I have been hearing the same complaints about the construction business since when I first started my general contracting company. It seems as if nothing changes as contractors continue doing business the same way. But a select few successful contractors and subcontractors seem to get more than their fair share of the profitable projects over the years. What do they do different?
At other times, companies realize that they don't have the required expertise in-house to obtain the required results. Finally, management can determine that external suppliers who specialize in a particular field can carry out work at a lower cost than internal departments. In all these cases, companies look at subcontracting as a possible option.
It solves the immediate problem the company faces but has disadvantages of its own.
Large Projects Businesses using subcontractors can take on projects that are much larger than those they can handle on their own. They earn a profit on the parts of the project handled by subcontractors and can greatly grow their overall revenues. Larger projects come with higher risk.
When more subcontractors receive orders, the risk that one of them will not perform as required is higher. Coordination is another headache.
The company acting as the principal must ensure that the extra profit and revenue is sufficient to make the higher-risk project worthwhile. Professional Services Many tasks and projects require the services of professionally qualified specialists who sign off on the work.
A company may not have the required professionals on staff and has no ongoing need for them.
In that case, it is an advantage to subcontract the professional services and avoid having to hire professionals like engineers, architects or lawyers. The disadvantages of subcontracting this work lie in costs: The hourly expenses are high, and the professionals are independent in that they don't report to supervisors inside the company.
These factors make it challenging to control the costs of these subcontracts.
Expertise When the involvement of professionals is not legally required, it may still be advantageous for a company to subcontract specialized consulting services. Companies who develop special skills in areas like environmental disciplines, traffic management or archaeology can usually get the work done more rapidly and at lower cost than non-specialists.
The disadvantages of subcontracting this work lie in quality issues: Since the main contractor lacks the expertise in these fields, he is at the mercy of the subcontractors in that respect.
Cost Companies producing large volumes of one or a few products or services generally have lower costs than principals or main contractors who have to handle many tasks and goods. Subcontracting to these high-volume companies generally saves substantial amounts of money.
In construction, high-volume companies typically handle cement work and steel structures. Companies often subcontract direct mail campaigns or data processing. While such subcontracts save money, the contracts must specify the levels of performance and the quality that the principal company requires.
The disadvantage of such subcontracts centers on the risk that the subcontractors may not meet schedules or quality requirements.GUIDEBOOK FOR FACILITATING SMALL BUSINESS TEAM ARRANGEMENTS SEPTEMBER ii Contents Arrangements as Subcontractors..B-1 RESOURCES and awards to teams composed of large contractors.
A new practice, Strategic. Permission to utilise this document is gratefully acknowledged.
Austroads and the APCC would also like to thank Peter Barda, Executive Director of the Australian Construction Industry Forum, for his at the forefront of developing strategies and directions that balance .
A high point of contention is the debate on the managerial competence of subcontractors; nevertheless, hope is expressed at the possibility of improving collaboration between the main contractor and subcontractor within traditional construction procurement work environment. Small and large government contractors can dramatically increase their probability of winning government contracts by integrating their capture, teaming, and business strategy work.
Questions of teaming and joint venturing should occupy a prominent role . Description: CSH is seeking a subcontractor to provide expertise in analysis and strategic planning related to hospital funding for housing-related services, rental subsidies, tenancy supports, and/or infrastructure investments for high need individuals experiencing homelessness.
The aim of this research is to create a framework that considers the risks of subcontractors in international construction projects to allow them to create a win-win strategy.
The framework considers two perspectives: the level of the subcontractor’s performance and the interface risks between the general contractor and the subcontractor.