Subcontractors are a vital part of the construction industry, and it’s easy to see why. They offer contractors the ability to have a flexible workforce that scales with each project they take on without the overheads of employing a full-time workforce. You can’t overstate the value of the expertise subcontractors offer, either; there are always tasks on a project that require specific specialist skills.
However, managing subcontractors can be tricky. It’s essential to adhere to best practices regarding subcontractor management to ensure you hire the right people for the job and avoid any potential confusion or conflicts that might cause delays or affect work quality. This article will look at the eight best practices for effective subcontractor management.
Best Practices for Subcontractor Management
Let’s explore the best practices regarding subcontractor management so you can understand why they’re crucial to your project and what to do at each stage of the process.
Define the Scope of the Job and Set Expectations
The initial step in managing subcontractors is to define tasks and set clear expectations. The more detail you can add at this stage of the process, the easier it will be to get accurate bids, compare bids, and manage subcontractors once the project is underway.
In terms of scope, think about the tasks that you need subcontractors for, what standards you expect from them, what qualifications or licenses they require, and the timeframe for the job. You should also be clear about your payment terms at this stage. This includes invoicing procedures and any bonuses you might be offering or penalties that may apply.
Finally, you should lay out your expectations regarding change orders so both parties know what to do if you need to modify the job scope and manage expectations if things don’t go as planned.
Always Get Multiple Bids
It always pays to get bids from multiple subcontractors to manage your budget and quality control effectively. Failing to do so may result in overpaying for work, making it difficult to manage budgets and stay competitive. Additionally, as the project progresses, having bids from multiple subcontractors gives you a safety net should the subcontractor you initially hire be unable to complete the task.
When comparing bids, consider a range of possible factors and the price quoted for the job. Is time an essential factor for you? Will the quality of the work be the same for all subcontractors? Sometimes, the cheapest quote won’t be the best value for money for the project as a whole when you consider the extra factors, especially if there’s a risk of having to redo work.
Of course, given all these factors, comparing bids can be challenging. One thing that can make a difference is to be thorough and specific about what you ask for when you get quotes. You can also consider creating your bid form with all the information about the project and tasks you require by using HR software so that you have like-for-like information to compare.
Do Due Diligence
When you think you have the right subcontractor for the job, remember to vet them and get references from previous employers before you commit to hiring them. You should check the quality of their work and gauge their reliability and capacity to stick to deadlines.
It’s also vital to do due diligence by checking qualifications, licenses, and insurance, including liability insurance and worker’s compensation. This is a critical part of the process for several reasons. Firstly, it’s down to you to provide a safe working environment for your workers, including ensuring that you’re only hiring competent, safe people to work on sites you run.
Secondly, if an accident were to happen, you must have the relevant documentation in place to prove that you’ve done everything possible to ensure the safety of your employees. It also means you should perform due diligence and record the accident.
Write Clear, Detailed Contracts
Once you’ve negotiated the terms, it’s vital to ensure you take the time to set everything in stone before the work begins. A good contract should be as detailed as possible while allowing for projects to change, and the scope of work may need to be adjusted.
First, start by ensuring that you have basic information, such as:
- The tasks required
- The quality of work you expect
- The timescale for the project
Next, you need to ensure that the financials are in line. Confirm the payment amount, when you will make the payment and any bonuses you offer. You also want to be specific and open about penalties for late work completion or substandard work.
You’ll also need to ensure that you put in provisions for what to do if the scope of the work changes. Make sure subcontractors you hire are happy to take on a little extra work if required so they don’t leave you in the lurch.
You should also ensure that you have negotiated the cost of additional work to manage your project budget effectively. Finally, ensure that the contract has provisions to help you resolve issues if they arise.
Perhaps the best way to do this is to consider standardizing the contracts you make with your subcontractors by utilizing a human resource information system (HRIS) to ensure you clearly have all the information set out before you start.
Manage Risks
Construction projects always involve risks, from supply troubles and adverse weather to quality control and staffing problems. You need to be prepared for any eventuality to mitigate financial risks.
However, remember to apply diligence to subcontractors you’ve hired, too. It’s easy to forget, as it’s not unreasonable to expect your subcontractors to take care of every aspect of the job they commit to do for you—and good subcontractors will do that. But at the end of the day, your project is affected if things go wrong.
When using subcontractors, ensure you have contingency plans if they can’t complete the job. It might be a problem at their end—unexpected illness, for example—or it might be due to delays at your end resulting in scheduling conflicts. Either way, ensure you have a backup plan if they can’t finish the work.
Pay on Time, Every Time
As sole traders or small businesses, many subcontractors may lack the resources or cash flow to handle late payments. They might be relying on the money they get from you to buy the materials they need for the next job or to pay their mortgage.
If you want to build positive relationships with your subcontractors, take the lead in ensuring they get paid on time. Set out payment terms in your contracts and adhere to them rigorously.
Remember that, as sole traders or small businesses, they probably don’t have accounts departments either, so consider sending out reminders for them to send in invoices. Alternatively, you may want to set up self-billing arrangements to automate invoicing to avoid chasing up busy subcontractors.
Evaluate Performance and Quality Control
As a contractor, it is your responsibility to ensure the quality of your project. Your name and reputation are on the line. Your customers don’t know or care that you’re using subcontractors. They see subcontractors as employees you pay differently.
That means you need to ensure that you check all subcontractors’ work thoroughly. Set up systems to sign off work completion, including quality control. However, this isn’t just about you approving work—include subcontractors in the process, too.
Give your subcontractors feedback on how they’ve done things, and, if necessary, let them know if you’d like them to do anything differently. This openness will help resolve issues and improve quality in the future.
Build Positive Relationships
High-quality subcontractors are incredibly valuable. If you find a reliable person or company that consistently does quality work on time, make sure you take the time to build on that relationship.
Set up meetings with subcontractors you regularly use to ensure you’re both happy with how things are going.
Finally, remember to keep communication channels open at all times. Always make yourself available to help your subcontractors by phone or through a digital contact center platform, and allow communication through SMS or email. Doing so will help you resolve any issues and avoid conflicts.
Summing Up Subcontracting
Subcontractors can be invaluable. They can give you access to specialist skills that your employees may lack; they help you manage costs by giving you access to a flexible workforce without the overheads associated with full-time employees; they let you grow your construction business by enabling you to take on more significant projects without overstretching your team.
However, they also require careful management. Take the time to prepare appropriately. Get multiple quotes, find the right subcontractors, and set the terms in stone before you start. By doing this, you can build lasting relationships and be confident in your ability to take on any project and deliver quality work to your customers.