The Hidden Cost of Delayed Payments

In the Oil & Gas and Power EPC industries, subcontractors are often the unsung heroes of large projects, delivering the expertise and execution required to bring massive undertakings to life. Yet, when it comes to payment terms, these same subcontractors frequently find themselves at the mercy of practices that are not only unsustainable but downright exploitative.

The Reality of Being the Bank

Stretching payment terms to 120–180 days—or longer—is becoming the norm for many contractors. For smaller businesses, this isn’t just an inconvenience; it’s a direct threat to their survival.

These delays effectively force subcontractors to act as the bank for clients who have already reaped the benefits of completed work. The subcontractor is left financing not just the operational costs of their work but also the broader project, shouldering risks that were never part of the agreement. Payroll still needs to go out every two weeks, often to dozens or even hundreds of workers. Vendors supplying critical materials expect their invoices to be paid promptly. Equipment dealers don't care about your client's payment schedule; they just want their lease or loan installments on time.

This financial juggling act takes a toll. It doesn’t just strain cash flow; it limits the subcontractor’s ability to grow, bid on new projects, or invest in better tools and technology. Imagine being in the middle of a project and realizing that the financial resources you need to complete it are tied up because the client hasn’t paid for previous work.

The mental and emotional strain compounds the financial burden. Business owners are stuck in a cycle of chasing overdue payments while simultaneously trying to deliver quality work on their current contracts. Every delayed payment creates a ripple effect: late payments to suppliers, tense conversations with lenders, and reduced ability to keep staff employed or offer competitive wages.

Ultimately, this system penalizes the very companies that are the backbone of project execution. The imbalance is glaring—subcontractors absorb nearly all the financial risk, while clients benefit from completed work without shouldering their fair share of responsibility. It’s not just unfair, it’s unsustainable for an industry already stretched thin.

Two Worlds: The Stark Contrast Between Clients

What makes this issue even more frustrating is the inconsistency across clients. On one hand, there are companies that pay promptly after invoice approval, as long as their processes are followed, a fair and efficient system that supports healthy partnerships.

On the other hand, some clients outright refuse to pay on time, benefiting from completed work while shifting 100% of the financial risk onto subcontractors. This disparity is glaring, especially when you see these same companies boasting about their quarterly financial successes. At the very least, a simple “thank you” would be appreciated for essentially financing their operations.

The Broader Impact: A Systemic Issue

This isn’t just about one bad actor or a handful of subcontractors feeling the pinch. It’s a systemic issue that ripples across the entire industry, affecting not just the companies involved but also the broader economy and the reputation of the sectors in question. When subcontractors are left holding the financial burden, the consequences are widespread and severe.

Innovation Stalls

When smaller players are forced to focus on survival rather than growth, innovation becomes an afterthought. Subcontractors that might otherwise invest in new technologies, advanced tools, or training programs for their teams instead find themselves scrambling to cover immediate costs. The result? The industry as a whole stagnates, with fewer advancements in efficiency, safety, and sustainability. This lack of innovation isn’t just a loss for the subcontractors, it’s a loss for the entire value chain, including the clients who depend on their services.

Erosion of Trust

The relationship between contractors and clients is built on trust. When clients routinely delay payments, that trust begins to erode. Subcontractors start to view contracts with suspicion, questioning whether agreements will be honored or whether their work will be valued. Over time, this erosion of trust leads to adversarial relationships, where both sides are more focused on protecting themselves than collaborating for success. It’s a vicious cycle that can derail projects and hurt long-term partnerships.

Decline in Project Quality

The financial strain caused by delayed payments often forces subcontractors to make difficult decisions. Cutting corners becomes a necessity to stay afloat—reducing crew sizes, stretching equipment beyond its limits, or using lower-quality materials. While these compromises might save costs in the short term, they jeopardize the quality, safety, and longevity of projects. For industries like Oil & Gas and Power EPCs, where precision and reliability are non-negotiable, these shortcuts can have catastrophic consequences.

Wider Economic Impact

The ripple effects extend beyond the immediate stakeholders. When subcontractors fail due to financial strain, local economies suffer. Jobs are lost, communities lose thriving small businesses, and the industry loses valuable expertise. Additionally, the inefficiencies and delays caused by this systemic issue increase overall project costs, driving up prices for end users and consumers.

The Need for Change

The systemic nature of this issue means it can’t be solved by any one company or subcontractor, it requires an industry-wide commitment to fair practices. Clients must honor payment terms and recognize the critical role subcontractors play in delivering projects on time and on budget. Without this change, the industry risks not just its reputation but its ability to attract and retain the skilled professionals it depends on.

What Needs to Change?

It’s time for the industry to recognize that delayed payments hurt everyone in the long run. Here are a few steps that could begin to address this issue:

1. Contractual Terms: Payment terms should be honored without exception. If the contract says 30 days, it should mean 30 days.
2. Accountability: Clients who habitually delay payments should face penalties or reputational consequences. Transparency is key.
3. Fair Payment Practices: Prompt payment systems, like those implemented by some clients, should be the gold standard.

A Call for Accountability

Subcontractors shouldn’t have to carry the financial burden for an entire industry. It’s time for clients, especially those boasting billion-dollar earnings, to step up and honor their commitments. Fair payment isn’t just about keeping businesses afloat—it’s about creating a more equitable and sustainable industry for everyone involved.

The question is: Will the industry rise to the occasion, or will subcontractors continue to shoulder the risk for someone else’s success?

Share your thoughts below—how can we push for change together?