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Ohio’s Cuyahoga County Considers Eliminating Payment Bonds

A change in the law would have a big impact on small businesses, says the American Subcontractor's Association.

Sat October 12, 2013 - Midwest Edition
Construction Equipment Guide

Ohio’s Cuyahoga County is the latest jurisdiction to attack subcontractor payment protections.

On Aug. 12 and 21, the county’s Public Works, Procurement and Contracting Committee heard testimony and debated an ordinance proposed by the County Executive and the Director of the Law Department, which would eliminate payment bonds on county construction projects.

In an Aug. 19 letter, ASA called on committee members to oppose the proposed ordinance. “On a typical construction project, a subcontractor extends a significant amount of credit to its prime contractor,” ASA Chief Advocacy Officer E. Colette Nelson said. “The subcontractor pays its employees and suppliers before it submits an invoice to its prime contractor customer. Slow or no payment from its customer can rapidly erode the cash flow of a subcontractor and disrupt its ability to continue operations. The smaller and less experienced the subcontractor, the more rapidly its operations will be devastated by slow or no payment. This is particularly problematic for small and emerging subcontractors on projects for construction owners that aggressively encourage their prime contractors to subcontract to historically under-utilized businesses.”

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