Choosing a subcontractor or contractor may sound simple to some, but for those who are not seasoned in doing it, there can be devastating consequences throughout the project if the wrong one is selected.
For twenty of my thirty-five years in the construction industry, I interviewed, evaluated, and awarded contracts to subcontractors. Having a contractor do what they said they were going to do and meet your expectations is where the rubber meets the road.
What I’m about to share with you comes from my own experience. We are not going to discuss contracts at this time. Instead, I would like to focus on some key points you can think about next time you are choosing a contractor.
Consequences of selecting the wrong subcontractor
The consequences of having the wrong contractor can vary depending on the size and scope of the project and also whether it’s a contractor choosing a sub or an owner choosing a contractor. Here are a few key things that can go wrong if you choose the wrong person for the job.
1. Your reputation can be in question. A good general contractor prides himself or herself on having a solid team of subcontractors for the success of the project. The project owner can be a great referral for your portfolio and help you get your next job. A bad subcontractor can put that in jeopardy.
2. Scheduling delays. Staying on schedule is critical for any construction project. A good subcontractor understands they want to be ahead of schedule early on, since picking up time at the end of the job can sometimes be next to impossible.
3. Liens. A legitimate subcontractor can carry himself or herself financially between payouts. Some contractors get themselves behind, essentially robbing Peter to pay Paul. If a material supplier has not been paid by a subcontractor on your job, a lien could be placed on the property.
4. Defects. The primary causes of construction defects are materials, workmanship, and design. It may seem obvious that a contractor should have good workmanship, but they should also be well versed in the materials they are using and knowledgeable about design and what will or will not work.
5. Abandoning the job. For one reason or another, contractors sometimes pack up their tools and walk off a job site. This is more likely to happen when a large down payment was paid before any work was started or when the contractor requested more money than work completed on a payout request. Never allow the payments to get ahead of the work completed.
Key points for choosing a subcontractor
Since selecting the right subcontractor for the job is so important, here are a few tips I have learned over the years that may help you in your decision-making process.
1. Experience. Does the contractor have adequate experience in the work intended to be completed? Is the work their specialty? Checking references on completed jobs, their bank for financial stability, and material suppliers for good standing can help you develop a clear picture of the contractor.
2. Scope of work. It is critical for you and the contractor to agree in writing on the complete scope of work the contractor is to perform. It is also important to know if the subcontractor is going to sub out any of their work. A schedule of values should accompany any serious quote, with a price breakdown for payout request purposes and to aid in comparing other pricing.
3. Comparing apples to apples. This can be one of the most challenging parts of choosing a contractor. When reviewing proposals, make sure each contractor is bidding the same thing. It will take some work to sort it out, but it is time well spent. When you begin to get clarification of what is and is not included in each proposal, you may find the initial low quote is actually the most expensive.
4. Pricing and unit pricing. Getting the best price for the work to be performed is the goal. Getting unit pricing for possible additional work to be performed should be considered if you anticipate the possibility of additional work. For example, if you have a site with poor soil conditions or a possible buried rock or foundation, you may want to get unit pricing on:
The building site is always the wild card. Extras for preparing the site for the building can be very expensive and can sometimes cost as much as the building itself. It is critical to control the cost on extras as much as possible.
5. Safety record. A construction project has its share of dangers, which is why job-site safety is one of the most important aspects of a construction project. A strong safety culture that starts with management and flows down to the field employees is critical. Keep in mind, a project that results in a serious injury or death is devastating and can even shut down the job.
6. Insurance. You probably know contractors should have insurance, but it is also important their insurance is adequate for protecting the owner and any possible upstream party. A contractor that has insurance with an insurance carrier who understands construction can help secure the proper coverage for the project. Sometimes, when a subcontractor is subcontracting work and there is a downstream risk transfer in the contract, the bottom tier subcontractor is not properly covered for the project.
Always remember, your power to negotiate is before you award the contract. It takes work and wisdom to select a contractor. Trust is always earned and never permanent. Gather as much information as you can and seek wise counsel if needed to build your team. It will make a world of difference in the success of your projects.