What Are “Back Charges” in the Construction?

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What Are Back Charges in the Construction?
A back charge is a billing intended to recover an
expense from a previous billing period. It could
be due to the recipient of services or goods
failing to pay, an adjustment owing to an error,
or the need to recover an expense that was not
billable until a later period due to scheduling
concerns.
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Construction projects are only finished with the
general contractor encountering a problem with a
subcontractor or vendor. When issues arise, the
parties responsible for payment must have a
process in place to charge a sub for any direct
and unplanned expenditures incurred as a result
of the subs work. In construction, this is where
back charges come into play.
Construction Back Charges Explained A back charge
is essentially an offset for unanticipated costs.
To get right to the point, lets look at generic
contract law. Contracts provide for the recovery
of damages when one party fails to perform.
Damages are awarded to place the injured party
in the position they would have been in had the
contract been performed properly by all parties.
The same logic applies to back charges. Back
charges can be incurred in several ways faulty
work/materials (cost to finish/replace) Worksite
damage (repair costs) cleanup (costs incurred to
maintain worker safety or OSHA compliance) Equipme
nt use (rental/use fees)
If you, as the general contractor, need to pay
more to repair, replace, or clean up the work of
a subcontractor or vendor, the expense can now be
borne by the party that should have finished it
in the first place.
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Before proceeding, keep in mind that back charges
in the construction are not statutory (i.e.
mandated by law). They are, rather, contractual
rights. This means they are governed by the terms
of a contract (assuming they are included in the
contract at all). Many subcontracts include
provisions for back charges, but many do not. If
a contract does not provide for back charges
(also known as a right to set off), withholding
may not be a smart idea.
Back Charges Success Factors If youre not
diligent, back charges can be troublesome.
Communication and documentation are the two most
important considerations. (To be honest, most
construction disagreements might be settled by
dialogue and documentation but thats a topic
for another blog post!) Communication It is best
practice to expressly state any back charge
notice requirements. Check that the subcontract
has adequate notice provisions. That is, if you
incur back charges, make sure you are advised of
them and given enough time to remedy, repair, or
clean up any faults generated by your teams work.
According to the document, a contractor must
provide notice before incurring any back charges.
The subcontract then stipulates that another
written notice be delivered 7 days after the
services or materials were rendered. Finally, by
the 15th day of the following calendar month, the
contractor must deliver a formal compilation of
the charges.
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Many GCs, however, utilize their own contract
forms, which can change any or all of the
notification requirements. Even if it is not
required by contract, it is excellent practice to
maintain communication in order to reach an
acceptable conclusion. Also Read- Top 10 Best
Construction Companies In Lucknow Documentation P
roper and precise documentation is essential,
whether you are the GC or the sub! When sending
notice of substandard work to GCs, add as much
detail as feasible. Take progress shots for your
records if the sub decides to take corrective
measures. If the sub does not correct the faults,
it is critical to preserve separate invoices and
timesheets for the back costs to present to the
sub/vendor upon completion.
If the back charges are disputed for any reason,
it is critical to provide sufficient evidence
that they were directly caused or incurred by
that specific sub. On the other hand, the
subcontractor should document all phases of the
work accomplished. When courts examine back
charges, they look to see if the incurred
expenses are within the scope of the contract.
This is a pretty broad interpretation, and it is
not always a hard and fast rule (especially when
it comes to cleaning up or causing harm to an
unrelated aspect of the project). Keeping
accurate documents can assist you in contesting
any unjustified back charges. 
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Ghar Banwao is Construction company in Lucknow ,
providing one stop Solution in Architect,
Construction with Material,Interior
designer. Final Word I hope this article
contains all the answers to What Are Back
Charges in Construction? answered in simple
words, step by step. If you liked the article,
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