Is the above a more “cynical” version of the Golden Rule or one that accurately explains how the business world works? As Geoff Pender reports for the Sun Herald it is the latter as local contractors evidently agreed to what amounts to loan shark contractor terms to get a piece of the BP pie. I work for none of these companies so I’ll comment here as an expert and say that holding retainage to maximize the float is very common. Also common is 10% retainage and even then generally not on cost-plus labor contracts.
Insurance companies delay paying claims to max out the float. Certain mortgage companies did likewise after Katrina, holding insurance proceeds paid on damaged/destroyed homes, in one case in which I am personally familiar, in an amount far more than the related mortgage.
This story also made it on MPB this morning. While SEACOR subsidiary O’Brien’s Response Management’s treatment of its subs certainly appears to smell (as does homegrown Yates and a host of other generals for that matter), I’ll add there is another element in play that makes this story as reported in the media to this point incomplete as there are complexities present that I do not see accounted for in the reporting. I will say that greed was the driver of a 20% retainage clause in the subcontract in question. There is no telling what other devils are buried in the details.