Prompt Pay Bulletin

During the Spring of 2014, ASA of Central Pennsylvania distributed a Payment Survey to ASA members of Central PA and Western PA as well as subcontractors of other construction trade organizations. 

The respondents were Pennsylvania subcontractors and specialty constructors predominately in the private, non-residential sector.

Here is a sample of our findings:    

Respondents reported that the time from completion of their subcontract to final payment (100% of retainage received) can AVERAGE from less than 2 months to a period exceeding 18 months. 


Nearly fifty percent of the respondents reported it taking no less than 6 months on average to receive final payment even though Pennsylvania state law requires retainage to be paid by the owner with 30 days of completion. 


Additionally, over sixty percent of respondents report that the period is increasing in the current business cycle.

 Can You Negotiate a 'Pay-If-Paid' Clause Out of Your Contract?


"The subcontractor should share in the risk of owner insolvency." Subcontractors often hear this argument from general contractors as to why the subcontractor should sign a contract containing a "pay-if-paid" clause. ASA's "Subcontractor's Negotiating Tip Sheet" on the "Pay-if-Paid Clause" provides subcontractors with a suggested response: "My credit risk is with you. There's no justification for me to also extend credit to the owner. I don't have a contractual relationship with the owner. You did the credit check on the owner and your decision to go forward is strictly your responsibility."

Another common excuse that general contractors may make is, "Pay-if-paid is a valid concept." A subcontractor that has studied the "Pay-if-Paid Clause" tip sheet would know that it could counter with: "Contingent payment terms are void in some states as being against the public interest and fair contracting practice. Even widely-endorsed model documents, such as ConsensusDocs and AIA, do not include a pay-if-paid clause. I would have to be a pretty lousy business person to agree to such a questionable concept as pay-if-paid." 

In a 2013 survey, ASA members said the "pay-if-paid" clause is one of their most problematic. "A pay-if-paid clause shifts the risk of owner insolvency from the prime contractor, who has the responsibility to check the credit of theowner and the financing of the project, to the subcontractor, who may not even have access to that information," said Brian W. Cubbage, the chair of ASA's Task Force on Contract Documents and contract administration counsel of the Heico Construction Group, LLC, Alexandria, Va. "If a subcontractor agrees to a subcontract that makes payment completely contingent upon payment by the owner to the general contractor, the subcontractor may never get paid." 

In the tip sheet, ASA recommends that a subcontractor, faced with a subcontract with a "pay-if-paid" clause, substitute such language with: "Subcontractor does not accept the risk of Customer's receipt of payments from any source, and in no event will payments to Subcontractor be based upon or subject to, Customer's receipt of payment for Subcontractor's work." 

The ASA "Pay-if-Paid Clause" tip sheet and a summary of Pennsylvania law concerning contingent payment are available on ASACP's website

What can you do to help yourself and your company?  

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