Risk Management
New Platform Calculates Contractor, Owner Pay Practice Ratings
Levelset profiles designate firms as fast, medium and slow payers
Contractors have long struggled with slow payments. Management consultant PwC said in a recent report that it takes an average of 83 days for payment to reach contractors after invoicing. The uncertainty and costs of late payments impose incalculable costs and risks that are only partly limited by state lien and prompt pay laws. Until now there was little or no public airing of pay-related experiences with specific companies.
One firm that provides services to help manage and expedite payment through cloud-based software, Levelset, has unveiled a new platform designed to do what Glassdoor does for employers or Yelp does for restaurants.
The new part of Levelset’s website provides company profiles that rate general contractors and owners as slow, medium or fast payers. Levelset’s platform also allows companies to post review comments describing their experiences and offering advice to others.
The often-stinging, anonymous comments on the company profiles may reverberate as much as the speed ratings.
The often-stinging, anonymous comments on the company profiles may reverberate as much as the speed ratings.
If you work for one company, a subcontractor posted, “you need to plan for filing a lien.”
Another comment: “Slow pay, slow processing of change orders, some up to a year.” Yet another post claimed, “I still haven’t been paid for a job in 2017.”
Although a bad review will affect a company’s star rating on Levelset’s website, it won’t affect a company’s payment speed score. Levelset CEO Scott Wolfe Jr. said the scoring algorithm’s calculation of a payer as slow, medium or fast is separate from the reviews and is based exclusively on documents in the company’s database and public information.
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The payment speed score is based on past-payment history compared to other construction contractors.
One part is based on the type of slow- or nonpayment documents sent or filed. Another is the total number of documents exchanged. Still another factor in the score is whether the contractor has previously been associated with slow- or nonpayment.
The final score also takes into account the recency of detected payment issues. Of 23 companies and related entities profiled on Levelset that are among the top 20 on ENR's current Top 400 Contractors list, 14 are rated as slow payers, two as fast and seven as medium.
In an email to ENR, Wolfe said his company offers to firms that are subject to harsh criticism, an avenue to repair or improve their reputations.
A contractor can improve its image in a negative profile by inviting current or past subcontractors to post positive reviews about their experience, Wolfe said. On each profile, the company is invited to “improve your score and avoid potential payment issues with your subcontractors by requesting a preliminary notice or exchanging lien waivers,” which require the profiled contractor to create a Levelset account.
By using the platform in a free account, a reviewed and rated contractor can enter its own past projects where there were no slow-payment or nonpayment problems.
More generally, Wolfe pointed out that without using Levelset, a contractor can also burnish its reputation by being more upfront with its expectations and by paying quickly.
The American Subcontractors Association, which advocates for subcontractor payment rights, did not immediately offer a comment requested by ENR on the usefulness of the Levelset website.
The ratings and reviews are an interesting strategic move in a competitive market for software-based payment management services. Although there are comparatively few competitors dedicated solely to payment, other companies with more comprehensive management software for contractors provide payment-related features.
Levelset, based in New Orleans, and with a staff of 200 people, also has offices in Austin and Cairo. Last month, the company announced it had secured $30 million in new financing from Horizons Ventures, with participation from five other venture capital investors.
