Construction Project Management Services and Construction Books
  • Construction Home
  • About Paul Netscher
  • +Construction Books
    • Successful Construction Project Management
    • Building a Successful Construction Company
    • Construction Claims
    • Construction Project Management: Tips and Insights
    • Construction Management: From Project Concept to Completion
    • An Introduction to Building and Renovating Houses
    • The Successful Construction Supervisor and Foreman
    • Designing your ideal home
  • Construction Management Services
  • Book Reviews
  • Contact
  • Blog | Construction Management
  • Site Map
  • Blog | Home Improvement
  • Index of construction articles
  • Useful Links
  • Index Home Improvement

Are your subcontractors profitable? Should you care?

14/7/2015

0 Comments

 
Picture
Image courtesy of renjith krishnan at FreeDigitalPhotos.net
Many General Contractors (Main Contractors) probably aren’t concerned whether their subcontractors make or lose money on their construction project. Why should it impact them? It would after all seem to be an anomaly, because if a subcontractor is making money it’s probably at the project’s expense? But no! 
​

In fact some GC’s make a habit of squeezing their subcontractors so they can be more profitable.
​#subcontractors #constructionmanagement

"Squeezing subcontractor so that your company makes more money is usually counter productive and often costs the project"

Why it’s helpful when your subcontractor is profitable

​A subcontractor who is profitable is usually a happy subcontractor, and a happy subcontractor is:
  1. more likely to treat your project with the importance it deserves, allocating their time and resources when needed
  2. more willing to assist and accommodate the contractor when required
  3. of course a subcontractor who makes money on your project and is looked after will usually want to work for your company again, possibly even giving you a better price than they provide your competitors on your next project, which could give you a competitive advantage

​But a subcontractor who loses money:
  1. may cut staff and equipment on the project to save costs, which may jeopardise the project’s safety, quality and schedule
  2. could take short cuts which could endanger safety and affect quality
  3. might use inferior, cheaper products
  4. often go to any lengths to lodge claims for additional costs and additional time, which if justified will cost the project money, however many might be spurious and merely an attempt to claw back some of the subcontractor’s losses, yet these claims will still tie-up the contractor’s staff and cost money to evaluate and refute them
  5. may become bankrupt on the project, meaning you will have to engage another contractor at additional costs and delays to finish the outstanding work
  6. won’t want to price your next project, or will add a premium to their price knowing that you are a difficult customer
Picture
"Subcontractors that become bankrupt often create a major headache for the project"

How you can assist your subcontractors

So why do subcontractors lose money and how can you assist them to make money?

Many smaller subcontractors aren’t astute as they should be, or don’t have the management skills and knowledge that they should. Some subcontractors are working on a number of projects at one time, trying to share their time and resources between their different projects and clients. They often don’t have the money for a large number of supervisors or project managers. Some General Contractors are happy to let their subcontractors bumble on, only taking action when there’s a major problem. I however, prefer managing my subcontractors and providing help and guidance when needed
"Be fair to your subcontractors, this includes paying them on time and not impeding their work"
​How you can help your subcontractors?
  1. Pay them on time and don’t unduly hold money due to them.
  2. If the subcontractor is producing poor quality work which has to be redone they will incur additional costs not allowed for. Point out poor work as soon as it’s noticed and ensure that the subcontractor has the appropriate quality systems in place before starting the project. What’s expected of your subcontractors? Do they know?
  3. Many subcontractors don’t have suitable staff or supervision on the project causing them to manage their works inefficiently, resulting in poor productivity and planning. Assist subcontractors where possible to plan and manage their contracts as efficiently and productively as possible. This doesn’t mean doing the work yourself, but it may mean calling them and pointing out potential problems which they haven’t seen. Managing your subcontractors. Ensuring your project is successful.
  4. Subcontractors often lose money when they don’t have access to their work area due to the main contractor or another subcontractor delaying them. Many subcontractors will, of course, claim for these delays. Ensure that your subcontractors aren’t held up by your work, other contractors or the client.
  5. Adjudicate subcontractor prices thoroughly to ensure that they understand the project, their price is market related and that they have the skills and resources to undertake the project.
  6. Another reason for not making money may be because they aren’t maximising their revenue, although, of course, you don’t want them doing this at your cost. Often though, subcontractors end up performing additional work for the client due to an increase of scope, or a change in the specifications, resulting in additional or more expensive items being required. If you’re aware of any reason for the subcontractor to request additional monies from the client you should, in general, be encouraging your subcontractor to claim for these, and if necessary even assist them. If the claims are successful the subcontractor not only earns more revenue, resulting in them making money, making them happier, but the contractor usually earns additional profit as a result of their mark-up on the subcontractor’s claim. An introduction to construction variation claims for construction project managers video 13 - Claims by Subcontractors against Contractors
It should be remembered that many subcontractors may be unsophisticated in their approach to claims and may require assistance to not only maximise the claim against the client, but also to present it in such a way that it’s not refuted by the client. By assisting the subcontractor you could also have some control in ensuring the claim is presented in such a way that your company, and project, doesn’t risk being in the position where it has to pay monies that should be covered by the client.
Picture

