scope out work they will never bid on, but the others will.  Now the other 3-5 bid the exact same job.  Have them walk the site at the same time.

If you don't know what a gant chart is, learn.  GCs get paid by the milestone and work done.  Any GC that wants to get paid every Friday is looking to you to float his payroll.  Don't.

ALL change orders must be made in writing.  And by writing, I mean there's a form to fill out, in detail, signed by both, and copies made.  NOT a bloody text message.  Changes should never be made lightly or with minimal information.  It should be at least inconvenient but really, should be somewhat painful.  This keeps changes to only the really important stuff.  GCs will be deterred from padding the job via change orders.  Here's the job.  Here's the payment.  Do the f-ing job.

NO ONE steps onto the jobsite without coughing up a copy of their state ID and pic of the license plate of the vehicle.  This includes the GC.

GC must deliver a copy of each sub and materialman's contact info.  You aren't looking to steal their people.  It is in case a semi wipes them off the face of the earth one night.  (alternatively, it is in case they ghost you and to protect against fraudulent claims from subs that never worked your site)

GC must name you as additional insured on their insurance.  No insurance? No job.  Check the policy every 3-6 weeks to make sure it hasn't lapsed.

No payment until GC sings affidavit that all subs and materialmen have been paid for under this disbursement (attach copy of the work/materials this payment covers).  Must be notarized under penalty of perjury.  Disbursements are made after a licensed inspector walks the property for a visual inspection and compares against the draw.  Is X done at ##%? Y/N.  No argument.  No debate.  Is the job done or not?  Yes = paid.  No = not paid.

IF AT ALL POSSIBLE, you should buy materials and arrange delivery to the jobsite.  Materials get locked up.  Funny how when the scope calls for the $100 widget, a $70 generic-widget gets used.  GC either packs up all tools every day or provides a Conex, depending on how long the job goes on.  Either way, post a sign disclaiming liability for tools left.

Run a criminal and civil background check on the GC.  Better to pay ~$250 now and loose a liability than risk loss later.  You don't care about moving violations or child support, or even most violent crime (one of the few jobs a felon can get sometimes).  You want to know if they have fraud, theft, or "crimes of moral turpitude".

Holdback last 15% of the contract payment pending final walkthrough and final payment affidavit.  Independently verify with subs.

TELL THEM ALL THIS UP FRONT.  Just telling them how your jobs will run will deter Shifty Sam.  Tell them also, that failure to comply will result in firing and YOU CAN use their subs to finish the job.

Now....any GC that operates like this WILL NOT be the lowest cost supplier.  Your cost will be, on average, 15 to 25% higher.  Compare that to the cost the cheap GC will cost you to clean up these M&M liens.

Finally, if they do all this, and comply with the contract...PAY IN FULL AND ON TIME. The burden shifts to you to be the straight shooter. It doesn't matter that your HML is slow with the draw wire or you wanted to take down another deal with the draw funds, pay the GC. You must also monitor your GC. If you DGAF about your project, how much should you expect your GC to care?

This is how you become a PROFESSIONAL and how to expect those you do business with to be a professional, too.  Everyone hates this part.