If I learned only one thing from researching Textura and its Construction Payment Manager (CPM), it’s that easily digestible information about the product is hard to find.
It 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.
Take, for example, Textura’s Client Success Stories. Of the 11 success stories, nine are about general contractor or construction management firms. (The other two highlights are an employee-owned grocery store and a pharmaceutical company.)
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.
Construction Payment Manager (CPM)
CPM is designed to help GCs with three categories of functions within construction payment management:
- Invoicing and Payment
- Compliance Management
- Lien Waiver Exchange
This video from Textura’s youtube account outlines the purported benefits of the CPM for subcontractors. While the CPM user-interface seems a bit dated, or at least the video does, 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.
How Much Does the 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. 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 (1) Textura would be used on the project, and (2) how much Textura cost, and that subcontractor would have to pay for it themselves.
CPM Lien Waiver Exchanges
One of the primary features of the CPM is its lien waiver exchange. 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.
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.