Backcharge

Definition

A general contractor's deduction from a sub's pay for work it says it had to fix.

Why It Matters

A subcontractor's margin is decided twice: once in the bid, and again when the general contractor deducts for cleanup, damage, late work or corrections it says it made itself. Most subcontracts let the general contractor take the deduction from the next pay application and argue about it afterward, so a backcharge arrives as cash already withheld. Ask a seller for the backcharge log by customer. A pattern against one general contractor is a relationship problem, and a pattern across all of them is a crew problem. Settle open backcharges before closing, or price them out of the receivables.

In numbers: A drywall sub billing $2,000,000 a year that loses 2% to backcharges gives up $40,000, which on a 10% margin is a fifth of its profit.