Best Practices for Managing sub-contractors

In most construction projects, sub-contractors represent the majority of the Cost of Work.  Most residential Owners spend no time considering who their sub-contractors are.  While it is not prudent to come between a General Contractor and his subcontractors, it is prudent to establish some parameters for accepting a subcontractor.

In considering the best practices for managing subcontractors, we need to keep in mind that the legal relationship is expressly between the General Contractor and the sub-contractor.  While you can and should establish parameters to govern who the General Contractor can hire, the final decision should ultimately be theirs.

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.

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.

Request copies of the sub-contractor agreement.  The GC must 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 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.

Establish communication protocols.  All communications should flow through the GC.  Dont 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 gave 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?

For more tips on how to manage your project, check out my articles on www.luisgile.com.