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Slow payments cost GCs and subs $64 billion annually

Codes and Standards

Slow payments cost GCs and subs $64 billion annually

Study finds 51-day average payment turnaround.

By Peter Fabris, Contributing Editor | October 17, 2019

Courtesy Pixabay

Delayed payments are costing both general contractors and subcontractors tens of billions annually, according to a new study.

The study was conducted by construction finance platform Rabbet, formerly Contract Simply, in partnership with Procore Technologies. A similar study by Rabbet in 2018 found that slow payments cost subcontractors $40 billion.

This year, the company added general contractors to the study, and found payment delays cost all contractors an estimated $64 billion. More than 60% of subcontractors said they have decided not to bid on certain projects if the owner or general contractor has a reputation for paying late. Some 72% said they would offer a 1% to 5% discount for quicker payments.

Just 39% of subcontractors said that they are able to cover late payments with cash on hand. Slow payments by owners drive up the cost of projects by about 5.3%, according to the study. Owners also risk mechanic’s liens and project shutdowns when they pay late.

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