General contractors play a vital role in construction projects, not just because of their management expertise but also because they have access to a pool of qualified subcontractors with a track record of performing quality work at a fair price. This access is often the deciding factor in winning or losing a bid. So with that said, to excel as a general contractor, it's crucial to actively manage your relationships with your subcontractors.
Key Takeaways
- GCs often rely heavily on subcontractors to provide the labor and working capital to construct projects.
- Maintaining a good working relationship with a pool of qualified subcontractors is necessary for GCs to succeed.
- Clear communication between the project management team and the subs is essential to maintaining a good working relationship and smooth-running jobs.
- Promptly addressing potential conflicts is needed to prevent damaging a GC’s relationship with their subs.
- A GC’s relationship with their subs is strengthened when the GC is concerned about their subs’ success and considers how their decisions affect their subs.
Why Subcontractors Are Crucial
In the construction industry, subcontractors provide GCs with a qualified workforce that has expertise in a specific construction area. They also provide the funding to pay the labor from the time when the work is performed until the payment is received from the owner via the general contractor.
Strategic selection of the right subcontractors who can deliver quality work at a competitive price can be a game-changer for GCs. To be successful, GCs must develop good working relationships with a pool of prequalified subcontractors. Imagine if all your subcontractors offered you better prices than your competitors because they prefer working with you. That could significantly increase your chances of winning the construction project.
The time and effort invested in developing and maintaining good working relationships with your subcontractors can yield a significant return on your investment. This return can be in the form of increased collaboration, improved subcontractor performance and responsiveness, better pricing, better access to a high-quality workforce, and faster construction. These improvements strengthen the GC’s reputation, which can lead to more work. You’ll also want to provide subcontractors
Let’s take a look at some of the best practices of good subcontractor management. When employed throughout a company, these practices help GCs develop and maintain a strong pool of qualified subcontractors and a productive work environment.
Facilitate Good Communication
One essential key to developing good relationships with your subcontractors is facilitating clear communication among your project management team and subs. Here are a few ways you can maintain good communication with your subs.
1. Establish Communication Channels
One way to improve communications is to identify the proper communication channels, including establishing a point of contact for each subcontractor and the preferred method of communication. Project management software (like Procore and MS Teams) can be used to establish communication lines and keep all the project’s communications in one place.
2. Remain Open to Communication
Additionally, companies should identify the follow-up procedures for when the GC’s employees or subcontractors are unresponsive. When people feel like they are being ignored, they become frustrated, which can lead to tension on-site that adversely affects the project delivery. All stakeholders must be comfortable raising issues, expressing concerns, and discussing problems.
Subcontractors should feel comfortable contacting the GC’s owner when they feel the project management team is not adequately addressing their concerns. It is vital for GCs to gracefully accept negative feedback from their subs. Getting upset or defensive closes the lines of communication. Conversely, gracefully accepting criticism helps the subs feel like you take their concerns seriously and strengthen the relationship. Similarly, the project management team should feel comfortable contacting the subcontractor’s managers if their concerns are not sufficiently addressed.
3. Communicate Clearly
Unclear communication creates confusion and makes it challenging to complete the job on time and under budget. Here are a couple ways to maintain clear communication:
- Establish Expectations - All communication should clearly establish the GC's and subcontractor's expectations and commitments. This begins during procurement by including a well-written scope of work in the request for a quote (RFQ) and a subcontract with clearly defined provisions establishing the standards for the subcontractor’s performance. These should be written so that the subs clearly understand your expectations. Vaguely written scopes of work leave the subs wondering what you want and lead to confusion and problems during construction, as well as change orders.
- Provide a Complete Project Schedule - The project schedule should clearly identify the project’s workflow, timelines, and milestones. It should also specify the start and end dates for each deliverable required to complete the project’s scope.
- Provide Feedback - You’ll also want to provide subcontractors with real-time feedback about their compliance with safety standards, their quality control efforts, and other performance issues. This includes providing both positive and negative feedback about the subcontractor’s work and promptly providing them with notification when problems arise. Only providing negative feedback will quickly shut down communications and strain the relationship.
4. Communicate Consistently
Communication should be ongoing and subs should be updated frequently on changes to the project requirements, project plans, schedule, and change orders. Construction management software often has functions that can streamline this process.
