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Selecting The Right Contractors and Subcontractors for Your Project

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Construction
By Paul Netscher | Read time: 4 minutes

Have you selected the wrong contractor or subcontractor for your project? The contractor performed badly, with delays and poor quality? Perhaps there were hidden extra costs and their final price when the work was complete was much higher than you expected?

Regrettably many projects go badly because the wrong contractor or subcontractor is selected. Often owners or contractors are only focused on the lowest price and select the cheapest contractor who is sometimes the wrong contractor and proves to be very costly. It’s therefore important to consider the following when selecting your contractor:

  • Does the contractor have the required experience to deliver the work? Don’t just take their word for it, check their references and visit their completed projects.
  • Do they have the applicable registrations to do the work? Ask to see the registrations.
  • Can they produce acceptable quality? Some projects and clients require contractors to have particular quality registrations. But more importantly, have they produced good quality work on their previous projects? Do they have a quality management system? Do they have the required people and skills to produce good quality work?
  • Have they worked on similar projects? This not only relates to the type of work that’s involved but also to the type of project and client. For instance, many contractors may be able to deliver a similar project on a commercial building project in the city, but have no experience on working on remote mining or oil and gas projects which have specific requirements and require more onerous safety standards. There is also a large difference between contractors that build low-cost houses, to those that build houses for the luxury market.
  • Do they have the resources to carry out the work? This includes equipment, management, and the craftspeople. If they don’t have the resources can they access the resources and will they be able to manage them?
  • Do they have the financial means to carry out a project of this size? Because of the way project finances are structured, with contractors usually only being able to invoice for work once it’s been completed and then they’re only paid one month to three months later, often after the client has deducted retainage monies, contractors often experience negative cash flows on their projects until they are substantially complete. The larger the project the larger the negative cash flow will be. Contractors have to be financially secure, with sufficient cash reserves to withstand the negative cash flow on this project combined with the negative cash flows they may be experiencing on other projects they’re working on. But furthermore, if contractors are suffering losses on other projects this could cause them financial stress on the new project which could mean they can’t pay for people and materials on your project. In extreme cases the contractor could become bankrupt partway through the project, which would leave you in trouble, facing delays and additional costs, while you find another contractor to finish the project.
  • How does the size of the project compare to the size of projects the contractor has undertaken in the past? Contractors may have successfully completed smaller projects, but managing a large project can involve different management techniques. In addition, larger projects require more resources and more support from their head office. Larger projects also impact contractor’s cash flow more than smaller projects do.
  • What other work are they currently doing? If they are involved with other large projects they may not have the resources or the finances to undertake additional work.
  • What is their safety record? A poor safety record is often indicative of poor management. But, contractors with a poor safety record shouldn’t be used on your project. Accidents delay projects, they result in negative publicity for the project, it usually involves lengthy investigations and masses of paperwork which takes everyone’s attention away from getting the project completed, and poor safety could get the project stopped until the contractor rectifies the safety breaches.
  • Do they have a good reputation?
  • Have they got a record of being claims orientated and engaging in legal disputes with their clients? You don’t want to have to waste time arguing spurious claims or engaging legal experts to argue frivolous disputes. Sure there will probably be changes and additions on your project, but you should be comfortable that the contractor will deal with these in a prompt and fair manner, as you should also deal with the claims.
  • Are they reliable and complete their projects on time?

It always pays to check references, who did they work for previously and were they happy with the contractor’s performance. Even visit their completed projects to see if you’ll be happy with the standard of work. Past performance, however, is not always indicative of how a contractor will perform on a contract and I have, on occasion, had good contractors perform poorly on my project due to them being overcommitted on other projects, which meant they had insufficient and poor quality resources for my project.

It’s good practice to meet the proposed team that will be on your project. Understand who they are and their knowledge and experience.

Conclusion

It’s always important to carefully check out your contractors before appointing them to carry out work for you. That cheap price could be very expensive if your project is finished late, the work is poor quality, or there are hidden additional costs. Importantly also know that you can work with their team – construction is a team effort.

Have you ever appointed the wrong contractor? What were the consequences?

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