When your subcontractor is in trouble

​However some subcontractors will never make money on a project, due to their incompetence, or a contract price that is too low. (Selecting subcontractors for your construction project) I certainly don’t advocate you pay them money which isn’t due to them. Still, it’s important the Project Manager is aware of problems a subcontractor may have, particularly if they are losing money on the project, and takes mitigating actions, for example:
  1. tasks may have to be removed from the subcontractor’s scope to ensure that work can proceed according to schedule
  2. assist the subcontractor where possible, and when unnecessary costs will not be incurred
  3. start preparing a replacement contractor (this may take the form of getting quotations for the outstanding work and checking on the availability of other subcontractors), to ensure minimal time is lost should it become necessary to appoint another subcontractor
  4. try to ensure that the subcontractor completes all work they have started so, should they leave the project, there aren’t numerous unfinished tasks which will be difficult and costly to complete
  5. ensure major items of equipment and material already procured by the subcontractor are installed as soon as possible
  6. expedite the delivery of long-lead items supplied by the subcontractor
  7. ensure the subcontractor has not been overpaid, the retention money held is correct, and the bonds and sureties are valid
  8. understand your contractual rights so that if you terminate the contract it is done correctly

Subcontractors are vital to the success of many construction projects

"Successful construction projects are built by a harmonious team"
​Construction requires teamwork. Often subcontractors are vital to the success of a project. A delay or poor quality caused by a subcontractor usually impacts the project as a whole and negatively impacts the General Contractor’s reputation. Proper selection of subcontractors including correctly adjudicating their quotation will help minimise problems. Managing subcontractors properly is essential.
​#contractors #constructionmanagementtips #constructionsubcontractors

"This book is fun to read and full of examples of what to be aware of with project management." (Reader Amazon)
Picture
(Written by Paul Netscher the author of the acclaimed books ‘Successful Construction Project Management: The Practical Guide’ and ‘Building a Successful Construction Company: The Practical Guide’. Both books are available in paperback and e-book from Amazon and other retail outlets. This article is adapted from information included in these books.)

​Other similar articles by the author
Understanding what impacts your company’s reputation
Did you make a difference on your project today?
Choosing a subcontractor
​© 2022 This article is not to be reproduced for commercial purposes without written permission from the author.
construction management construction project management
0 Comments



Leave a Reply.

    As an Amazon Associate I earn from qualifying purchases

    Archives

    June 2022
    May 2022
    March 2022
    January 2022
    December 2021
    November 2021
    October 2021
    September 2021
    August 2021
    July 2021
    June 2021
    May 2021
    April 2021
    March 2021
    February 2021
    January 2021
    December 2020
    November 2020
    October 2020
    September 2020
    August 2020
    July 2020
    June 2020
    May 2020
    April 2020
    March 2020
    February 2020
    January 2020
    December 2019
    November 2019
    October 2019
    September 2019
    August 2019
    July 2019
    June 2019
    May 2019
    April 2019
    March 2019
    February 2019
    January 2019
    December 2018
    November 2018
    October 2018
    September 2018
    August 2018
    July 2018
    June 2018
    May 2018
    April 2018
    March 2018
    February 2018
    January 2018
    December 2017
    November 2017
    October 2017
    September 2017
    August 2017
    July 2017
    June 2017
    May 2017
    April 2017
    March 2017
    February 2017
    January 2017
    December 2016
    November 2016
    October 2016
    September 2016
    August 2016
    July 2016
    June 2016
    May 2016
    April 2016
    March 2016
    February 2016
    January 2016
    December 2015
    November 2015
    October 2015
    September 2015
    August 2015
    July 2015
    June 2015
    May 2015
    April 2015
    March 2015
    February 2015
    January 2015
    December 2014
    November 2014
    October 2014
    September 2014
    August 2014
    July 2014
    June 2014
    May 2014
    April 2014

    Categories

    All

    RSS Feed

    Copyright 2016 - The attached articles cannot be reproduced for commercial purposes without the consent of the author.
    The opinions expressed in the attached articles are those of the writer. It should be noted that projects are varied and different laws and restrictions apply which depend on the location of the contractor and the project. It's important that the reader uses the supplied information taking cognisance of their particular circumstances. The writer assumes no responsibility or liability for any loss of any kind arising from the reader using the information or advice contained herein.
    "I have what I consider some of the best books on construction management."


    Books are available from:
    Amazon.com
    Amazon.co.uk
    takealot.com

    kalahari.com
    Amazon.in
    Amazon.de
    Amazon.fr
    Amazon.it
    Amazon.com.au
    Powell's
    Fishpond
    uread
    bokus
    Amazon.ca
    Amazon.es
    Other retail stores


    Available in paperback or on Kindle

    ​"28 YEARS OF CONSTRUCTION PROJECT MANAGEMENT EXPERIENCE, DEVELOPING SUCCESSFUL CONSTRUCTION PROJECT MANAGERS AND BUILDING SUCCESSFUL CONSTRUCTION COMPANIES"

Construction Books

Successful Construction Project management
Building a Successful Construction Company
Construction Claims: A Short Guide for Contractors
Construction Management: From Project Concept to Completion
Construction Project Management: Tips and Insights
​
Build and Renovate Your Home With Your Eyes Wide Open
Book Reviews

Construction services

Construction Management Services
Paul Netscher
Construction Management Blog
​Home Improvement Blog

Contact
Developing Successful Construction Project Managers.

Building Successful Construction Companies.
30 years of construction project management experience
  • Construction Home
  • About Paul Netscher
  • +Construction Books
    • Successful Construction Project Management
    • Building a Successful Construction Company
    • Construction Claims
    • Construction Project Management: Tips and Insights
    • Construction Management: From Project Concept to Completion
    • An Introduction to Building and Renovating Houses
    • The Successful Construction Supervisor and Foreman
    • Designing your ideal home
  • Construction Management Services
  • Book Reviews
  • Contact
  • Blog | Construction Management
  • Site Map
  • Blog | Home Improvement
  • Index of construction articles
  • Useful Links
  • Index Home Improvement