If your company is ready to take on a large project with one of the world’s biggest general contractors for the first time, research should be the first step you take. That’s because the construction industry is fraught with cash flow issues, slow payment, and credit issues that can lead to nonpayment and other nasty payment disputes. This subcontractor guide to McDermott International should help you get your company ready to take on any project and make informed decisions before you sign the subcontract.
This guide includes information about McDermott’s company history, recent payment history, prequalification process, and payment process, along with links to valuable resources. You can also find three sure-fire tips to help you secure payment on any and every construction project.
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About McDermott International
McDermott International was founded in 1923 by J. Ray McDermott in Eastland, Texas, and has been an important piece of both American and global development ever since.
In 1942, McDermott contributed to the war effort by constructing dry docks and landing ship tanks for the U.S. Navy. In 1947, McDermott made history by building the first concrete oil platform not visible from land. Not long after, the firm built the first fixed steel platform in the Gulf of Mexico in 1950.
In 2018, McDermott merged with CB&I to create a vertically integrated onshore-offshore company. After some difficulty with incorporating the company, McDermott filed for Chapter 11 bankruptcy protection in 2020.
After a successful restructuring, the company exited bankruptcy, having eliminated $4.6 billion worth of debt, according to a June 30, 2020 press release.
With operations in the Americas, Europe, Africa, Asia, the Middle East, and Australia, McDermott International is one of the largest engineering, procurement, construction, and installation companies in the world.
The firm pulled in revenue of over $6.7B in 2018, and currently sits in sixth place on ENR’s Top 400 Contractors list for 2020.
McDermott’s primary market is oil and offshore, but they also operate in:
- Natural gas processing
- Hydrogen and syngas production
- Industrial storage
- Water and wastewater
McDermott provides process planning and development, fabrication, onshore construction, marine construction, procurement, and consulting services for these industries. Here are a few notable McDermott projects:
- Aasta Hansteen Spar Topsides – Norwegian North Sea
- Baton Rouge FCC Unit Turnaround – Baton Rouge, LA
- City of Albany Clarifiers – Albany, GA
- Water Tower Township of Northville – Northville, MA
- Khuff Gas Development Platform – Abu Dhabi
McDermott was incorporated in Panama and is headquartered in Houston.
Before Working With McDermott
No matter what kind of work you do or who you’ll be working with, it’s important to make sure both the project and the general contractor are right for you. Subcontractors and suppliers should always prequalify the general contractor before entering any kind of agreement.
You can determine whether or not a general contractor is a good fit by following these five prequalification steps:
- Review the GC’s payment history
- Review the GC’s credit history
- Learn from other subcontractors who have worked with the GC
- Get a feel for the GC’s payment process
- Review a sample subcontract
By following these five steps, you can make sure you’re entering into a worthwhile project with a reliable general contractor. Additionally, knowing how your general contractor handles payment helps you follow their processes more closely. This allows you to make informed decisions that ensure you get paid on time.
If you’re looking for a place to begin prequalification check out McDermott International’s payment profile.
McDermott has a payment score of 59/100, which gives them a C rating. Payment score is calculated by comparing McDermott’s recent payment history with thousands of records from other general contractors across the country.
Along with their medium payment score, one past subcontractor has given McDermott a contractor rating of four stars out of five.
Recent payment disputes
Within the last 12 months, McDermott International has worked on eight projects that attracted mechanics liens. Four of the mechanics liens involved contractors that weren’t directly hired by McDermott, the other four claimants being subcontractors to McDermott.
The most valuable mechanics lien on record claims over $6 million, and it was filed on December 9, 2019 by a company working on McDermott’s own property.
The second-most valuable was filed on an Entergy project in November 2019 to the amount of $3.4 million. McDermott was the general contractor on the project but didn’t directly hire the subcontractor.
McDermott’s Prequalification Process
After you prequalify McDermott and decide you’d like to work with them, the next step is to go through their prequalification process.
In order to get prequalified by McDermott, you need to go to their suppliers and subcontractors page.
First and foremost, McDermott wants to make sure the suppliers and subcontractors they work with meet their Code of Business Ethics and Conduct and Social Responsibility Policy. After you read through those policies, you can get in touch with the supplier support team at email@example.com. Include the following information when you reach out:
- What products do you manufacture, or what services do you provide?
