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Austin, Texas – (BUSINESS WIRE) – Rabbet, the leading provider of home finance software to real estate developers and mortgage lenders, has released its Annual Construction Payments Report 2021 with insights into the rapidly increasing costs associated with slow payments in the construction industry.
Based on a survey conducted in September 2021, general contractors and subcontractors estimate that the cost of variable payments for wages and bills passed on to real estate developers and financiers an additional $ 136 billion in project delays and higher bids from contractors.
In order to compile the data, Rabbet distributes a survey every year to general contractors and subcontractors who represent a large number of trades. This year’s report tracks how 94 US survey participants managed working capital, bid decisions, and project risk in the face of slow payments over the past 12 months. The data from 2021 were then compared with data from previous years.
The most important findings include:
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72 percent of the subcontractors would grant a discount for payments within 30 days
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67 percent of subcontractors say they chose slow payments not to bid on a project because of a general contractor or owner’s reputation for slow payments
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35 percent of all general contractors state that work has been delayed or ceased in the past 12 months due to delays in payment to crew members
General contractors were most likely to report that the top three impacts on their cash flows in 2021 were increased material costs (76 percent), longer material lead times (47 percent), and COVID restrictions (47 percent). When asked what would change if respondents could change a component of their payment process, many general contractors wrote that they needed automatic, instant, or direct payments.
“Unexpected supply chain uncertainty requires contractors, developers and lenders to take a collaborative approach to addressing price and deadline risks in 2021,” said Will Mitchell, CEO of Rabbet. “The pandemic has shed further light on existing process challenges and the need for transparency, automation and centralization in construction payment processes has never been greater. It is imperative for our industry that all parties involved in the construction payment process choose to streamline their processes to reduce the staggering $ 136 billion cost to the industry. ”
These findings support the findings from the 2021 Home Financing Report, in which 100 percent of home loan originators believed that human error posed a risk to their home finance processes.
To view the full 2021 Construction Payment Report, click here. You can find more information about Rabbet at www.rabbet.com.
About Rabbet
Rabbet provides cloud-based solutions for commercial lenders and real estate developers to centralize home finance, automate administrative tasks and reduce the time it takes to manage draws. Rabbet, based in Austin, TX, was founded in 2017 and provides transparency and efficiency in commercial construction projects worth billions of dollars.
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https://www.businesswire.com/news/home/20211109005312/en/Slow-Payments-to-Cost-the-Construction-Industry-136B-in-2021
