Before Accepting "Takeover"
Work
Takeover work can be a good opportunity, but there are several issues you
should examine before agreeing to step in and complete a project. If a
takeover project has been offered to your firm, here are some things you'll
want to investigate.
Background of the Dispute
Find out why the owner and the original contractor parted ways. Was it for
cause? If so, can you avoid the same issue? Did the owner have difficulties
paying the contractor on time? If this was the case, can you say for sure
that it will be different for you if you take on the project? Obviously, you
don’t want to commit your resources to a takeover project only to end up
waiting a long time to get paid. One possible way to avoid late payment
issues is to insist on a retainer up front or regular payments for completed
work, on a weekly basis, for example.
Current Status of the Work-in-Progress
A careful inspection of the worksite conditions, the worksite's access and
egress and the quality of the work performed so far can help you estimate
expenses and how much profit you are likely to make on the work.
Adequacy of Current Insurance Policies
Contact your insurance agent for confirmation that your current policies
include coverage for takeover work. Walk away from the project if you don’t
have or can’t obtain coverage since the financial risks would be too high.
Willingness of Subcontractors to Stay on the Job
Clarify before accepting a takeover job whether some, all or none of the
subcontractors will be staying on the job. Some subcontractors might be
reluctant to continue working if the original contractor failed to pay them
for the work they’d already performed. If that’s the case, it might be
necessary for the owner to step in and pay the subcontractors what they are
owed. If the subs have been paid on time, inspect their work to be sure that
it meets your standards. Then, you can ask them to stay on if you wish.
Takeover work can be profitable. However, be sure to seek input from your
professional advisors regarding due diligence before you agree to take over
an existing project. We’d be happy to help you in any way we can; please
contact us.
Work-In-Process is provided by
Somerset for our clients and other interested persons upon request.
Since technical information is presented in generalized fashion, no
final conclusion on these topics should be made without further review.
For additional information on the issues discussed,
please contact
Ken
Hedlund,
Jay Feller,
Steve George,
Chris
Mayfield or
Rebecca Ogle
of our
Construction & A/E Team.
This document is not intended or written to be used, and cannot be used,
for the purpose of avoiding tax penalties that may be imposed on the
taxpayer.
Somerset CPAs,
P.C.
3925 River Crossing Parkway, Third Floor
Indianapolis, Indiana 46240
317.472.2200 • 800.469.7206 • FAX 317.208.1200
www.IndianaConstructionCPAs.com
