For most companies engaged in contracting, entering into subcontracts is a routine necessity to ensure that a project is completed in an efficient and timely manner. Even larger companies with a healthy amount of resources at their disposal often find it advantageous to subcontract with another entity that specializes in the provision of a certain good or service. Of course, entering into an agreement with subcontractors can be risky, as their shortcomings or delays can cause a ripple effect across the entire project. Here are some tips for mastering subcontracts:
Do Some Research
Companies often go with the cheapest subcontracting option, which may end up working out fine but is not necessarily the best reason to make a decision. By entering into an agreement with a subcontractor, a company is putting its reputation on the line, so doing some research prior to selecting a subcontractor is imperative. Some firms may not have the bandwidth to get a job done if there will be any specific constraints or expectations, and it is clearly best to find this out before handing over the reins. A sufficient amount of due diligence must be conducted for each prospective contractor to ensure that it is the right fit in terms of ability and timing.
Consider Smaller Firms
In some cases, rather than go with the cheapest option, some companies may opt to go with a well-known firm as their contractor of choice. The tried and true option may well be the best option, but companies should be willing to give other businesses, especially smaller, locally-owned ones an opportunity. With government contracts, there are even specialized services and incentives for companies to recruit the services of smaller businesses for their subcontracting needs, so going that route could lead to some financial benefits.
Put it in Writing
Regardless of the nature of a subcontracting relationship, the terms of the agreement absolutely must be put into writing. The relationship between primary contractor and subcontractor is still a contract, the results of which can have pretty significant consequences. As with the primary contract, any subcontract must contain clear and concise information with respect to roles and responsibilities, as well as potential ramifications for breach or failure to perform as stipulated. The more specific an agreement is, the less likely it is for there to be unwanted surprises or issues down the road.
Given that a subcontractor’s performance is often vital to the primary contractor’s profit and reputation, it is always a good idea to offer attractive incentives to elicit the best firm for the job that will consistently deliver timely, high quality work. For example, these incentives can be bonuses for staying ahead of schedule, special renewal provisions for any subsequent subcontracting work, or the possibility of funneling additional work opportunities from other contracting partners. As with any contracting arrangement, primary contractors must ensure that they have a strong working relationship with all subcontractors to ensure the contractual obligations are met satisfactorily.