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Real Estate & Property Law

: a View from the property line

PART TWO: How to Spot and Fix 15 Contractor Overbilling Errors

By William G. Gammon

Ok, so we've recovered from the first seven contractor overbilling errors as outlined last week, now as promised, I am filling out the list and telling you about errors # 8 through 15.

(8) Use of non-essential personnel. As a rule of thumb, you shouldn't have to pay for your contractor's on-the-job training of new hires, or for personnel that didn't directly affect your community's services or projects. Be sure and examine your contractor invoices for excessive labor charges and inquire as to who exactly was working, on what, and when. If trainees were used on a project, demand that a reduced rate be charged for their time since by default the trainees would not possess the same skills as that of a seasoned professional.

(9) "Rounding Up" the Hours. Be sure that invoices follow the correct procedure as detailed in the contract for billing hourly time, whether it be in hourly, quarter-hour, or other increments. Contractors may sometimes "round up" the time spent on a project both accidentally and purposefully. If your contract doesn't specify incremental billing, it would be a good idea to institute that change upon the next extension or modification of same.

(10) Overbilled Travel Time. Like for personnel, avoid rounding up of travel time, or excessive travel charges. Ask the contractor for schedules to show trip routes and/or mileage to prove or disprove any excessiveness on travel billables.

(11) "Past Due" Amounts already paid and/or non-existent. Make sure that any invoice alleging past due amounts is reviewed for accuracy. Sometimes, payments can get delayed in the mail, or the contractor's accounting system generated the bill before applying payment, etc, which might indicate a past-due when the condition doesn't really exist.

(12) Double-billing for back ordered items or work not yet performed. Some contractors as a strictly housekeeping issue and for accounting purposes, will enter charges in their system to bill you for parts that are backordered or for labor that is scheduled but not yet performed. Then, when the parts arrive, or the work is performed, the contractor makes another entry, whether by accident or otherwise. This double-billing can be costly if the contractor is not aware of its own internal accounting procedural mistake. Review invoices for any incidence of this billing error and discuss with your contractor.

(13) Late fees or penalties not in the contract. This is simple. Don't let your contractor bill you for items not enunciated or detailed in the services contract.

(14) Improper tax calculations. Some contractors may charge sales tax for items that are either non-taxable, or tax-exempt depending on the taxing regulations for your state or municipality. If you suspect that you are paying sales tax incorrectly, have your accountant or an auditor verify that the sales taxes assessed are proper.

and finally...

(15) Used vs. New parts. Be careful if a contractor is billing you for new parts but installing refurbished ones. This can become a big profit center for contractors by saving money on the purchase then marking up for "new" to their clients. Check invoicing for product identifiers and descriptions to ensure that the parts installed can be verified in the field.

*Thanks to the Insider's Guide to Managing Community Associations for excerpts used in creating this article.

Full post as published by a View from the property line on November 17, 2006 (boomark / email).

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