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even well-meaning GC’s feel a loosening of the pressure to get the owner to make payment. Then the incentive structure changes. Under a pay-if-paid clause, the GC is no longer incentivized to fight tooth and nail for payment because it won’t have to pay the subcontractors out of its own pocket. Instead, simply closing out a project and getting what payment it can starts to look more appetizing, which incentivizes conduct like: • Settling claims out from under subcontractors for deep discounts that are passed on to subcontractors; • Discarding subcontractor change orders in order to close out a project; and • Accepting backcharges from the owner and passing the backcharges along to subcontractors under a “pay-if-paid” guise. In short, the pay-if-paid clause perverts the GC’s incentive structure to something akin to that of a mere fixed-rate consultant. As long as the consultant (or GC) gets its fee, it becomes less and less important whether the subcontractors actually recovers the fair and agreed- upon value of its work. Will You Choose to Stand up Against Pay-if-Paid in Your Business? So, how can you work with GC’s to reset the incentives to make
payment on construction projects? And if a GC refuses, how can you get paid anyways? The answer is, in part, knowing your rights and the leverage you still have. Ask yourself: • Have you ever felt helpless to obtain prompt payment when confronted with a pay-if-paid clause? • Have you ever wondered how to break the pay-if-paid cycle from the beginning, when negotiating a contract? • Have you ever wondered what tools you have to leverage payment even when the GC holds up the pay-if-paid shield? If you answered “yes” to any of those questions, email me at jwyatt@harrisonlawgroup.com for a copy of my new free Report: “How to Beat Pay-if-Paid Clauses Even When it’s ‘Too Late’”. In that Report, I lay out vital information, such as: • How to negotiate a “reasonable payment time” clause with precise examples of appro- priate language; • Knowing your rights in a true “pay-if-paid” situation, including your specific right to have the GC go to bat to get you paid; and • How to leverage payment (with specific ex- amples) from the GC and project owner when you are stuck in a pay-if-paid regime.
-Jeremy Wyatt
jwyatt@harrisonlawgroup.com
www.HarrisonLawGroup.com
(410) 832-0000
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