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Wednesday, July 08, 2009

De-selecting a sub

San Francisco general contractor Dave Markham of C.M. Peletz Co. has posted a fascinating observation about how he decides which subtrades to use, and which ones to drop.
I don't think he will mind me reproducing the post in full here:

I once attended a forum sponsored by CSI (Construction Specification Institute) where one of the topics was Contractor/Subcontractor relations. There were several executives of large General Contractors in attendance. When prompted on the subject, one of the panel members, Jim Balboni, an executive with Otis Elevator, stood up on his chair and shouted, “Why in the hell do contractors continually use subcontractors that fail them!” In the best humor there is always some truth.

The General Contractor/Subcontractor relationship is, for better or worse, a telltale of project health or for that matter Contractor health. A great subcontractor makes the job of the General less time-consuming and allows him more time to plan and budget and thus makes the General look good. A poor subcontractor bogs all facets relating to his portion of the project down and can make the project and the GC look like a disaster.

In order to truly represent the interests of the client, the subcontractor list must constantly evolve. Great subcontracting companies come and go. So by simultaneously trimming the potential subs-list and adding to it constantly, you are adding extreme value to your relationships with clients. Pricing will be competitive and current. Technique and communication will be modern. Trust will be there.

That is not to say that all subcontractors must go. We have several that we have worked with for more than 20 years and continually stand the reasonableness test.

Disengaging from a subcontractor prior to contracting for a project

As with any relationship, until we have experienced a project together, we really do not know each other. A Subcontractor who violates the basics needs to be let go before they start for

  • Improper insurance
  • Disagreement with our indemnity language in our subcontract agreement
  • Expired license
  • Poor or non-existent references
  • No office presence where phone calls, (e)mail and faxes are received, messages taken and phone calls, (e)mail and faxes returned.
  • A misunderstanding of the management necessary for the very high caliber building process

If a subcontractor fails in any of these or you get the gut feeling that you’ll be let down, pass early and often. Experienced Generals know the feeling.

Eliminating a subcontractor from the proposal list

Now that we have experienced a project together, besides pricing, what makes us know the Subcontractor should not be considered for the next team effort:

  • Poor product installation
  • Offers no consultation in trade
  • Improperly handles client/GC relationship
  • Improperly handles architect/GC relationship
  • Continuously late, inaccurate billings on improper form
  • Does not understands the key rule that additional or extra work will not be paid for unless approved prior to work being completed
  • Maintains a slovenly jobsite environment
  • Add your own here

There is some give and take with this list. A subcontracting field with a small number of competent competitors might warrant a little leeway on a few of the above items. There might be some give and take for a rock-star that does very fine work. However, if a few of the above are tied together, even the best subcontractor is expendable.

The bottom line is that the GC needs to pull off the project on time and within budget and make the experience for the client worth reliving. If a subcontractor isn't doing his part to contribute to that smile on the Client's face, perhaps their place on the subs-list should be reconsidered.

I've always maintained that the most important aspect of marketing your business is how you handle your actual work, and Markham proves this point with this argument. Of course, not every story is the same and we all know of the classic challenge of general contractors receiving unrealistically low bids from sub trades who may be less than totally qualified.

Do you decline the "low bid" and then not win the final job, or do you accept it, knowing that things are likely to go wrong? This is one problem that isn't going away anytime soon.

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