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Hiring a subcontractor can be a strategic way to manage risk, improve efficiency and deliver successful projects. For general contractors (GCs), however, the stakes can be high: The subcontractor team can make or break a timeline, budget or client relationship.

In this article, we’ll discuss the value of hiring the right subcontractors. We’ll also weigh inherent risks and provide actionable steps so contractors can navigate the hiring process with confidence.

Subcontracting vs Self-performing

Self-perform construction has its strengths. It gives general contractors more control over quality, scheduling and processes. However, it can also require a heavy investment in full-time workers, equipment and other resources — which might not make it the best fit for every project.

Subcontractors, on the other hand, can handle defined scopes of work which allows contractors to focus on overall project management and timelines. They can also help fill the gaps caused by labor shortages.

Builders facing labor shortages are to complete projects. Subcontractors allow contractors to scale labor up or down depending on demand, avoiding the overhead costs of maintaining a large full-time team during slower periods. 

Subcontractors vs General Contractors

Before we go any further, it might be important to clarify that subcontractors and general contractors have two distinct roles.

A subcontractor is hired by a general contractor to perform specialized tasks (such as electrical, plumbing, or drywall). Unlike general contractors, who oversee the entire project, subcontractors focus on specific scopes of work. 

Benefits of Subcontracting

Subcontractors can offer general contractors the flexibility and expertise needed to tackle common construction challenges. 

Addressing Labor Shortages

Hiring subcontractors allows GCs to effectively address labor shortages by staffing a project without the need to recruit full-time employees or carry overhead. This approach provides flexibility and scalability, enabling contractors to adjust their workforce according to project demands and timelines. Subcontractors can be hired on a project-by-project basis, which is particularly advantageous when facing tight deadlines or handling multiple projects simultaneously.

Managing Costs

Rather than maintain a full staff year-round, GCs can bring in subcontractors during busy seasons or for larger projects. Since subcontractors often handle their own staffing, materials and equipment, they may help reduce costs and align expenses with project needs. This can help GCs meet deadlines, ensure quality and stay within budget.

Mitigating Risks

Subcontractors also help reduce risks, particularly in areas that require specialized expertise. By assigning tasks to experienced subcontractors, general contractors might avoid issues that arise from undertrained or overstretched crews. 

That said, GCs should implement a standard prequalification process for subcontractors and use clear agreements to minimize risks such as delays, safety concerns or quality issues.

How to Hire a Subcontractor: Key Steps

We’ve put together the following steps to help GCs hire subcontractors with confidence. These steps are designed to help construction teams work with subcontractors to meet project goals while minimizing potential risks.

1. Clearly define the project scope.

Contractors will often divide the prime contract into specialized scopes of work for different types of subcontractors. For example, an electrical subcontractor’s scope might include installing all wiring, rough-ins and final connections, along with defined deadlines for each stage.

Clearly defined scopes also help with setting expectations for quality and timelines. During this step, GCs can take measures to reduce misunderstandings and increase accountability by providing subcontractors with detailed documentation like blueprints, specifications and deliverables.

How to Define the Scope Before Hiring Subcontractors:

• Break the project into clear, defined tasks or stages.
• Specify timelines and deadlines for each task.
• Identify the materials, tools and resources needed.
• Define quality standards and expectations for each part of the project.
• Clarify who will be responsible for permits, inspections and safety compliance.
• Document any special requirements, such as certifications or specific expertise.

This process might differ depending on the project and subcontractor, but generally includes the steps listed. GCs might also want to consider key questions while defining the scope, such as:

• ��What specific tasks need to be completed, and which subcontractors are best suited for each one?
• ��Are there any particular resources, materials or equipment needed for these tasks?
• ��What safety and compliance measures need to be addressed within the scope of the subcontractor’s work?

2. Carefully vet potential subcontractors.

Once the scope is defined, the next step is finding the right subcontractors to execute the work. With reputation and relationships on the line, GCs should consider thoroughly prequalifying potential subcontractors.

