I recently talked with one of our clients who is having problems with his subs. After getting quotes and starting a job, he’s hearing things like, “I didn’t include that in my quote,” or “That’s not my job.”
There is obviously a communication problem between the general contractor and the sub when things like this happen. It’s also possible the sub is trying to add extras to their quote to push up the price. That’s what can happen when the job isn’t well-defined upfront.
In business, the best communication is in writing, and that’s why you need a written agreement with every subcontractor. You actually need two written agreements: one is a broad agreement defining your relationship, applicable to all jobs, stating how you will work together. This can be done once and updated or reviewed annually. The second agreement is the specific paperwork defining what will and won’t be done for each job.
This is how we work together.
It’s important to define the ground rules of your relationship, such as project scheduling and behavior on the job. Will you require an invoice, and what is your payment schedule? Don’t forget to include topics such as using mobile phones on the job site, borrowing the client’s tools, making sure the materials used match the specs, and anything else that’s caused you problems in the past. Most of this is covered in our Subcontractor Manual.
Be sure to include the license, bonding, and insurance requirements for your locality. Tell them how often you’ll be checking to make sure it’s current. If your sub falls behind on insurance payments, you could be at risk. Follow up on a regular basis to protect your business.
One of the big complaints I hear from general contractors is about subs who don’t show up on time. If you’re a general, have you considered putting a two-level payment schedule in place for your jobs? Give the subs a bonus if they start and finish on time. Of course, you’ll have to make sure the job is ready for the sub when you tell them it will be ready; that’s part of a win-win agreement.
Update this manual each year, and ask your subs to read and approve it. If they won’t take the time to read the manual and sign it, find another sub.
This is the job.
This agreement is unique to each job. It’s up to the general contractor to spell out what work they want the sub to do on each job. The sub needs to look it over, match it to the job they see and add or delete items as needed. They list their price on the job, sign it, you sign it, and now you have a contract for the work to be done. A contract. Not a guess, or an approximation that can be done whenever the sub gets around to it. You have a contract.
If neither one of you is sure what’s behind a wall or under the floor, write a Demolition and Discovery Agreement with the owner. This allows you to open up the wall and get paid for the work. Now you have everything open in front of you so there’s no need to guess at the job conditions, what is to be done or by whom. We discuss this type of agreement in both Markup & Profit Revisited and Profitable Sales, A Contractor’s Guide, along with sample agreements.
Subs, if your work segues into another trade’s work or vice versa, be sure you specify who is to do what. If you’re an HVAC contractor, you should specifically outline who will be responsible for the electrical and water supplies and any drainage to all your equipment. The general contractor might not be aware of the companion hookups you may need, so it’s your responsibility to tell them. Don’t tell them during the job that the hookups are someone else’s job, and you will charge them to do it. If you want to charge them for that work, then you should have seen it up front and called their attention to it.
Clean up your estimating system and procedures so you don’t miss details while estimating the job. If necessary, take our course, Profitable Estimating Training. It applies to specialty contractors as well as general contractors.
Do what you agreed to do at the price that was agreed, and do it on schedule. Tell the general contractor that any changes will automatically change your price and will require a Change Work Order that must be signed before you’ll make the change. Now everyone is on the same page.
Generals, if you won’t give the time and effort to put together a subcontractor manual defining your relationship, and define each job in writing before the sub gives you a price, then you have no one else to blame for surprises or extras on a job.
Do your job, make all agreements win-win, and we can all make some money.