A back charge is a deduction from what you owe a subcontractor or supplier, to recover costs you incurred on their behalf. Common causes: repairing damage they caused, doing cleanup they failed to do, completing or correcting their work after notice, or covering costs from their delays. Most subcontracts spell out the notice and documentation required before a back charge can be applied.
Why it matters
Back charges are one of the main ways a GC recovers margin that leaked because of someone else’s problem. They’re also one of the most disputed items in construction. Without timely notice, photos, daily logs, labor and material tickets, a back charge is a negotiating position, not a recovery. Sloppy back charges damage subcontractor relationships and often get dropped at closeout.
Worked example
Illustrative: on Riverside Medical Center, a drywall sub’s crew damages installed ductwork. The GC sends written notice the same day with photos, then has the mechanical sub repair it on a T&M ticket for $3,850. The GC issues a $3,850 back charge to the drywall sub, references the notice, ticket and daily log entry, and deducts it from the sub’s next pay app with a change order to their subcontract.
Common mistakes
- Issuing back charges months later, without the notice the subcontract requires.
- No supporting documentation, such as daily log entries, photos or signed tickets.
- Deducting the money without reducing the subcontract value, so commitments and retainage get out of sync.
How os.construction handles it
We’re building back charges to link to the daily log, photos and T&M tickets on the same record, and to flow into the subcontract and AP once a person approves them.