Subcontracts Owner doesn’t “recognize” subcontractors They are representatives of the contractor Contractor must be confident they can perform Reputation Financial strength Labor force Job history Strength and skill of PM Past work with team Estimating ability

Subcontracts Increasing the number of subcontractors on the job reduces financial risk but increases communication complexity Decision to subcontract versus self-perform is a risk/return optimization problem Self-perform work has potential for greater reward, but carries more risk Self-perform is less risky when you have long-term trades people and well-understood market

Subcontracts Subcontracting passes risk on to subcontractor in return for certain cost Subcontracting can shorten schedule if subcontractor has access to superior technology or resources (knowledge) Subcontracting can also reduce schedule flexibility because of contractual constraint

Subcontracts Must bind subcontractor to a cost and schedule consistent with overall project parameters Contractor serves as conduit for changes and claims on behalf of the subcontractor Major subcontractors sometime included in partnering team, working with government agencies and field coordination

Subcontracts Need to have hoisting, clean-up, work-hours, lock-out, freight and unloading, and labor relations issued spelled out in the subcontract AGC has several standard subcontract types Contractor/subcontractor share risk of payment Subcontractor takes risk of payment Design-build subcontract

Subcontracts Subcontracts can be negotiated or competitively bid- usually determined in part by the owner Subcontractors can be asked to do value engineering, but must be careful about bid comparison and bid shopping Usually pre-qualify subcontractors- financial strength, certifications, bonding