How to backcharge a subcontractor the right way
Every superintendent has a story about the backcharge that went nowhere. The drywall sub's lift gouged a finished corridor, your painter fixed it, you deducted $2,400 from their next pay app — and three months later it's still "in dispute," the sub is holding up their closeout docs, and the PM is splitting the difference just to get the job closed. Nine times out of ten the problem wasn't the facts. It was the process: no written notice, no chance to cure, no backup for the number.
The free backcharge notice template above fixes the process. It gives you a backcharge notice that covers notice, cure, and cost in one document, and a backcharge log that tracks every one from issued to collected.
Not legal advice. Your subcontract controls whether and how you can backcharge. Read the notice, cure, cleanup, and backcharge clauses — and the deadlines in them — before you send anything.
The backcharge process, step by step
- Document it before anyone touches it. Photos with dates, location, and scale. Note it on the daily report. Tell the sub's foreman on site the same day and write down who you told.
- Check the subcontract. Find the notice requirement, the cure period, who must receive notice, and the markup allowed on backcharges. The prime contract usually has a parallel clause — AIA A201-2017 §2.5, for example, gives the owner the right to carry out work the contractor neglects after a 10-day notice-and-cure period — and your subcontract likely flows something similar down to your subs.
- Send written notice with a cure period. Describe the deficiency specifically, cite the spec or drawing, set the cure deadline, and say what happens if they don't cure. The template calculates the cure deadline from the notice date.
- Give them the chance to fix it. Unless it's a safety emergency, let the responsible sub correct it. A cured deficiency is a closed problem and a preserved relationship.
- If they don't cure, correct it and track the cost. Use your own forces on T&M tickets or another sub on a separate PO. Keep sign-in sheets, material receipts, and equipment records.
- Issue the backcharge with backup. Labor, material, equipment, other, and markup per the subcontract. The template subtotals by category and applies your markup %.
- Log it and collect it. Enter it on the Backcharge Log, update the status as the sub responds, and deduct accepted amounts on the next pay application.
What goes in a backcharge notice
| Section | What to include |
|---|---|
| Notice | Backcharge number, notice date, notice type (notice of deficiency, backcharge invoice after cure, emergency correction, final), delivery method. |
| To / From | The responsible subcontractor and the person the subcontract says receives notices. |
| Contract / spec reference | Subcontract number, the cleanup / right-to-cure / backcharge clauses, and the spec section or drawing the work violates. |
| 1. Deficiency or damage | Type, exact location, date discovered, who found it, and a specific description. "Damaged walls" loses; "12 LF of finished GWB gouged by scissor lift at corridor 2-110, 4'-6" AFF" wins. |
| 2. Notice to cure | Cure period, calculated cure deadline, who corrects it, and the plain-language consequence of not curing. |
| 3. Cost breakdown | Line items by category with quantity, unit, and rate; category subtotals; markup %; total. |
| 4. Photos & documents | Photo numbers, daily report reference, T&M tickets, invoices, and whether each is attached. |
| 5. Acknowledgement | The sub's response (accepted, accepted in part, disputed, will correct), accepted amount, recovery method, and signatures. Signature acknowledges receipt only unless they accept. |
Common reasons for backcharges
- Damage to other trades' work — lifts striking finished walls or installed conduit, core drilling without slurry containment, overspray, broken glass.
- Failure to clean up — the most common and most disputed. Issue written cleanup notices first; backcharge only after the cure period passes.
- Defective or nonconforming work — slab out of tolerance, work not per spec, failed inspections requiring rework by others.
- Unperformed scope — items in the sub's scope that you had to complete.
- Schedule and manpower failures — supplementing a sub's crew after a written notice of default.
- Warranty call-backs the sub won't respond to.
Why backcharges get disputed (and how to avoid it)
No notice or no chance to cure
If the subcontract requires notice and an opportunity to cure and you skipped it, you've given the sub their best argument. Even when the subcontract is silent, notice is simply fair and makes the charge stick.
No backup
A lump sum with no hours, rates, or receipts is a number the sub will negotiate down. Signed T&M tickets for your own forces — or the correcting contractor's invoice — make it a number they can't.
Wrong sub
On a busy floor, three trades could have damaged that wall. Photos, the daily report, and a witness statement from the foreman prove who did it. When you truly can't tell, cleanup and damage are sometimes split among trades per the subcontract — say so in the notice.
Waiting until closeout
Backcharges that appear on the final pay app as a surprise look like leverage, not cost recovery. Issue them when they happen and deduct them monthly.
How the Backcharge Log works
One row per notice: BC number, responsible sub, description, type, notice date, cure days, status, and dollars. The log calculates:
- Cure By — notice date plus cure days; highlighted red if past due and the sub hasn't responded.
- Disputed $ — issued minus accepted, when the status is Disputed or Partially accepted.
- Balance to Collect — accepted minus collected: money the sub agreed to that you haven't recovered yet.
- Days Open — from notice until Collected or Withdrawn; amber over 30 days, red over 60.
The summary shows total issued, accepted, disputed, collected, amounts awaiting a response, and your recovery rate. A by-subcontractor table rolls up each sub's totals — the number you want in front of you at the monthly pay-app review and at closeout.
Backcharges and pay applications
Accepted backcharges are normally recovered as a deduction on the sub's next pay application, shown as a separate line so the math is visible. Some contracts let you offset against retainage, and small ones sometimes get paid by check. Whatever the method, record it in Collected $ only when the money actually comes off — that keeps Balance to Collect honest.
If you're tracking backcharges alongside daily reports, T&M tickets, subcontracts, and vendor invoices in separate spreadsheets, the backup is always somewhere else when you need it. Field PM keeps field reports, photos, T&M, POs, and subcontractor pay apps on the same job, so the evidence for a backcharge is already attached. Start a free 30-day trial.
Related free templates
- Time & Material Ticket — the signed backup for correction work by your own forces
- Daily Field Report — record the damage the day you find it
- Punch List template — track deficiencies before they become backcharges
- Notice of Delay Letter — when a sub's failure delays the job
- Pending Change Order Log — keep backcharges and change orders separate and both tracked
- Markup vs. margin calculator — set your backcharge markup correctly
- Browse all free construction templates
