Construction Financial Glossary

Back Charges Definition

Back charges are deductions made by a general contractor from a Subcontractor’s payment due to costs incurred from the subcontractor’s failure to meet contract requirements. These can result from defective work, missed deadlines, or additional labor required to fix issues.

How Back Charges Affect Project Costs

Back charges directly impact a subcontractor’s earnings, reducing their final payment amount. They are commonly used to recover costs for rework, equipment rental, or corrective measures needed to keep a project on schedule.

Preventing and Managing Back Charges

To avoid disputes, subcontractors should carefully document their work, address deficiencies proactively, and maintain clear communication with the general contractor. Contracts should outline clear guidelines for back charges to prevent unexpected deductions.



Related Terms: Change Orders, Liquidated Damages, Retainage, Punch List

FAQs

Can subcontractors dispute back charges?

A: Yes, subcontractors can dispute back charges if they believe they are unjustified. Proper documentation and contract review are key in resolving such disputes.

How can back charges be minimized?

A: By maintaining quality control, meeting project deadlines, and clarifying responsibilities in contracts, subcontractors can reduce the likelihood of back charges.

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