- What separates you from your competitors?
- What aspects of your company will help McDermott win work?
- What certifications do you have that prove your quality standards?
- How do you track and ensure safe work practices?
Along with sending an email, prospective subs and suppliers should also fill out the Demonstration of Interest form. After you fill the form out, you will be contacted if your materials or services are a good match for a McDermott project. Your information will be retained for six months in the meantime.
In lieu of an online portal, suppliers and subcontractors should expect to interact with a local McDermott procurement office. If you have any questions about procurement or would like to locate your local office, contact the McDermott headquarters:
915 N. Eldridge Pkwy.
Houston, TX 77079 USA
Telephone: +1 (281) 588-6600
After you make contact with McDermott and send the information they request, your application will be logged in ISNetworld. ISNetworld is a software that connects suppliers and subcontractors with general contractors.
GCs use software like ISNetworld to streamline the prequalification process and keep track of the suppliers and subs they employ, including the notices, invoices, and other documents that come with each construction project.
McDermott has been using ISNetwork since 2019.
McDermott’s Payment Process
Getting a feel for McDermott’s general payment process is just as important as getting a feel for their prequalification process. Below, we’ll break it down into four steps: Before the job starts, applying for your first payment, applying for progress payments, and applying for your final payment.
Before work begins
After prequalification and before you step foot on the job site, there is still some documentation that you’ll likely need to provide. This generally includes your W-9 form, a copy of the subcontract, any bonds as required by the project, and your proof of insurance.
If you need to provide anything outside of the above items, your McDermott project administrator will let you know.
Applying for first payment
One of the biggest mistakes you could make at this stage is to provide incorrect or inaccurate information on your pay apps. In order to avoid any payment delays or communication breakdowns, make sure that you provide all the required information and that the information is 100% accurate.
Applying for progress payments
Progress payments help both GCs and subcontractors manage cash flow on a project and make sure everything is getting done on time.
Applying for progress payments on a construction project with McDermott is a similar process to applying for your first payment. Usually, you’ll need to give McDermott a thorough pay application and a detailed schedule of values.
Again, this isn’t the same for every single project. If you’re asked to sign a lien waiver or any other document, be sure to review it with a construction payment expert to make sure you have recovery options should you go unpaid over the course of the project.
Applying for final payment
When the end of the project comes into sight, it’s time to start thinking about applying for your final payment with McDermott.
Just like when you applied for your first payment, you’ll need to send a detailed pay app to McDermott. However, big general contractors often have a close-out process for their suppliers and subcontractors.
The project administrator will let you know which close-out documents you’ll need to fill out to apply for the final payment. In most cases, these documents will include a certificate of substantial completion, a completed punch list, and some form of lien waiver. You may be presented with a lien waiver in exchange for a promise of payment, but make sure you understand what you’re agreeing to before you sign anything.
3 Tips to Get Paid With McDermott
No matter how large, capable, and reliable the general contractor on your project is, you should always take steps to improve your chances of getting paid on time. That’s because the construction industry has some of the slowest payment times compared with almost any other industry.
On top of that, cash flow on any given construction project can be interrupted very easily, causing delays and disputes. To maximize your chances of avoiding dispute and nonpayment, you should do the following on every project:
1. Send a preliminary notice
Regardless of whether or not preliminary notices are required in your state, you should send one on every project. Preliminary notices notify the parties higher up the payment chain of who you are, what your job is on the project, and that you know what you’re doing. This alone tends to send your pay app to the top of the pile.
Additionally, preliminary notices are often a requirement to maintain your mechanics lien rights. If you’re in a state where prelims are mandatory, failure to send one could cost you a lot of leverage if you go unpaid.
2. Send invoice reminders
Especially on larger projects with tons of subcontractors and suppliers, you should always send invoice reminders to make sure your pay app doesn’t get buried under all the rest. To make sure you’re using invoice reminders as efficiently as possible, it’s a best practice to set up a regular procedure for sending them. This incorporates reminders as part of your payment routine for each project you participate in.
3. Preserve your right to file a mechanics lien
Every state has mechanics lien laws, providing one of the most powerful collection tools that contractors have at their disposal. However, there are often very specific requirements that you must meet in order to file one.
Depending on which state you work in, these requirements often include sending the proper notices, meeting the proper deadlines, and having a valid contractors license for the work you’re doing.