Waiting for slow payments is a well-known thorn in the side of subcontractors. It’s the associated difficulties presented by slow payment, however, that take this waiting from an annoyance to a significant problem. Subcontractors often required to float project costs, and waiting for payment from the GC can stress working capital and cause severe cash flow problems. In extreme cases, this can even lead to a business’s failure.

In a move purported to address this issue, and benefit subcontractors, Textura Corporation teamed with Greensill Capital (and Turner Construction) to roll out their Early Payment Program™. The Early Payment Program, or EPP, ostensibly provides subcontractors with a set, earlier date for payment and, accordingly, a way to avoid cash flow and balance sheet problems, and reduce risk.

But, does the EPP really do what it says it does or is it merely smoke and mirrors, and another way to benefit the top of the payment chain at the expense of a “tax” on subcontractors? Does Textura’s Early Payment Program actually provide a real benefit, or is it simply a way to make subcontractors pay for an uncertain result? And, further, is Greensill’s support for the program based on a misunderstanding of construction payment and Textura’s role?

Early Payment?

The main benefit of the Early Payment Program touted by Textura is that subcontractors can rely on a date-specific payment, supposedly made 30 to 90 days earlier than it generally would be. The process works as follows:

  • A participating GC (one using the Textura’s CPM and who has chosen to use the EPP) enrolls their project and eligible subcontractors in the Early Payment Program.
  • Subcontractors decide whether or not they wish to participate in the program, and if so, agree to specific invoice payment terms (one of which is the payment of a fee tied to each particular invoice amount).
  • Subcontractors submit invoices to be approved.
  • Invoices are approved by the GC; and
  • Payment is made to the subcontractor using EPP funds.

Given this process, it appears that there may be several holes in the ability of the Textura Early Payment Program to provide practical benefits. Or, at least, several questions are raised as to the ultimate efficacy of the program and its ability to create the benefits to subcontractors it alleges.

Fee for Payment

While nobody expects to get anything for free, it’s not too much to ask to not be forced to pay extra to get what you deserve. While the time-value of money is all well and good, and understood by subcontractors who are routinely forced into untenable cash-flow positions, there are limits to what amount of payment can reasonably be foregone in an industry that already operates on razor-thin profit margins. While general margins change from year to year, construction industry participants routinely bring up the back of the pack in terms of overall profit margin. When the overall profit margin for a year can be minuscule, the imposition of a 1% (or greater) fee to get paid in a timely manner can be cost-prohibitive. Sacrificing a percentage of money due in order to get the money more quickly can sometimes be a good idea, but the value of that mechanism is tempered when there are already protections available to guard against slow payment.

It appears that the program is being financed by the subcontractors at a rate 0f a little over 8% per year. There is already protection built into the law for the express purpose of protecting subcontractors (and GCs and sub-subs) from slow payment. Pay-when-paid clauses, which nicely set forth an aspect of the problem as stated by Textura (payment to a sub withheld until some time after payment from the owner is received by the GC), have routinely been held by courts to only limit payment for a reasonable time – not indefinitely while a GC waits for payment. Further, prompt pay statutes have strict payment timelines which, if not followed, can result in the imposition of large interest and penalty awards. While prompt pay statutes may sometimes be limited in applicability, or promptness of payment required, they can also provide a date by which subcontractors can expect payment – without an associated fee. While Textura notes that the fee associated with the Early Payment Program is generally less than 1% per invoice, the exact basis for the fee is difficult, if not impossible, to find. With the potential to be charged more than 1% per invoice, the EPP may prove too costly for the benefit provided.

While it’s unclear exactly how much earlier payment will be provided, Textura alleges that by using the Early Payment Program, a subcontractor could expect payment approximately 45 days earlier than would otherwise be expected. When this 45-day timeline is coupled with the 1% fee for use, it appears that the program is being financed by the subcontractors at a rate 0f a little over 8% per year. This seems like a pretty good deal for the GC, at the expense of the subs the program is purporting to help.

What’s The Actual Time Period?

While Textura estimates that subcontractors will be paid an average of 45 days faster through use of the Early Payment Program, the payments are dependent upon invoice approval, EPP funding, GC buy-in, and use of Textura’s CPM.

