It’s inevitable on a construction project: you run into some specialized work that needs doing, and you just don’t have the workers with that kind of expertise. It’s time to go outside your firm and find a subcontractor who can get the job done.
But hiring a subcontractor is fraught with peril.
A 2017 study published in the Journal of Mechanical and Civil Engineering found that there are a whole host of issues why subcontractors cause construction projects to fall behind, including inadequate experience, inappropriate construction methods, poor time and cost estimating, lack of supervision and just generally being unreliable.
Hiring the wrong subcontractor or failing to get the most out of them has very clear consequences: you will fall behind schedule and you will have to pay more money to fix the problems caused by the subcontractor.
This step-by-step guide to hiring the right subcontractor and managing them efficiently will show you how to get top subcontractor performance and avoid losing money from subpar work and delays.
1. Determine Whether You Really Need a Subcontractor
Take a deep breath. Before you take the plunge on hiring a subcontractor, ask yourself: Do you even need one? Sometimes, the workers you need for a particular project have been right under your nose the whole time.
You only need a subcontractor if the work falls outside of the expertise area of your employees—or if the employees with that expertise are focused on a more important project. Otherwise, you’re just wasting money.
You should have a detailed record of exactly what skills your employees have, as well as good construction software that keeps track of what projects your employees are working on. This will help you better understand whether you can take care of this new project without going outside your firm and hiring a subcontractor.
RECOMMENDED ACTION: Create a spreadsheet of all your employees and list the expertise for each one. That way, whenever a project comes up, you can check what expertise is needed for the project against the employees you already have.
2. Find the Right Subcontractor the First Time
Your subcontractor should have a few key qualities, and you need to find out whether they have them as early in the process as possible: during the request for quotation (RFQ) process. When you put that RFQ out there, require that subcontractors provide sufficient detail in these areas:
Safety: Does your subcontractor have proof of safety compliance?
This is the first and most important criterion for any subcontractor. It is your responsibility to evaluate the safety record of the company you’re hiring. Along with asking for proof of safety compliance, check the OSHA website to see if they’ve been cited in the past.
Financials: Is your subcontractor financially solvent?
A subcontractor that is financially unstable may put you in a bind by, for example, running out of money to purchase materials for a project, which causes their work to grind to a halt and forces you to scramble to avoid delays.
Equipment: What kind of equipment does your subcontractor have access to, either through leasing agreements or actual assets?
If your subcontractor lacks the necessary equipment, they need to lay out in the response to the RFQ how they will get the job done. Make sure you list in the RFQ what equipment is necessary to do that job.
Staffing: How many people are on their staff and what’s their expertise? Who is going to be at the job site and what kind of hours can you expect them to be working?
All of these questions should be laid out before you pull the trigger on hiring them in order to avoid confusion and consequent delays on the job site.
Budget/schedule: Can the subcontractor draw up a complete budget and schedule for the project?
The budget should fully break out how much they are charging you, and any expected expenditures for materials and labor. You should check their estimates to make sure they are reasonable and that the subcontractor is not simply low-balling you to win the bid. Their schedule should also have a number of milestones and benchmarks that you can measure them against, not just a planned completion date.
Track record: Has the subcontractor ever tackled a project like this before?
Ask them for examples of previous work and references. If in the past they’ve run over budget, ended up weeks behind schedule or just put forward shoddy work, you can bet you’re going to have some headaches on your project.
But having strong references isn’t enough: Ask them for examples of work they’ve done that is comparable to your project. You don’t want a subcontractor that is about to bite off more than they can chew.
RECOMMENDED ACTION: If you’ve used a simple RFQ template in the past, scrap that and draw up a more detailed RFQ that requires detailed information as specified above. This may take a couple hours on your part, but it will be worth it to find a subcontractor that can stay on budget, on schedule and deliver top quality work.
3. Manage Effectively by Starting With a Contract
Once you’ve chosen the contractor, you need to manage them effectively. The first thing is to get them to sign a written contract—they should not be allowed on the job site without one.
A good contract will include the following:
- Payment terms: How much you will pay the subcontractor for their services, provided certain deadlines and parameters are met.
- Statement of work: A document laying out the exact scope of work, including deliverables and deadlines.
- Provisions: These are agreements that come into play if there is a breach of contract.
- Rights and duties: This lays out which party is responsible for what. For example, you may deny any responsibility for a subcontractor’s liability insurance, requiring that they get it themselves.
Once you have them under contract, you can invite them to the job site to meet your crew and perhaps sit in on a meeting or two. You’ll want them to become accustomed to how you like to do things and how you communicate with workers. This is important, because they’ll essentially be your employees for the time spelled out in the contract.
RECOMMENDED ACTION: Find some good contract management software to help you more efficiently manage the contracts you have with subcontractors.
4. Keep Your Subcontractor on Track
Check up on your contractors as you would any other employee. Treat them well, but ensure that they are meeting safety regulations and the terms of the contract. It’s much easier and less costly to correct issues at this stage than at the end.
Schedule weekly meetings with them. Find out what they accomplished in the past week, and ask them to give you benchmarks on what they expect to accomplish this week. Make them be specific, and then bring those benchmarks up at the next meeting. Use this opportunity to ask them what they need from you as well.
Open up lines of communication. Provide a way for them to stay in touch with you at all times, perhaps through a company-wide messaging app or live chat software that your employees use—or set up a communications channel especially for them.
RECOMMENDED ACTION: Inform your subcontractor that you will want to hold weekly meetings with them, and that you will want them to bring specifics on benchmarks and milestones to that meeting. Settle on a day, and hold them to it.
5. Evaluate the Subcontractor’s Performance
A good subcontractor is tough to find, so when you find one, hold on to them. The next time you need similar work done, you can go straight to them and know they’ll do the work right the first time without having to go through the hassle of the RFQ process.
The key to determining whether your subcontractor is worth staying in touch with is to evaluate them against certain key performance indicators (KPIs).
Your KPIs can be whatever you choose, but they should make sense for your business. Here are some common ones:
- Whether they stayed on budget
- Whether they met the schedule they set out at the beginning of the project
- How the quality of their work matched up to what you expected
RECOMMENDED ACTION: Sit down with some of your key people to determine what kind of KPIs should serve as the standard by which you judge subcontractors. How strict should you be on adhering to schedule? Or staying on budget—is there any wiggle room at all? What standards will you measure their quality against?
Once you agree on these KPIs, evaluating subcontractors will be straightforward, and you can be confident in your assessment.
Next Steps to Take to Maximize Subcontractor Performance
This guide should have given you a clear picture of how to find the right subcontractor, manage that subcontractor efficiently and then evaluate their performance afterward. Now, it’s time to put those lessons to use.
- Create a spreadsheet of employees along with their areas of expertise so you can spot opportunities to use your own workers instead of subcontractors.
- Create a detailed RFQ customized for your business’s needs.
- Draw up key performance indicators (KPIs) for your business that you will use to judge contractor performance.
- Find subcontractor management software.
Stumped on how to sort through all those software options to find the one that’s right for your business? Reach out to one of our software experts for help.