1. 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

2. 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

3. 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

4. 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

5. 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

6. 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