Today, very few general contractors self-perform the construction work that actually builds the structure or facility. General contractors buy trade labor through subcontracts. During the bidding process, various trade contractors offer up bids for various sections of work. These bids are what gets placed into the general contractor’s price to the owner in the contractor’s bid.
At this point, there is no contract between the general contractor and the trade contractor. There is just an offer of services (sometimes including materials) at a specified price. Once the general contractor is determined to be the winner of the job, the contractor will select which trade contractors to hire to do the work on the project. A subcontract is executed with each of these trade contractors. A big part of the project team’s job is to manage every subcontract – to see that all of the conditions of the contract are adhered to and that the work is performed in accordance with the plans and specifications.
Almost every business is familiar with the concept of purchase orders. A purchase order is an agreement between a vendor and a customer to provide certain products that meet a particular specification for a specified price. Purchase orders work in construction the same way they work in other businesses.
As you know, there are hundreds of products and materials that go into building a new structure or facility. Keeping up with all of these orders and delivery dates is an awesome challenge but a crucial one. Order mishaps and delayed deliveries have caused many jobs to suffer costly consequences for the contactor and the owner.
One strategy often used by contractors to better manage this process is assigning a member of the project team to function as the purchase order expediter. This person’s responsibility is to focus on the procurement schedule relative to construction progress and to track purchase orders and deliveries. Failure in this area can be devastating to the success of the project.
Portions of this content was sourced and/or published in:
- Barbara J. Jackson, Construction Management Jumpstart