Managing subcontractors effectively is crucial to productivity and profitability. Experience, organisation and effective communication are all important factors. Here we nail down some of the common issues and their solutions.
According to a 2016 Sourceable report on subcontractors’ role in productivity, research indicates that the average downtime across a range of trades is about 47 per cent, and that productivity measured by performance of the same task on the same site can vary by as much as 50 per cent, and up to 500 per cent on different sites.
That’s a huge difference.
Some of the main causes of lost productivity have been shown to be
- size of labour force (small or large)
- poor site management
- lack of detailed planning
- poor workforce consultation
- contractual conflicts
- uptake of new technologies.
The report canvassed the opinions of 71 top tier Australian subcontractors who identified a number of recurrent issues, from bid shopping to planning, management and supervision, coordination and documentation and admin compliance, to building relationships and trust.
Contracting the right project team of subs can make a difference to productivity of 20 to 30 per cent. This stands in opposition to the unscrupulous practice of employing cheap overseas labour to achieve a low tender price, then using top tier subs to fix up the quality shortfalls.
The Australian way
The way construction projects are usually contracted, where a principal employs subcontractors individually and communicates with them through a project manager, has a number of advantages ‒and downsides, according to law firm MinterEllison.
Plus: It’s speedy. Early work packages can be undertaken while others are being finalised.
Downside: It can result in lack of clear planning. According to the Sourceable survey, it’s not unusual for subs to have only 30 per cent of the information they need at the start of a job.
Plus: Flexibility. Packages and individual contracts can be amended without the cost of altering an overarching contract.
Downside: It can be a costly and time consuming process to negotiate individual contracts.
Plus: The principal retains ultimate control over the entire life cycle of the project.
Downside: The principal assumes total project cost risk.
Plus: Collaboration. Subcontractors can contribute to how a project is executed.
Downside: No single point of accountability.
Planning and management
General contractors can avoid the downsides and ensure their projects are completed to schedule and to standard by using a project management plan. The plan should cover the scope of work and include detailed definitions, specifications, time lines, implementation stages, procurement strategies and contingency considerations. This can be assisted by using project management software.
Tips and tools for managing subcontractors, some general guidelines
- Contracts should outline the roles and responsibilities, including project specs, terms and conditions, remuneration and payment methods.
- The sub needs to have all the relevant information to carry out the contracted works ahead of schedule. They also need to be updated promptly with any changes.
- Hold regular meetings. This provides a platform for subs to express concerns and can help head off potential issues or disputes.
- Have subs sign acknowledge receipt of all relevant documentation by signing for it or by email, and keep these records on file.
- Always inform subs of any project changes as soon as possible. Keep dairy notes of conversations, disputes and resolutions on file.
Principals also have overall OH&S responsibility. Subs must undergo project induction which takes them through safety requirements and they must follow health and safety, environmental and industrial relations procedures which are regulations compliant.
Talk to an expert
Gallagher’s specialist construction brokers have the expertise and industry knowledge to formulate insurance solutions for complex construction projects and assist stakeholders with managing their risk exposures.
To the extent that any material in this document may be considered advice, it does not take into account your objectives, needs or financial situation. You should consider whether the advice is appropriate for you and review any relevant Product Disclosure Statement and policy wording before taking out an insurance policy.