Back Charges in Construction Contract: Case Study of Airport Project

Abstract

One of the problems causing subcontractors to have back charges is the lack of contract clauses in the subcontract document to prevent from back charging. This paper identifies the items that are frequently back charged and determines the primary reasons for subcontractor back charges during the construction of the passenger terminal complex of the international airport project. The authors collected 16 items that were back charged, worth USD 658,000. The authors collected and analyzed contract documents, site reports, emails, meeting minutes, and photos to investigate the back charge claims of the prime contractor to the subcontractor. From this case study, the authors found the primary reasons for back charges were a frequent change of construction managers, subcontractor’s lack of knowledge about the contract clauses, lack of proper documentation, and late notice of back charges made to the subcontractor. The analysis and study findings can help subcontractors to understand the potential sources of back charges, identify contract clauses in overcoming back charges, be aware of the possible abuse of back charges, and make more informed decisions before signing a subcontract document.