A National Electrical Contractors Association contractor joined other members of the construction industry on Capitol Hill on Thursday morning to testify before the House Small Business Committee at a hearing about the effect of federal change order delays on small businesses.
Greg Long, a longtime NECA member and electrician since 1979, testified on behalf of the association at the hearing. He established Long Electric Company, based in Napa, CA, in 1990. The business offers electrical services specializing in commercial and industrial construction to include maintenance, modernization and new construction.
Small contractors and subcontractors such as Long Electric must pay out of pocket for employees, equipment, materials, and taxes, financing the work performed pursuant to the change order, while agencies delay payment for the work performed. This creates an untenable, financially unstable situation for small business contractors and subcontractors.
At the hearing, Long said in his experience he has seen that many contractors are not paid in a timely manner and that it sometimes takes as long as 18 months.
“This can be crippling to a small business,” he said.
Long urged members of Congress to pass reforms that streamline the payment process.
“We need a standardized change order protocol,” he said. “There has to be accountability.”
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The purpose of the hearing, titled “All Work and No Pay: Change Orders Delayed for Small Construction Contractors” and held at the Rayburn House Office Building, was to examine potential solutions to alleviate the financial burden on small businesses. It included members of the Subcommittees on Contracting and Workforce as well as Investigations, Oversight, and Regulations, chaired by Rep. Steve Knight (R-CA) and Rep. Trent Kelly (R-MS), respectively.
Other witnesses included Edward DeLisle, Co-Chair of the Federal Contracting Group at Cohen Seglias Pallas Greenhall & Furman PC in Philadelphia; Andy Brown, Vice President of GlenMar Construction in Clackamas, OR (on behalf of the Associated General Contractors of America); and Colette Nelson, Chief Advocacy Officer at the American Subcontractors Association in Alexandria, VA (on behalf of the Construction Procurement Coalition).
Nelson said creating a process that is quicker is paramount. Brown, moreover, said his company was unable to bid on other federal projects in the past because his equity was tied up while waiting for payment and processing of change orders.
“This is quickly becoming the norm,” Brown said.
Long added said many contractors are not going to continue to do work when they’re not getting paid.
“Contractors aren’t doing anything wrong,” he said.
On Tuesday, Knight, Murphy and Rep. Brian Fitzpatrick (R-PA) introduced legislation to ensure federal contractors get paid in a timely manner for change orders. The Small Business Payment for Performance Act (H.R. 2594) allows contractors to send an invoice once the order in completed and request that they get paid 50 percent of the bill immediately to offset extra costs. Small businesses currently contract without that protection.
“NECA thanks Representatives Fitzpatrick, Knight and Murphy for their bipartisan efforts to help small firms in the construction industry – we are proud to offer our support,” said Marco Giamberardino, NECA’s Executive Director of Government Affairs. “The benefits of this legislation are clear: transparency in federal construction contracting and providing contractors with a predictable flow of funds from the federal government to contractors for the work they perform. This legislation will help meet this goal.”