ASA White Paper Helps Subcontractors Master Payment for Stored Materials

Construction subcontractors that purchase and store materials in advance for their portion of a project face a special set of payment concerns. The ASA white paper Mastering Payment for Stored Materials reviews these risks, discusses industry practices, and recommends steps a subcontractor can take to protect itself. For example, if bid documents don’t address payment for stored materials, a subcontractor may want to condition its bid on language assuring timely payment. The ConsensusDocs Form 750, Standard Form of Agreement Between Constructor and Subcontractor, provides that the subcontractor is entitled to payment for materials and equipment delivered to the site, or at another location if agreed in writing. Contract terms permitting payment for materials delivered and stored either on-site or off-site universally use subjective terminology such as “suitably” to describe the way the materials must be stored, require that off-site locations for storage be approved in writing, in advance, and universally require subjectively-described “satisfactory evidence” that title is transferred and that the materials are properly insured. Regular communication with the prime contractor, in advance of ordering materials for which early payment will be sought, is therefore vital. When a specific acquisition of such materials or equipment is contemplated, talk to the prime contractor ahead of time to be certain that your arrangements will be “suitable” and “satisfactory.” A written document prepared by either yourself or the prime contractor, with the signature or initials of a person in authority, will serve as the best guarantee for any subcontractor’s expectation of being paid for materials not scheduled to be immediately incorporated into the work. Even an email exchange with the proposed arrangement and a response accepting the arrangement can serve this purpose. A discussion with an insurance agent knowledgeable of the terms of the builder’s risk policy for the project may also save expense and time. The white paper is available under “Contracts and Project Management” in the Member Resources section of the ASA Web site.