What Is a Back Charge in Construction?

January 23, 2024

It’s not uncommon for construction projects to experience back charges between contractors and subcontractors. While these fees can be a source of friction between teams, they are an essential part of managing project costs and ensuring that everyone is on the same page. By understanding the ins and outs of construction back charges, you can ensure that your projects stay on schedule and within budget. In this article, we will explore what a back charge is and what steps you can take to avoid them.

What Is a Back Charge in Construction?

A back charge is an amount deducted from payment to a contractor or subcontractor as a result of errors or problems with their work. A general contractor or project owner can impose back charges when they identify defects, deficiencies, or costly damage that are attributable to the performance of a particular subcontractor or supplier. Typically, a back charge is calculated as a dollar amount and then subtracted from the contract payment to the party at fault.

To reduce the risk of back charges, a project manager should review contracts carefully, pay special attention to clauses related to back charges, communicate regularly with contractors and subcontractors, document changes to the scope of work, and keep detailed records of expenses. In addition, it is important to address any issues as soon as they arise to prevent them from spiraling out of control. Ultimately, most back charge disputes can be avoided through open communication and careful documentation.

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