ASA of Metro Washington
Metropolitan Washington Airports Authority
Talking Points for Dec. 8th Meeting

The American Subcontractor Association of Metro Washington thanks the Metropolitan Washington Airports Authority for their request to provide input on potential barriers that may affect minority, women and disadvantaged businesses from being more active in Airports Authority contracting opportunities.  We offer the following specific concerns:

CASH FLOW is the number one concern affecting small businesses.  A subcontractor, for example, who performs base contract work the first week of December typically does not see payment until the end of January or the beginning of February.  And if that subcontractor is second tier then one to two weeks are added to the duration.   If the costs expended the first week of December, for example, are for a “price and proceed” change order then payment would not be received until 8 weeks after the cost proposal is submitted, approved, formally issued, signed and billed – many months after the work is performed.  MWAA can improve the cash flow of small businesses in the following ways:

  • Pay the general contractor 7 days after a complete requisition is submitted.  Require the general contractor to pay subcontractors in 7 days.  Post on a public website all payments to the general contractor.  Include on that website an MWAA contact and phone number for subs to call in the event the general contractor has not made payments on time.  General contractors who do not pay timely should be assessed a penalty. 

  • MWAA needs to manage the change order process with the same intensity as the overall project schedule.  It is too easy for all parties to procrastinate pricing, approving, and processing change orders.  Demand accurate and detailed proposals in 10 days.  Review and approve proposals within 7 days.  Then issue the formal change order in 3 days.   Paying changes timely will make MWAA the owner of choice. 

is the second biggest concern affecting small businesses.  Some general contractors’ subcontract agreements are predatory as they transfer risk to small businesses and those small businesses are either unaware of the risk, the risk is not within their control, or the transfer of risks is blatantly unfair.  Turner’s subcontract agreement is not subcontractor friendly, one example being the flow down of the OCIP deductibles to the subcontractors. 

CHANGE ORDER MARK UPS need to reflect the reality of small businesses.  The smaller the business the higher the overhead.  A typical small business subcontractor has an overhead of 20%, a typical large subcontractor has an overhead of 12%, a typical mid-sized local general contractor has an overhead of 7.5%, and a typical national general contractor has an overhead of 4%.  A reasonable profit margin on change orders is 10%, and more than that if the changes take a long time to process.

PRIME CONTRACT PAYMENT BOND must be made public or required to be sent to the subcontractors upon signing the subcontract agreement by either the GC or MWAA.  The bond is a first and second tier subcontractor’s best legal recourse for recovering funds owed but unpaid.  GC’s and some owners put up substantial barriers to subcontractors to obtain a copy of the bond.  Those barriers delay filing of claims and hurting subs cash flow. 

OPEN MEETINGS WITH MWAA.  All regular progress meetings between the general contractor and MWAA must be advertised to the subcontractors as open to their participation.  Openness creates understanding and collaboration.  MWAA will be pleasantly surprised with the input that these subcontractors have to offer. Some GC’s are reluctant to have subcontractors present because GC’s then cannot play the subs off against the owner.  Projects that have subcontractors engaged at the highest level tend to finish on time and within budget.  Open meetings should be advertised in the solicitation so that the subcontractors see that MWAA cares that they participate.

COMPLETE SCHEDULES NEED TO BE MADE AVAILABLE.  MWAA must require that the “complete” monthly schedule update prepared by the general contractor be made available to the subcontractors.  A “complete” schedule displays all the logic (predecessor, successors, float, start/completion dates etc, except cost loading).  General contractors as a group tend to keep subcontractors in the dark by not providing anything to the subcontractors other than the activity, duration, and the early start date.  GC’s do this to prevent the subs from asserting their contractual rights.  However, it backfires by preventing subcontractors from properly planning and coordinating their work.  Just like open meetings with MWAA, transparency in scheduling will ultimately lead to a project being finished on time.

DIRECT ACCESS TO THE CONTRACTING OFFICER.  MWAA is encouraged to advertise to the subcontractors the name and phone number of the MWAA Contracting Officer.  Subs need a direct hot line to the Owner at the highest level to report abuses or unfair treatment, or maybe even to compliment someone for things being done well.  This access to the Contracting Officer should be included in the project’s solicitation so that the subs can see that the CO cares.

QUALITY.  Subcontractor owners are smart people who want to do a great job.  MWAA must demand intelligence and professionalism from all stakeholders including itself.  If the job isn’t getting done, then call it out and require changes before mediocrity becomes the norm.    

FREQUENT LABOR INTERVIEWS.  The prevailing wage acts and certified payroll are challenging to subcontractors.  Identifying mistakes early is beneficial to subcontractors.  It is easier to fix wage and fringe problems in the beginning than at the end.  MWAA should make it a priority to interview at least one of each subcontractors’ employees the first week the firm shows up on the job, and then monthly.  MWAA should also have all certified payrolls carefully reviewed and make available the work rules and definitions associated with the wage determinations. 

ASA of Metro Washington welcomes the opportunity to have an on-going dialogue with MWAA to address these issues on a regular basis.