Backcharges have always been a painful but necessary part of commercial construction. Whenever possible, it’s best to avoid the backcharge process all together and work to resolve things proactively, but sometimes that’s not possible, or it makes sense to have one Subcontractor perform work for another.
Even though a backcharge is a standard process in commercial construction, the only tools available to track, communicate, and share backcharges between stakeholders are most commonly paper, email, and spreadsheets. Backcharges often get entered in a GCs system of record, but the only way to share them between parties is in an exported spreadsheet or PDF log.
In this blog post we want to break down why that is, what the root causes of backcharge pain are, and explore ways that backcharges can be more effectively managed.
What is a Backcharge?
Simply defined, backcharges are when one Subcontractor must perform work outside of their original contract because of the actions or inaction of another Subcontractor on the same project. Subcontractor A performs the work and sends a Change Order Request (COR) to the General Contractor, and the General Contractor then sends the cost as a deductive COR to Subcontractor B who caused the out of contract work. It’s a net zero liability to the GC, and a net zero liability to the project Owner, with the GC essentially becoming the middleman.
Say you’re a General Contractor managing a construction project, and the plumbing contractor is on the jobsite finishing an install when a pipe bursts, damaging a new paint job on the hallway wall. You’ll need the painting contractor to repair the damage, but the extra work isn’t part of their contract. So the painter tracks the time and materials (T&M) spent on the work, prices a COR for $5,000, and sends it your way. You receive the painter's COR and send a deductive COR of negative $5,000 to the plumbing contractor. The plumber then needs to review the cost and agree on the COR.
The Root Causes of Backcharge Pain
But much like traditional CORs, backcharge processes suffer from manual processes, fragmented email chains, cumbersome spreadsheets, and a lack of best practices. This haphazard and burdensome approach can result in backcharges piling up, unseen risks emerging, and contentious negotiations at the end of a project. We believe there are 3 key elements that make backcharges painful in commercial construction:
- Time to Visibility: Understanding the cost of the backcharge and the time it takes to process between parties can be excruciatingly slow. The delay in surfacing the cost and processing backcharges is a major cause of pain and contention.
Slow time to visibility is the root cause of having backcharges pile up. If it takes weeks or months to process the costs, the value can skyrocket before the GC or the Subcontractor being backcharged can have time to react. Without immediate notification, corrective actions cannot take place. - Lack of Quality Documentation: Often, the quality of documentation received by the General Contractor is confusing and hard to read or understand. Additionally, the communication back to the Subcontractor can be of poor quality, too. This lack of clarity can lead to disputes and further delays.
Bad documentation is the root cause of disputes. If the work being backcharged is properly documented and clear to all parties there is less room for argument. - Poor Organization: Other than spreadsheets, PDF and email, there's no efficient way for a backcharge to land between the parties. This lack of standardization and organization can create confusion and hinder the resolution process. A GC can enter the backcharge into their project financial software, but that's still not visible to all parties without an exported PDF log.
Without the transparency of sharing supporting documentation and logs in a central location to streamline communication, backcharges will linger and add risk to all projects.
How Clearstory Resolves Backcharge Pain Points
So, how does Clearstory address these pain points? With our end-to-end workflow, Subcontractors can instantly generate a backcharge ticket, complete with photos of their work. The ticket is automatically priced and sent to the GC, and with a simple click of a button, the GC can reroute to the Subcontractor being backcharged, all within the same day of the work being done.
Why is this important? Well, if the backcharge is for recurring work, the Subcontractor can take corrective action to avoid even more backcharges piling up for ongoing projects. Plus, Clearstory ensures that everything is clearly documented with photos and tracked in a back-end, cloud-based Change Order Log visible to each party involved, providing the transparency to streamline communication and ensure that everyone is on the same page, reducing the chances of disputes.
Thanks to Clearstory's shared, real-time COR log, Specialty Contractors and GCs can now effortlessly manage backcharges through a dedicated workflow that integrates every aspect of the process. Engineered to meet customer demand and designed with customer input, Clearstory's Backcharge feature makes it simple to attach backcharges to existing CORs or upload backcharges from outside Clearstory. Let’s take a look at how easily the process works:
Creating Backcharges from Received CORs
- Start at the Received COR Log.
- On a received COR line item, select "More."
- Click "Create Backcharge."
And, you’re done. With this functionality, you can create a backcharge entry against an existing COR entry. This can be a COR received via Clearstory from a Specialty Contractor or one you've created on behalf of a sub or trade partner. Plus, you can create multiple backcharges against a single COR entry.
Uploading Backcharges from Outside Clearstory:
- Head to the Received COR Log.
- Select "Manage Log."
- Choose "Upload a Backcharge."
That’s it. In this user-friendly flow, you can simply drag and drop a COR file from outside Clearstory, seamlessly adding it to both your Received COR Log and the log your contractors maintain as a backcharge.
Hopefully you can avoid backcharges all together on your projects, but when they do occur, Clearstory's Backcharge feature empowers GCs and trade partners to tackle them effortlessly, avoiding the pain points caused by processing delays, lack of quality documentation, and poor organization. By closing the visibility gap and providing a clear, organized process, we're setting the stage for simplified backcharge management that reduces risk for all stakeholders and makes construction a better place.
Ready to Learn More?
Clearstory is rapidly becoming the standard way in which costs are communicated in the commercial construction industry. To learn more about Clearstory and see how thousands of contractors are improving their Change Order process, connect with one of our experts at info@clearstory.build or request a live demo.
