Six months after the San Antonio Spurs moved into their new home, almost a dozen companies were still haggling over payments tied to the $190 million arena. Similar problems dogged Ford Field in Detroit. The $500 million stadium became a political football, prompting several subcontractors to take legal action over payment.
The battles at both venues demonstrate the potential pitfalls of participating in high-profile sports construction projects. Industry experts say subcontractors, in particular, need to study the sources of funding, payment schedules and contingencies before signing on for such work.
"In many cases, these companies are dependent on a chain of payment that can stretch over a long period of time," said David Mendes, communications director at the American Subcontractors Association in Alexandria, Va. "A smaller company may have already put out the labor, rented equipment, bought materials, and they're stuck waiting for the check."
To avoid such problems, the association offers these tips for subcontractors:
Understand state laws regarding payment and funding for the project. Mendes suggests a Web site, www.statelocalgov.net, to determine what rules apply, depending on where the stadium or arena is being built.
Check to see whether construction is being paid from public sources (local and state government) or private ones (the team). Most large-scale jobs such as ballparks use bonds for funding. If that's the case, find out what the bond rules are regarding contractors and subcontractors. A good source: www.sio.org, home site of the Surety Information Office.
Learn whether a "pay-if-paid" clause exists. Such clauses determine whether a subcontractor receives payment at a certain time regardless or is dependent upon the general contractor receiving payment first. Translation: Is your company subject to payment delays while the general contractor and the project backer (local government, team, etc.) haggle over money? If it is, you need to know that before you begin work, not after. In some states, pay-if-paid clauses are illegal.
Establish whether lien rights apply. Some construction contracts allow lien waivers, which can take away much of a subcontractor's leverage during a dispute.
Follow the money trail. Most sports construction jobs draw on public funding, which means the financial aspects become public record. Keep abreast of those public funds: Has the money been appropriated? If not, think twice before delving into work that may cost thousands on the front end, with no money earmarked in return.
Trade associations and other industry groups can help decipher the ins and outs of construction terms and contracts. There are numerous resources on the Web, many of which can be gleaned from the ASA's site at www.asaonline.com.
Many firms make the mistake of calculating résumé value from working on a high-profile stadium before they calculate financial return and payment deadlines.
"People jump at having their name in lights," said Jim Riordan, director of the sport management program at Florida Atlantic University. "Maybe you've been hired to do the carpet in the suites and you expect to be paid every two weeks or whatever. Well, don't count on that. Be sure, so you're not surprised."
Many groups, such as the ASA, have local and national chapters. In many cases, members can find industry colleagues and discuss their experiences working with various general contracting firms through databases such as the National Business Practices Interchange.
"With projects this large, you're a very small piece of the pie," Riordan said. "So what you have to know is who's controlling the purse strings. You don't want to get caught up in the hoopla and find yourself waiting on checks."
Erik Spanberg writes for The Business Journal in Charlotte.
