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Construction subcontractors facing cash flow crisis

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“Thousands of construction subcontractors are facing a cash flow crisis after several firms doing major government contracts failed in the past two months.

In the construction industry the impact of corporate failure spreads far and wide, with changes to industry work practices in recent years seeing subcontractors replacing employees.

Debt recovery specialist Glen Bower says thousands of subcontractors are vulnerable and that many are small, family-run businesses that depend on a cash flow.”

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Filed Under: News Tagged With: Bankruptcy, cash flow, Subcontractors

Study: Nearly one-third of small contractors report ‘bait and switching’

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“For Eric Basu, stories of being wronged on contracting work go on and on. There was a time his San Diego-based defense company, Sentek Global, joined as a subcontractor to a larger, prime contractor that wanted Sentek on board in part, Basu suspects, because his business fulfills a state set-aside requirement for veteran-owned companies. After the prime won the bid, Basu said they stopped returning his calls.

Basu is not alone in his caution. Nearly a third of subcontractors reported having at some point been “stiffed” on a contract with a prime, according to a recent American Express survey. For the report, AmEx surveyed 740 small federal contractors. While the practice raises ethical issues, it’s not illegal: Contracting regulations don’t mandate that a prime firm must stick with any particular sub.

The report found that nearly half of active small firm contractors have successfully pursued subcontracting as a procurement strategy, and these businesses derive an average of 25 percent of their procurement business from subcontracts. But for many, being listed as a subcontractor on a winning bid sometimes results in disappointment rather than new business. The survey found that 29 percent of small firms have been victims of “baiting and switching,” in which a prime contractor wins a bid with a specific subcontractor but then either uses a different sub in the execution of the contract, or simply keeps the work for themselves.”

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Filed Under: News Tagged With: Bidding, procurement, Subcontractors

Filed Under: NewsTagged: ,Bidding, procurement, Subcontractors
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