🤝 Subcontractor Management Guide
Your subs make or break your projects. Build a system to find good ones, manage them effectively, and protect yourself when things go wrong.
Quality Over Price
The cheapest sub often costs the most. Factor in risk, not just bid price.
The Subcontractor Lifecycle
- Prequalification — Vet before you bid
- Bidding — Get competitive pricing
- Award & Contract — Lock in scope and terms
- Coordination — Manage day-to-day
- Payment — Pay fairly and timely
- Evaluation — Document performance
Prequalification
Why Prequalify?
- Avoid unqualified bidders wasting your time
- Reduce risk of default mid-project
- Verify insurance and bonding capacity
- Check safety record (EMR)
- Confirm they can handle your project size
Prequalification Checklist
Financial
- Bank reference
- Bonding capacity letter
- Financial statements (large projects)
- Credit check
Insurance
- General liability ($1M+ typical)
- Workers' compensation
- Auto liability
- Umbrella/excess coverage
Safety
- EMR under 1.0 (ideally under 0.85)
- Written safety program
- OSHA 300 log (last 3 years)
- Safety training documentation
Experience
- Similar project experience
- References (call them!)
- Key personnel resumes
- Current workload/capacity
Legal/Administrative
- Valid contractor's license
- W-9 on file
- Union status (if applicable)
- Prevailing wage certified (if applicable)
Bidding & Selection
Getting Competitive Bids
- Invite 3-5 qualified subs per trade
- Provide complete bid packages
- Set clear scope boundaries
- Allow adequate time to bid
- Be available for questions
Bid Evaluation
Don't just take the low bid. Consider:
| Factor | Questions |
|---|---|
| Price | Is it realistic? Too low = problems |
| Scope | Did they include everything? |
| Exclusions | What's NOT included? |
| Schedule | Can they meet your dates? |
| Capacity | Do they have the manpower? |
| History | How did they perform before? |
Bid Leveling
Compare apples to apples:
- Clarify scope differences
- Add back exclusions at fair prices
- Verify unit prices are consistent
- Document assumptions
Subcontract Execution
Key Contract Provisions
Scope of Work
- Detailed written scope
- Reference drawings and specs
- Include/exclude list
- Interface points with other trades
Schedule
- Specific milestones
- Coordination requirements
- Delay provisions
- Liquidated damages (if applicable)
Payment Terms
- Progress payment schedule
- Retention percentage
- Lien waiver requirements
- Pay-when-paid provisions
Insurance & Bonding
- Required coverage amounts
- Additional insured requirements
- Bond requirements (if any)
Change Order Procedures
- Markup percentages allowed
- Documentation requirements
- Approval process
Default & Termination
- Cure periods
- Termination for cause
- Termination for convenience
Flow-Down Provisions
Ensure your subcontract includes:
- All requirements from prime contract
- Same dispute resolution process
- Matching insurance requirements
- Schedule obligations
Day-to-Day Coordination
Pre-Construction Meeting
Before work starts:
- Review scope and schedule
- Establish communication protocols
- Identify key contacts
- Review safety requirements
- Discuss coordination points
Weekly Coordination
- Schedule coordination meetings
- Review 3-week lookahead
- Identify conflicts early
- Document action items
- Follow up on commitments
Field Coordination
- Daily contact with foremen
- Coordinate access and staging
- Manage shared resources
- Address issues immediately
- Document everything
Payment Management
Pay Application Review
- Verify work is complete
- Check quantities
- Review stored materials
- Collect lien waivers
- Process timely
Lien Waiver Tracking
For each payment:
- Conditional waiver for current payment
- Unconditional waiver for previous payment
- Lower-tier waivers (if required)
Retention
- Standard: 10% until 50%, then 5%
- Release at substantial completion
- Hold until punch complete
- Require final waivers
Performance Issues
Early Warning Signs
- Manpower below plan
- Quality issues appearing
- Missing coordination meetings
- Slow response to RFIs
- Material delivery delays
- Safety violations
Addressing Problems
Step 1: Document
- Note specific issues
- Take photos
- Record dates and details
Step 2: Communicate
- Discuss with sub's PM
- Put concerns in writing
- Request corrective action plan
Step 3: Escalate
- Formal written notice
- Meet with sub's management
- Set specific deadlines
Step 4: Enforce
- Backcharges for deficient work
- Supplemental labor if needed
- Termination as last resort
Backcharges
When sub's work is deficient:
- Provide written notice
- Give reasonable time to correct
- If not corrected, perform or hire others
- Document all costs
- Deduct from payment or retain
Performance Evaluation
Track Throughout Project
- Schedule compliance
- Quality of work
- Safety record
- Responsiveness
- Punch list performance
- Documentation quality
Post-Project Rating
After each project, rate the sub:
- Would you use them again?
- For what project types?
- Any concerns for future?
- Update prequalified list
Build Your Network
Free Template: Download our subcontractor prequalification form.
Digital Option: CRM.Construction can track subcontractor relationships, project history, and performance ratings across projects.