General contractors typically evaluate candidates for their qualifications, reliability and safety practices. 

This could include: 

• Reviewing credentials like licenses and certifications
• Checking references, reviews and completed projects
• Asking for proof of safety training or certifications

By thoroughly vetting subcontractors, general contractors can mitigate subcontractor risks such as delays, safety incidents or poor workmanship.

3. Draft a clear subcontract agreement.

The next step is to formalize the relationship with a subcontract agreement. A well-structured agreement can help clarify everyone’s roles and obligations, making it easier to avoid misunderstandings. This kind of clarity can go a long way in reducing the chances of delays, financial hiccups or conflicts as the project moves forward. 

Subcontractor agreements will vary according to the project and scope, but typically provide clarity on: 

• Tasks, deliverables and deadlines for the subcontractor
• Responsibilities for providing labor, equipment and materials
• Payment schedules tied to clearly defined mailestones
• Procedures for managing changes to the scope of the work
• Safety responsibilities and compliance requirements
• Processes for resolving disputes
• Conditions for terminating the contract

4. Establish standard communication and collaboration practices.

Another important step in hiring a subcontractor includes setting up clear communication and collaboration practices. Having these outlined and agreed upon before the project starts can help improve productivity, resolve conflicts early and ensure veryone is on the same page. 

These practices will manifest differently depending on each GC, subcontractor and project, but could include: 

• Hold a kickoff meeting to train the subcontractor team on communication processes.
• Schedule regular progress meetings to discuss updates, address challenges and reinforce timelines.
• Use project management software to centralize communication, track progress,and keep documentation accessible to all stakeholders.
• Create structured workflows for raising and resolving issues promptly.

Managing Risks When Hiring Subcontractors

While hiring a subcontractor might be the best choice for a project, it also introduces risks. Below are common subcontractor risks like safety compliance, managing project changes and avoiding disputes and steps that can be taken to avoid them. 

Ensuring Safety Compliance

General contractors are responsible for ensuring that subcontractors meet safety and compliance standards. OSHA regulations specify that prime contractors for workplace safety, even when work is subcontracted.

Mitigating this risk can come down to the vetting process. According to OSHA, “Vetting subcontractors carefully is essential to ensuring safety and avoiding legal penalties.” As mentioned, many contractors require subcontractors to provide proof of safety certifications or conduct site audits to verify compliance.

Preparing for Change

Even the most well-planned construction projects are subject to unexpected changes. These could be due to shifts in client priorities, unforeseen site conditions or schedule adjustments.

As a result, GCs need a system in place to handle changes effectively. Establishing clear change management processes is one way to achieve this. For example, formal change orders can be used to document updated expectations, reassign responsibilities and specify changes in project cost and schedule.

Preventing Disputes

To prevent and mitigate disputes with subcontractors, general contractors benefit from:

• Using Detailed Contracts

  Contracts that clearly define roles, responsibilities, deliverables and processes for managing changes typically help set clear expectations.

• Holding Regular Progress Meetings

  These meetings can provide opportunities to address challenges early and ensure alignment on project goals.

• Maintaining Open Communication

  Transparent and consistent communication help reduce misunderstandings and keep all parties informed throughout the project.

Managing these risks can be a large part of working with subcontractors, but it’s not the whole picture. Beyond that, building strong relationships often depends on how well contractors and subcontractors work together toward successful outcomes.

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Using Technology to Improve Subcontractor Selection & Management

Using prequalification tools and  project management software can greatly simplify subcontractor management and improve project outcomes by: 

• Standardizing the subcontractor selection and onboarding process
• Centralizing workflows to keep contractors and subcontractors aligned
• Sharing documents and plans to ensure subcontractors are working from the latest project information
• Tracking progress in real-time to prevent delays and miscommunication
• Streamlining communication with a single platform for updates and issue resolution

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