The promise of early payment is being touted by Textura as a way to grease the wheels of increasing subcontractor buy-in. While subcontractors are the end-users that ultimately pay for Textura’s CPM platform, there has been some tension between Textura and those parties. In fact, it can be questioned as to whether Textura is a friend or foe to subcontractors, or even whether it’s business model is antithetical to support from subcontractors, such that it is creating its own hurdles.

While the concept of increasing the speed with which subcontractors get paid is a good one, it appears that the EPP may miss the boat on the actual upstream root cause of the payment delay. Once a subcontractor has completed work for which a pay-app has been submitted to the GC, the subcontractor is required to wait for the “review and approval” period prior to receiving payment. This review and approval period can represent the majority of the payment delay experienced by subcontractors but is completely untouched by the Early Payment Program. As noted above, under the EPP, the system for submission and approval of the invoice is unchanged. Once the sub submits the invoice through Textura’s CPM, it must then be approved by the GC in a manner apparently unchanged despite whether or not the invoice is subject to the EPP. There is no impact on the GC’s approval timeline of a submitted invoice. This potential stumbling block to “early” payment was noted by ASA President Brian Johnson in his March 2015 letter to members. Without addressing the root cause of the slow payment issue, the Textura Early Payment Program is already facing an uphill battle for efficacy.

Is Greensill Capital’s Funding and Involvement Based on Misunderstanding Construction Payment and Risk?

Greensill Capital has deep knowledge of supply-chain financing, especially in an electronic or technology-assisted arena. Comments made by CEO Lex Greensill during Textura’s 2015 Q1 Earnings Call prompt the question as to whether Textura’s CPM’s ability to limit financial risk has been overestimated.

While Textura’s CPM is clearly providing a way for the electronic processing of invoices and the associated payments, its ability in the second area may be limited. . . When asked about why a similar product to the EPP hasn’t been used in the commercial construction industry previously, despite successful use in other industries, and how the Early Payment Program’s current roll-out may be related to innovations presented by Textura’s CPM, Mr. Greensill pointed out two things: 1) technologically enabled electronic invoicing and payment processes; and 2) financial risk mitigation regarding liens. While Textura’s CPM is clearly providing a way for the electronic processing of invoices and the associated payments, its ability in the second area may be limited to an extent beyond that contemplated.

Mr. Greensill noted that:

I wouldn’t be able to be comfortable . . . committing and delivering payments or financing if the liens that the subcontractors hold had not been managed and released, and we had confidence that that worked. And so I guess through CPM, Textura cracked that nut. And that is really the kernel of what enabled us to be able, together with Textura and Turner, to actually deliver this into the marketplace for the very first time.

There are a couple of potential issues with this statement.

1) By allowing GCs to use and push through their own lien waiver forms, without respect to the requirements of individual particular states, and by allowing GCs to mandate their subcontractors electronically execute a lien waiver to get paid irrespective of other potential considerations, Textura may be facilitating the exchange of ineffective or unenforceable lien waivers; and

2) Textura’s reach extends only to 1st tier subcontractors.

The first point clearly outlines a potential flaw in the position that Textura’s CPM has cracked the nut of eliminating the financial risk presented by mechanics liens, even only as related to 1st tier subcontractors. The second point requires a little deeper dig into the construction payment process. Mechanics liens are not limited to 1st-tier subcontractors, or even subcontractors in general. As well as sub-subs, suppliers and equipment renters also have mechanics lien rights. While, presumably, most of the waivers presented by GCs to their subs through Textura’s platform include some language to the effect that the sub has obtained its own waivers down-the-chain, if those waivers have not been obtained, or are ineffective in some way, the lien exposure risk has not been mitigated. Any attempt to completely manage and mitigate mechanics lien risk on a construction project necessarily requires the adoption and buy-in of every party on the project. Since Textura’s CPM is limited in application to subcontractors, there is still significant lien risk on projects managed through Textura’s CPM.


Pretty much everybody agrees that the general burden on subcontractors to float project costs is a problem in construction payment. And, attempts to fix this problem are welcome. Textura’s Early Payment Program, while potentially a step in the right direction and some sort of olive branch to the subcontractor end-users Textura has had trouble retaining, may be ineffective to correct the underlying issue with delayed payments.

Further, in addition to potentially not solving the underlying issue, it is charging subcontractors for the pleasure of not solving it. Coupled with the fact that the capital company underwriting the endeavor may have overestimated Textura’s ability to mitigate the risk of liens, the Early Payment Program may be more bluster and less substance.

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