Friday, September 25, 2009

General Contractors: Beware of Your Subcontractors!

In a certain sense, I hate writing this blog post. It suggests a lack of trust and confidence between parties who are working side by side, and who may have worked together for years. However, in this economy, many are caught by surprise when a business goes awry. There are ways a general contractor can prevent nasty surprises from subcontractors, and vice-versa.

1. Make sure your subcontractors are in good financial shape. You might even want to go as far as doing a credit check on them. You need to know that they can pay their workers, provide proper equipment and have enough manpower to handle the job.

2. Check subcontractors' insurance policies and make sure they are current with high enough limits to protect you. If they have employees, be absolutely sure that they carry worker's compensation insurance.

2. Find out what else they're working on. If subcontractors are over-extended they can cause delays and throw off the whole project.

3. Insist on lien waivers once subs are paid. Nothing is more frustrating than getting a call from an owner who is fuming because a sub has filed a mechanic's lien on the property.

4. Consider a "pay when paid" clause in your contract. I'm not necessarily advocating them, but it is difficult to pay subs when the GC has not been paid by the owner.

5. Have a good contract that spells out your agreement with your subcontractors. It is better when the expectations of the parties are clear from the beginning, including methods and materials to be used.

It is unfortunate that one has to be wary when hiring subcontractors, but they reflect upon a general contractor's business reputation. For that reason, it is better to exercise caution.