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Backcharge Procedure

Document Type: Procedure
Version: 1.0
Last Updated: February 2026
Distribute To: Project Managers, Superintendents, AP

Purpose​

Establish a fair, documented process for charging subcontractors for work performed on their behalf or to correct deficiencies.

What is a Backcharge?​

A backcharge is a deduction from a subcontractor's payment for:

  • Work GC performed that was sub's responsibility
  • Damage caused by sub
  • Costs incurred due to sub's failure to perform
  • Cleanup performed by GC
  • Shared costs allocated to sub

When to Backcharge​

Legitimate Reasons:​

  • Sub-caused damage to other work
  • Failure to complete punch list
  • Failure to clean work area
  • Use of GC equipment/materials
  • Delays caused by sub
  • Coordination failures
  • Safety violations requiring correction
  • Defective work correction

NOT Appropriate:​

  • Disputed scope items
  • Unsubstantiated claims
  • Retaliation for complaints
  • Estimated costs without documentation

Backcharge Process​

Step 1: Document the Issue​

Before Any Work:

  • Identify the problem
  • Photograph conditions
  • Note contract requirement
  • Notify subcontractor in writing

Step 2: Notify Subcontractor​

Written Notice Must Include:

  • Description of deficiency
  • Contract reference
  • Deadline to correct
  • Consequences if not corrected

Allow Reasonable Time:

  • Emergency: Immediate
  • Urgent: 24-48 hours
  • Standard: 3-5 days

Step 3: Perform Work (If Sub Doesn't)​

If Sub Fails to Respond:

  • Document notification attempts
  • Perform necessary work
  • Track all costs carefully
  • Continue documentation

Step 4: Calculate Costs​

Include:

  • Labor (actual hours × rate)
  • Materials (with receipts)
  • Equipment (rental rates)
  • Supervision/overhead

Apply Markup:

  • Per subcontract terms
  • Typically 10-15% overhead

Step 5: Issue Backcharge​

Formal Backcharge Notice:

  • Reference original notice
  • Detail work performed
  • Itemize all costs
  • Attach supporting documentation
  • State amount to be deducted

Step 6: Process Deduction​

Deduct From:

  • Next progress payment
  • Retention
  • Final payment

Backcharge Notice Form​

================================================================
              BACKCHARGE NOTICE
================================================================

Backcharge #: ____________  Date: ____________

TO: ________________________________________________________
    (Subcontractor)

PROJECT: ___________________________________________________

SUBCONTRACT #: _____________________________________________

================================================================

DESCRIPTION OF BACKCHARGE:

Original Issue:
___________________________________________________________
___________________________________________________________

Date Notified: ______________________________________________

Contract Reference: _________________________________________

Subcontractor Response: ☐ None  ☐ Inadequate  ☐ Refused

================================================================

WORK PERFORMED BY GC:

Date(s): ___________________________________________________

Description:
___________________________________________________________
___________________________________________________________

================================================================

COST BREAKDOWN:

Labor:
| Description | Hours | Rate | Total |
|-------------|-------|------|-------|
|             |       |      |       |
|             |       |      |       |
Labor Subtotal: $________________

Materials:
| Item | Quantity | Cost | Total |
|------|----------|------|-------|
|      |          |      |       |
|      |          |      |       |
Materials Subtotal: $________________

Equipment:
| Item | Hours/Days | Rate | Total |
|------|------------|------|-------|
|      |            |      |       |
Equipment Subtotal: $________________

SUBTOTAL: $________________
Overhead/Markup (___%): $________________
TOTAL BACKCHARGE: $________________

================================================================

SUPPORTING DOCUMENTATION ATTACHED:
☐ Original notice to subcontractor
☐ Photos
☐ Time records
☐ Material receipts
☐ Equipment records
☐ Other: _________________

================================================================

This amount will be deducted from your next payment unless 
disputed in writing within 10 days.

Project Manager: ____________________  Date: ________________

================================================================

SUBCONTRACTOR ACKNOWLEDGMENT:

☐ Accepted  ☐ Disputed (see attached response)

Signature: _________________________  Date: ________________

================================================================

Documentation Requirements​

Required for Valid Backcharge:​

  • Written notice to sub (with date)
  • Contract reference
  • Reasonable time to cure
  • Proof of non-performance
  • Cost documentation
  • Photos (before/after)
  • Time records (if labor)
  • Receipts (if materials)

Common Backcharge Categories​

CategoryDocumentation Needed
CleanupPhotos, labor records
Damage repairPhotos, repair costs
Punch listList, notice, completion costs
Schedule delayImpact analysis, costs
Safety correctionCitation, correction costs

Dispute Resolution​

If Sub Disputes:​

  1. Meet to discuss
  2. Review documentation
  3. Negotiate if appropriate
  4. Document resolution
  5. Escalate if necessary

Contract Provisions:​

  • Follow dispute resolution clause
  • Maintain records
  • Seek legal counsel if significant
  • Subcontract Agreement
  • Change Order Procedure
  • Punch List Procedure
  • Coordination Procedure

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