Textura’s Construction Payment Management system (CPM) promises to increase efficiency, eliminate gridlock, and automate payments on construction projects, making it easier for subcontractors to invoice and get paid for their work. That sounds nice in theory — after all, getting paid in construction is notoriously difficult — but how does the Textura CPM actually perform in the real world?
What is Textura CPM?
Textura CPM is a platform for managing invoices and payments on construction projects. The software integrates with ERP systems to allow subcontractors to submit pay applications and lien waivers online, and receive payments electronically after approval. It even supposedly allows GCs to pay subtier contractors directly.
Oracle purchased Textura in 2016 for $663 million, planning to integrate the CPM into their Primavera project management platform.
Unfortunately, is near impossible to find information from Textura that specifically explains to subcontractors how they might use the CPM, the tangible benefits of doing so, or the associated costs. This seems odd, considering that more than 500,000 subcontractors have used Textura’s software products, compared to only 8,000 general contractors, owners/developers, and architects (according to textura.com).
Despite this enormous disparity in the number of end-users, many of Textura’s functions and features seem to exist largely, or solely, to benefit general contractors. Even Textura’s Early Payment Program, which sounds promising at first glance, ends up passing additional costs on to subcontractors.
Take, for example, Textura’s Client Success Stories, the majority of which highlight the benefits to general contractor or construction management firms.
General contractors use CPM to request payment and lien waivers, and to keep track of their subcontractors. In order to do so, those subcontractors must pay for, and use, the CPM software. Because of this, it is important for the subcontractors – the real end-users – to understand the platform. Though information is difficult to find, this article will attempt to provide subcontractors an overview of Textura’s CPM, and things that it may be worth keeping an eye on.
How to use Textura CPM
CPM is designed to help ge with three categories of functions within construction payment management:
- Invoicing and Payment
- Compliance Management
- Lien Waiver Exchange
While the CPM user-interface seems a bit dated, the value proposition extended to subcontractors appears to be providing the subcontractor the ability to migrate manual paper processes (sending invoices, lien waivers, and checks) through the internet.
One of the primary features of the CPM is the ability to exchange lien waivers digitally. Through the CPM lien waiver exchange, Textura purports to solve the problem of GCs not wanting to pay until a lien waiver is received, and the subcontractor not wanting to give a lien waiver until a payment is received by providing an “escrow-type” solution. Whether or not this is an actual problem, or requires an escrow solution is debatable at the very least. In any event, the CPM lien waiver exchange works in the following manner:
- The subcontractor sends a payment application to the GC electronically through the CPM
- The GC approves payment and requests a lien waiver
- The sub signs and uploads an unconditional lien waiver to the CPM, where it waits in a virtual holding chamber. At this point, the GC can only view an unsigned copy of the waiver.
- The GC instructs their bank to process a payment, via ACH, to the subcontractor’s bank. 72 hours after the GC sends payment instructions, payment is considered completed and Textura releases the signed copy of the unconditional waiver to the GC. In order to prevent the waiver from being released, the subcontractor must deliver a Notice of Non-Payment to Textura within 60 hours after the GC sends payment instructions. If that does not happen, payment is considered completed and the waiver will be released, whether or not the subcontractor actually receives payment.
A few things to note here: First, Textura advertises “standardized lien waiver [forms],” though it is unclear who drafts and provides these forms. It may mean that, through the use of CPM, GC’s are able to mandate the exact form and text of the lien waivers that subcontractors must use and deliver through the CPM. As lien waivers have significant impact on the waiving party’s rights (and ability to collect payment) it’s important to always read and understand lien waivers before signing.
Second, as McLennan puts it, “CPM does include traps for the unwary subcontractor”, including the 60/72 hour waiver rule. If the Notice of Non-Payment is delivered 61 hours after payment instruction are issued, the waiver will still be released. Furthermore, it is unclear how the subcontractor would know that a GC has issued payment instructions, thus they may not know when their 60-hour limit runs out. Additionally, general contractors have the ability to set parameters that prohibit subcontractors from modifying lien waivers.
How Much Does Textura CPM Cost for Subcontractors?
Every party sending waivers, invoices, or payments through CPM must have a license, and somebody must pay for each of those licenses.
According to subcontractor documents from RD Olson, a general contractor based in California, Textura charges subcontractors 0.22% (22 basis points) of contract value, with a maximum fee of $3,750. Sub-subcontractors and suppliers also charged a fixed fee of $100 per sub or supplier contract. At 0.22%, the maximum fee would kick in on a contract worth about $170,000.
Though it is the general contractor that usually requires that each party use Textura’s platform, they rarely cover the cost. In 2012, the American Subcontractors Association (ASA) met with Textura to express concerns raised by ASA members. Specifically, GCs were waiting until after a subcontractor had agreed to a specific bid to tell them that Textura would be used on the project, and that subcontractors would have to pay for the software themselves. Subcontractors are essentially asked to bid on a project without being fully aware of the costs they would need to incur.
Subcontractor Complaints About Textura CPM
These complaints, and the Terms and Conditions of Textura’s CPM, were examined by the American Subcontractors Association Attorneys’ Council, and their findings set out in an interesting article by Dan McLennon published in the May 2015 issue of The Contractor’s Compass.
Subcontractors’ complaints about CPM generally fall into three broad categories. The first category is the complaint that it is unfair to force subcontractors to assume the payment for part of the GC’s project management overhead costs by forcing subcontractors to pay for CPM use. Subcontractors are required to pay usage fees, subcontractor deferral fees, and subcontractor service fees – however, as noted in Mr. McLennon’s article, the contract does not specify what, exactly, those fees amount to. In a round-about way, inquiries into the amount of the fees are directed to Textura salespeople. Since discussions with salespeople are not included in the contract itself, the contract does not specifically state what subcontractors will end up paying for the use of CPM.
In the view of many subcontractors, as if being forced to pay for at least some of the GC’s project management overhead wasn’t enough, it adds insult to injury that the platform they are forced to pay for is used by GCs to delay payments or squash subcontractor rights. While the arguments related to the baseline rigidity of CPM are really (at least partially) a misdirected complaint about how GCs use the platform, rather than a complaint directed to CPM itself, it’s telling that CPM allows the GCs to act in this manner. In the words of the ASA Attorneys’ Council:
the [CPM] system allows general contractors to be unduly rigid in the processing of payments, and user experience is often that the generals blame the system and use it to delay issuing payments. . .
Textura allows GCs the ultimate control as to setting up the acceptable documentation and requirements, so the ultimate responsibility for the payment delays rests with the slow-paying GC. CPM, however, provides a neat scapegoat to which the GC can point to justify those slow payments, to the frustrations of the subs ultimately paying for the use of the platform.
In “the low-bid world,” as McLennon puts it, it’s easy for general contractors to exercise their leverage over parties lower on the contracting chain. In most cases, parties want to be fair, but sometimes, at some point in the contracting or construction process, they turn to trying to out-leverage the other project participants. As such, it is important for construction participants to be vigilant.
For subcontractors who work on razor-thin margins especially, it is important to know as much as possible regarding project expense and payment timing before starting a job. It may be beneficial to ask the GC ahead of time if CPM use is required, and if so, who is responsible for which costs.
Likewise, it’s always important to read lien waivers before signing, especially if the waiver is unconditional. If using the CPM system, once an invoice or pay application has been submitted for approval, diligent follow-up is likely necessary – there are only 60 hours from the time the GC sends payment instructions to their bank until the lien waiver is released, whether payment has actually been made, or not.