Backcharges are assessed by contractors against their subcontractors (or suppliers) when they perform work they claim is the responsibility of that particular subcontractor. The contractor claiming the backcharge deducts that charge from future payments due the subcontractor, often without substantiation or negotiation. There may be no greater source of friction on a construction project than disputed backcharges.
Disputes arise from two principal sources: the first is whether the alleged backcharge represents work which properly belongs to the subcontractor; and the second is whether the amount charged is fair.
Disputes over backcharges become bitter and hard to resolve where the subcontractor is not given advance notice and an opportunity to perform the work, and where notice of the asserted backcharge comes too late for the subcontractor to verify its reasonableness. The reverse is also true. Where there exists advance notice to the subcontractor with an opportunity to investigate and perform (even under protest), and prompt notice of the backcharge, affording the subcontractor an opportunity to verify the contractor's costs, disputes are more easily resolved by compromise. That is so because the poison of distrust is largely removed by fair and prompt notice which eliminates secrecy and allows the subcontractor a legitimate opportunity to evaluate its responsibility and exposure.
The only way to insure openness, and to foster trust, is by including provisions in the subcontract requiring prompt notice of backcharges. Both the A.I.A. subcontract form, and the statutory form of subcontract required for filed subcontractors on Massachusetts public projects, include explicit requirements for prompt notice of backcharges.
These same notice provisions are easily insertable into every other form of subcontract. Such provisions benefit both contractors and subcontractors because they remove a source of potential dispute which often can lead to bad blood and to court.
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