Mr. John E. Potter, President & CEO
Mr. William S. McDermott, Chairman, Board of Directors
Metropolitan Washington Airports Authority
Dear Misters Potter and McDermott:
The Alliance for Construction Excellence (ACE*), is in receipt of your letter to the American Subcontractors Association of Metro Washington (ASAMW) dated March 27, 2017 in response to their letter dated four (4) months earlier, November 8, 2016. The lateness of the response, coupled without an explanation as to why it took four (4) months to respond to our mutual serious concerns, is deeply troubling and disrespectful to our business community.
Recent projects in the DC region have led the American Subcontractors Association (ASA) of Metro Washington to make sure its members and all subcontractors are aware of the inherent risks in bidding projects that include an Owner Controlled Insurance Policy (OCIP) and other terms. Specifically:
Owner Controlled Insurance Policy (OCIP) often include a transfer of risk to subcontractors:
- OCIP terms and conditions often flow down from Owner by the GC to subcontractors.
- OCIP general liability deductible: What is reasonable and how will you cover this deductible in case of a loss?
- OCIP general liability claim costs: How will you cover investigative costs, court costs, attorney fees, cost of defense?
- OCIP builders risk deductibles: What level are you prepared to cover if there is a flood, pollution or other items not covered?
- OCIP’s sometimes will not reimburse subcontractors for profit, tax, overhead, insurance, or bonds attributable to repair or replacement work regardless of who is at fault.
Terms and conditions in the General Contractor’s subcontract:
- Be aware of phrases that hold all subcontractors collectively responsible for OCIP deductibles in the event of an Act of God.
- Be aware of phrases that hold all subcontractors collectively responsible for OCIP deductibles in the event the responsible party is not determined.
Change order mark ups flow down from Owner by General Contractor to subcontractors:
- Changes due to design defects: What is the mark up on change orders and how will you recover your costs? If not in the bid then you will have to live with the amounts allowed in the subcontract.
- Changes due to differing site conditions: What is the mark up on change orders due to differing site conditions? Again, how will you recover your costs?
Know what you are bidding – protect yourself and your company.
For years, subcontractors have learned to live with slow payments. Most of us expect to pay after we receive a service, have a project completed or obtain an item – like a meal or a new tool, or even a new building. But in the world of construction subcontractors, the company completes its work, pays its employees, vendors, etc and then waits around for 60, 90 days or even longer for payment. One group is trying to make this practice fair. That group is the American Subcontractors Association of Metro Washington.
The result of their efforts is taking shape in the District of Columbia as its Department of General Services prepares to reveal a Website that lists all payments made by the Department of Governmental Services. Once Subcontractors are aware that their prime contractor has been paid, then they can pursue available legal avenues to obtain timely payment for completed work. This results from legislation passed in 2016 that is likely to be a model for similar public displays of payments across the nation.