Masonry Magazine February 1982 Page. 38
CONSTRUCTION DISBURSEMENTS
continued from page 37
same work if funds are diverted by a party who becomes insolvent.
Lack of Incentive for Timely Completion of Project
Another frequently serious problem involves the timely completion of a project including punch list work. If retainage is held back for all trades until an entire project is complete, individual trades may lack the incentive to complete their work until they can reasonably expect the slowest trade to complete. As a result, needed punch list work may go unperformed for extended periods of time. If, added to that, a contractor is holding back retainage funds previously paid to him, there is no incentive for him to push for early final completion. Ironically, the owner is denied a fully-operational building by the very system established to provide the owner more control of the construction process.
Considering the serious nature of these problems, particularly in a high interest rate economy, it is evident that a far more practical payment system is needed if the construction industry is to function effectively. Certainly there are no immutable rules applicable to the construction payment process. The traditional methods evolved during earlier periods when general contractors performed the vast majority of their own work and received profits from doing it in a timely and correct fashion. By contrast, many of today's contractors invest the funds due subcontractors and suppliers.
The conventional payment method no longer serves well, and the financial community needs to apply its expertise to the use of better methods. This article will focus on alternative approaches that provide a more direct payment link between those supplying construction funds and those providing job-site material and labor for improving realty.
ALTERNATIVE APPROACHES
Direct Contracts Between Owners and Trade Firms
One such method is the use of direct contracts between owners and individual trade firms. This can be accomplished either through a direct contractual relationship between an owner and major specialty trade contractors or through a construction manager acting as agent for the owner. Such direct contracts have the obvious advantage of shortening the gap between the lender and the trades. These contracts also allow the trades to extend credit on the strength of a solid owner in those cases where a marginally financed general contractor is involved. Still, this method does not completely overcome the dependence of lenders on the integrity of those to whom money is paid-particularly where there are numerous tiers of subtrades and subsidiary suppliers.
Disbursement of Funds by a Title Company
A payment method pioneered by the Chicago Title Insurance Company is suitable for use whether one prime contractor or many contractors are involved. This approach provides for the disbursement of construction funds via a title company. A similar system, spearheaded by Lawyers Title Company, has also met with success in the Richmond, Virginia area. These programs, available in practically all states throughout the country, involve the following sequence:
GIANT-P-307-B
"OPEN THROAT"
its
EFFICIENCY
is in its
SIMPLICITY
CONCRETE-GROUT MACHINE
• CUSTOM BUILT LEVELS
• STANDARD LEVELS
• LEVELS REPAIRED
MASONRY BLOCK
SLABS
FOUNDATIONS
FORM FILLS
COLUMNS
MUD JACKING, ETC.
• Fewer moving parts means less repairs
• Driving pistons are to sides of machine
for easy maintenance
Any pump speed from 0 to maximum
FOR LITERATURE WRITE:
GIANT INDUSTRIES CORPORATION
8481 Whittier Boulevard
DEALER
RESPONSE
SINCE 1957
Pico Rivera, California 90660
(213) 699-6388 or 723-5218
38 MASONRY/FEBRUARY, 1982
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