More Than Ever, Manage your Subcontractors

With the slowdown in construction, we are seeing a dramatic increase in subcontractor defaults.  Even subcontractors who have been in business for many years are having some difficulty.  Many General Contractors are bemoaning that last year would have been better if it weren’t for one subcontractor or another.  This is a dangerous time to be using the subcontractor with the lowest bid.  Be careful to check the subcontractor’s credentials.   If you can, check with their suppliers and other references in the area.  It may be that your surety agent will have some information on a subcontractor.  Consider requiring a payment and performance bond from a responsible surety, especially if the subcontractor prices are low.  In these times, if sub bonding is not possible, you might more frequently consider providing joint checks to suppliers who send you a Notice to Owner.  A non-performing subcontractor can eat up the G.C.’s slim profit margin in a hurry.  Many G.C.’s think they can manage the risk by adequate supervision and requiring lien waivers.  I’m here to tell you that some pretty smart G.C.’s have been caught unaware in the last couple of years.  Be diligent.