Best Practices for Managing sub-contractors

In most construction projects, General Contractors (GC) use sub-contractors.  Sub-contractors perform the majority of the work, but most Owners spend little to no time considering who their sub-contractors are.

While it is not prudent to get too far into who the GC’s sub-contractors are (doing so adds liability to you), it is prudent to establish some basic parameters for acceptance.

We need to keep in mind that the contractual relationship of the sub-contractor is expressly with the General Contractor.  This means that even if you establish parameters for acceptance,  the final decision should ultimately be the GC’s.

Here are a few requirements you should ensure all of your sub-contractors meet.

Insurance Requirements

Requiring that all sub-contractor’s hold a minimum level of insurance is a must.  There are many trade contractors with little or no insurance and some GC insurances include provisions that could put you at risk if an insurable event occurs.  Speak with your property insurance carrier to establish what minimum insurance requirements you should require from the GC and his subs.

Proof of Licensure

Request proof of licensing for sub-contractor.  This is not cut and dry, there are some trades that are not required to hold licenses.  Call your local Building Department to determine which trades require licensure and require that those trades that do, provide proof of licensure prior to award.

Sub-contractor agreements

Request copies of the sub-contractor agreement.  The GC should have a written agreement with every sub-contractor.  The GC may be hesitant to provide you with his subcontractor agreements.  This is so because part of the way a GC makes money is by marking up the trade contracts.  The point here is not to uncover overcharges or to negotiate price.  It is important to see that a formal agreement exists between the GC and the subs and that the provisions of the GC’s agreement provide adequate protections for the Owner.  If your GC objects to sharing his agreements allow him to redact any pricing information from the agreements first.  This allows you to see the terms of the agreement without revealing too much of the GC’s financials.

Communication

Establish communication protocols.  All communications should flow through the GC.  Don’t ever give directives to a sub-contractor.  You must respect that the GC has to retain control over the site.  If you give a trade contractor direction to make a change without the GC’s knowledge you will be compromising the GC’s control over the job. There could also be gaps in the direction you give which could impact other trades.

Its important to know just how much control is appropriate when managing sub-contractors. Too few controls could mean poor quality, unsafe working conditions, or illegally performed work. Too much control could delay your project, add cost to the work, or increase the owner’s risk.  Strike a perfect balance and your project will benefit greatly.

What level of controls have you placed on your subcontractors? Do you feel you had too much or not enough?

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