Subcontractors often play an important part in the success or failure of construction projects. It’s therefore vital to ensure that not only is care is taken to select the right subcontractor, but also to ensure the subcontractor is managed correctly.
Unfortunately often subcontractors are selected only on the basis of price – the subcontractor with the lowest price is awarded the project.
This is often the same problem when clients, owners and developers select the General Contractor or Main Contractor where the cheapest price is often the deciding factor. Failure to select the right contractor for the project and only considering the contractor’s price is often a recipe for disaster which can result in delays, additional costs, disputes, poor quality and even accidents. Choosing the wrong contractor can lead to regret long after the project is complete.
Questions to ask your contractor or subcontractor
Of course it’s no good just asking questions and accepting answers. It pays to do further research. Ask to see their financial statements, contact their previous clients, and even a google search may turn up problems.
The more that can be discovered about the contractor before they are awarded the work the better. Not only can the capabilities of the contractor be researched, but it may be possible to discover their strengths and weaknesses which will, in turn, enable them to be better managed on the project.
Past performance, however, is not always indicative of how a contractor will perform on a project and I have, on occasion, had good subcontractors that have performed poorly, due to them being over-committed on other projects, which meant they had insufficient and poor quality resources for my project.
Adjudicating subcontractor and contractor quotes
Sometimes contractors don’t adjudicate their subcontractor’s prices correctly. When comparing quotes are you comparing ‘apples with apples’? A price may appear cheap but when all the factors are taken into account the total price may be more expensive than the other prices.
When adjudicating prices check that the supplier, contractor or subcontractor has:
In addition, check that you will not incur any additional costs to manage the subcontractor.
Compare the price with prices received from other contractors. A price substantially lower than the others should set off alarm bells and it is worth investigating why the price is so low. Sometimes contractors are desperate for work and submit a low price – this however comes with risks and a contractor whose price is too low may be tempted to take short cuts to make money – using inferior materials and skimping on resources. A contractor whose price is too low may also become bankrupt part way through the project which will void warranties and cause delays and additional costs to the project while a replacement contractor is appointed.
Of course there is nothing wrong with awarding the work to the contractor with the lowest price (even if their price is much lower than other prices), providing that you have ensured that they are the right contractor for the project, that there are no hidden extra costs which will be incurred later and that the contractor can deliver the project for their quoted price.
It is important that the documentation included with the request to price (request to tender) is complete and includes the terms and conditions for the project as well as the full scope of works, the project conditions and the obligations of both parties. Projects often incur additional costs and even sometimes lengthy contractual disputes because of poor contract documentation which is incomplete or ambiguous. (I will discuss subcontractor documentation in a future article.)
Selecting the right contractor, adjudicating their price thoroughly and appointing them using an enforceable contract which is complete with all the project’s terms and conditions can usually avoid delays, additional costs, extra management time and disputes later. Don’t simply select the cheapest contractor – it may be a very expensive mistake!
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