Strategies for Subcontractors: Navigating Unfavorable Contracts & Mitigating Project Impacts

Subcontractors often have to play the hand they’re dealt, which means operating under contract terms they have little to no room to negotiate. Many general contractors require their subs to sign standard form subcontracts and, not surprisingly, they’re typically drafted in favor of the general contractor. But unfavorable contract terms don’t have to result in financial strain and hardship for a subcontractor, even in the face of challenges on a project.

3 Strategies for Subcontractors

Merchants Bonding Company’s claims team has seen a lot of subcontracts and a lot of projects that did not go as planned. However, not all of those situations have resulted in a claim on the subcontractor’s bond. To the contrary, where subcontractors have implemented the following strategies, many have successfully mitigated potential impacts and completed the project.

1. Communicate Early and Often

Consistent, effective, and frequent communication is key to a successful project. When challenges do arise, subcontractors should note any impacts on their work, such as delays or shortages, and communicate them in writing to the general contractor. Subcontractors should then document their efforts to mitigate the impacts, in real time, and communicate those in writing as well. This creates a paper trail the subcontractor can use to show the general contractor why they’re not responsible for the impacts that would otherwise be the subcontractor’s responsibility contractually.

2. Use the Project Schedule as a Strategic Tool

The project schedule coupled with detailed progress reports around it, are a powerful tool for subcontractors. A preliminary schedule represents the general contractor’s aspirations as to how the project will proceed, but progress reports show the day-to-day realities of the project. In the event of a dispute, a subcontractor can use these reports to help avoid the very costly and time consuming process of undertaking a forensic schedule analysis.

3. Treat the General Contractor as a Partner

Working to establish a good relationship with the general contractor is beneficial to subcontractors. The recommended effective and frequent communication goes a long way to establishing that connection and working relationship so if problems do arise both parties can work together to develop and implement reasonable solutions.

By adopting these strategies, subcontractors can navigate challenging contracts, mitigate potential impacts, and cultivate successful partnerships with general contractors.