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Survival Guide for Subcontractors at Small Firms


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The subcontractor’s role is an important component to every construction job. General contractors and construction companies generally have some sort of constraints on their offerings, so they turn to subcontractors to fill in any skill gaps. 

In the last 15 years, subcontractors accounted for three-fourths of the building cost for nearly 75 percent of builders.

According to Builder Online, more than one-third of single-family builders use subcontractors for 100 percent of the building cost. These subcontractors range from carpentry to security personnel, and their numbers are still on the rise. In the last 15 years, subcontractors accounted for three-fourths of the building cost for nearly 75 percent of builders, a significant increase over the two-thirds who used them in 1999.

As a subcontractor, you are not only conscious of the daily operations on a job site, but you're also well aware of the problems plaguing the construction industry, since you're on the front lines of the building process. 

Retaining a Paper Trail

Since subcontractors deal with numerous different general contractors and personnel, and they must often hustle from one job site to the next in a single day, the working hours can become a blur of people, papers, and places. Subcontractors operating smaller firms might not have the available resources to hire administrative staff to keep all this information organized and easily accessible.

Due to the sheer volume of work and the fast-paced environment, subcontractors need to pay careful attention to every contract, communication, and RFI to ensure nothing slips through the cracks. Not finishing a particular task or failing to follow through on a contract can potentially cost subcontractors significant amounts of money. For subcontractors at small firms, any lack of income will ultimately hurt profit margins and possibly even cause a layoff. By using cloud-based construction software, subcontractors can keep all of this information in a single digital repository they can access whenever and wherever. This ensures nothing falls through the cracks.

In addition to keeping all files and documents within hand's reach to stay on top of all the pertinent tasks, subcontractors must also ensure they maintain all these contracts and communications in case they end up getting stiffed. According to FCW.com, a business technology website, even after being listed as a team member on a contract proposal, nearly 66 percent of surveyed small firms claim a large prime contractor disregarded the subcontracting opportunity. In a situation like this, subcontractors need to ensure they have the relevant documents and contracts in case they plan on pursuing the prime contractor.

Hiring Skilled Workers

Since prime contractors hire subcontractors specifically for their expertise with a particular skill set––from plumbing to electrical work––having laborers who know their craft is one of the most important aspects of the subcontracting field. Unfortunately, the financial crisis of 2008 caused a major downturn in the construction industry, which forced many of the most qualified workers to find jobs in other industries. Now that the construction sector is in full-on recovery mode, subcontractors are having a hard time finding the right people to fill these necessary positions. Subcontractors at small firms, who might not have the available resources to attract the best candidates, need to find other ways to ensure jobs are completed with a high quality level. 

Constantly Shifting Regulations

Chances are, being a subcontractor at a small firm means you do not have in-house legal counsel, or possibly even an attorney on retainer. Lawyers are expensive, and money spent on one could easily be reinvested in the company or used on capital expenditures. However, the lack of an in-house lawyer might mean you aren't receiving up-to-date legal counseling on a regular basis. In a world of constantly shifting federal, state, and local regulations, a simple misstep can lead to a major financial burden down the road.

For instance, the National Labor Relations Board recently made a controversial ruling on what constitutes a subcontractor, according to the National Federation of Independent Businesses. The bombshell decision essentially redefined subcontractors as director employees of whomever is contracting them. "If this decision stands the economic rationale for hiring a subcontractor vanishes," explained Beth Milito, Sr. Legal Counsel for the NFIB. "It will make it much harder for self-employed subcontractors to get jobs and of course it will drive up operating expenses for the companies that hire them."

While this isn't a nightmare scenario for subcontractors, it will potentially create more incentive for trial lawyers to file a lawsuit. Going after a subcontractor at a small firm might not net an attorney a substantial monetary reward, and in many instances, it just doesn't make financial sense to sue a small firm. However, now that subcontractors are defined as direct employees of whomever contracted them, attorneys can sue both companies and potentially recover more money. This leaves the door open for additional potential lawsuits against the smaller firms.

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