Ideally, your relationship with your subcontractors should be as dependable as your relationship with your employees. One way to ensure that is to have an agreement with your subs that defines your relationship so you both know what to expect.
Your Subcontractor Agreement
The agreement (which can be similar to that in your employee manual) should have two parts.
The first part is a broad agreement that covers all potential jobs with that sub and his crew. Include what you expect from them, such as:
- A firm price quotation for each job; if you don’t know what the price is for their work, you cannot build an accurate price for your potential client.
- Fixed figure quotes on all work other than minor changes; no Cost Plus or T & M quotes for work to be done.
- Providing proof of all required licenses, bonds, and insurance, as well as proof of financial competency; without these, they won’t be allowed on your jobs.
- Showing up at the worksite on the agreed-upon time, and what a legitimate reason is for not showing up as scheduled.
- Following the same work and safety rules that you expect of your own crews; keeping the job site clean, no use of loud radios, drugs, smoking, alcoholic drinks, and no side agreements made with the clients, etc.
Paying Your Subcontractor
You’ll quickly find that if you agree to pay your subs every two weeks on the job, you will attract the best people. The last thing subs need is a general contractor telling them, “I can’t pay you until I have been paid.” That approach is both foolish and dishonest. In many states, it’s become illegal, unless otherwise specified in the contract. Don’t do that to your subs. And don’t make them ask you for payment. Fair payment alone will go a long way in getting and keeping good subs working for you.
When you pay your subs, it should always be by company check. Never, never pay any sub, or for any labor, with cash. Company checks have your company name, your business address, and a number on each check. Checks not only provide proof of payment to the sub, but they also provide a record that protects you and your business. Make no exceptions. Paying subs or labor by cash is unethical at best, and you are just asking for a visit from state or federal auditors.
If you ask subs to do design work of any kind, you should be willing to pay for that service. If you use one sub’s designs but hire another sub to do the work, you owe the first sub for his design work. You want to be paid for the work you do; you should also pay others for the work they do.
Always be fair. If a situation comes up that is not in your subcontractor agreement, err on the side of the subs. Remember, they have families and a business to take care of just like you do. Trying to chisel a sub out of a dime is going to cost you dollars in the long run. Many general contractors never figure that one out and wonder why they can’t find and keep good subs.
Keeping Your Subcontractors
When asking subs to give a quote on a job, if you get the job – they get the job too. Don’t shop around on them. Once a job is quoted, expect the price to hold for that job. Your subs should know you (and the employee manual) well enough to know they should come to you about price increases at any given time.
It should be clear to your subs that if they want the “big jobs,” they must be willing to do the little stuff as well. If they are not willing to come out for a small job, find a new sub for your bigger jobs. When you do call them for small jobs, then you must be willing to pay a minimum trip charge.