A few construction management best practices will help you create consistent communication. Make sure you're holding regular meetings throughout the project’s life cycle, including weekly meetings at the job site to discuss the project's progress, coordinate the work for the next few weeks, and resolve any foreseen problems. This meeting should include the project management team and all in-house crews and subs who will be on the job in the next few weeks.
After your meetings, followup by providing meeting minutes to all subcontractors, including those who will not be working on the job for several weeks, so they are up to date on the project’s status. Follow-up emails and meeting minutes ensure that all stakeholders clearly understand the expectations and commitments made during the meeting.
Strategically Manage Conflict
Conflict management skills are essential to good communication and maintaining good subcontractor relationships. We recommend that GCs provide regular conflict management training to all their management employees and encourage them to use these skills in their daily interactions. It's also a good idea to offer this training to your subs.
Properly addressing conflicts improves relationships with subs, enhances communication among the stakeholders, increases collaborative problem-solving, improves decision-making, increases job-site productivity, and improves the stakeholders’ job satisfaction. Here are some things to keep in mind when dealing with conflict:
- Proactively address conflicts. Putting off addressing potential conflicts because you don’t have the time or dislike dealing with conflict allows them to fester and grow. Addressing the problems early on is easier than fixing a relationship damaged by an ongoing conflict.
- Establish the procedures for resolving conflicts. These procedures should establish the lines of communication for conflict (which may differ from regular lines), standards for appropriate behavior, and ways to defuse tense situations. They should include the option for mediation if the parties cannot solve the problem, as skilled mediators can help find common ground. These procedures should be included in the subcontract.
- Listen. When listening, one should try to understand the other person’s perspective and why they are feeling the way they are. Often, the emotions behind the conflict are more important than the actual point of conflict. When listening, one should not formulate a counterargument that will be used to win the dispute; instead, one should focus on what the other person is saying and the message behind it.
- Keep emotions in check. When emotions take over, reason, training, and other conflict management skills are forgotten. No one wins when we begin attacking and yelling at each other. When people are attached, they feel threatened and become defensive. Keeping emotions in check helps defuse the situation. Maintaining a cool head is much easier said than done. We all let our emotions get the best of us at times.
- Focus on solving the problem. When faced with a problem, look for creative solutions that benefit everyone. Clinging to specific demands or solutions restricts creativity, making it harder to find the best solutions. Solving the problem should be more important than feeding one’s ego by proving one is right.
- Keep the long-term relationship in mind. Where possible, you don’t want the solution to damage the relationship with a good subcontractor. Keep in mind that good subs are essential to a GCs success. When considering a solution, ask yourself what are the long-term benefits and costs of this solution? Making a small concession often pays for itself in the long run.
- Set boundaries. Despite everything, there are times when you need to set boundaries with subs. You cannot be successful by letting subs take advantage of you, nor can you let subs consistently fail to meet your expectations and their contractual requirements. Sometimes, it is better to sever your relationship with a subcontractor and find someone else to do the work. However, if GCs have a sound prequalification process and exercise effective subcontractor management, severing subcontractor relationships should be relatively infrequent.
🔎 Dive Deeper: PrequalificationThe Key to Choosing the Right Subcontractors
Treat Subs as Partners
Treating your subs as partners will go a long way towards creating trust in the relationship. This doesn’t mean signing a legal agreement that gives them ownership of your company, but rather working with them as if they were business partners. Think of it as you helping their business succeed, so they, in turn, help yours succeed. Here are a few things that you can do to facilitate this type of relationship.
Treat Them Fairly
Treating subcontractors fairly shows that you respect them and value your relationship. When subs feel they are being treated unfairly, the relationship can quickly deteriorate into a competition between the GC and the sub, where one wins at the expense of the other.
It is essential to understand that the sub’s emotion (the feeling like they are being mistreated) is as important as the situation that evokes the emotion. When subs feel mistreated, good communication and conflict management skills can help get to the root of the problem and find a solution that benefits the relationship.
Transparency helps subcontractors feel like they are being treated fairly. When subs feel that the GC has a hidden agenda, they are less trusting of the GC, and their relationship with them will suffer.
Transparency starts during the procurement process. Subs need to feel that their bids were evaluated fairly. One way to improve transparency is to share your evaluation criteria when you ask subs to bid on the project. After selecting a sub, share the bid prices with the unsuccessful subs and explain why you selected another sub. If the unsuccessful subs feel that you are favoring others over them, they will be less likely to provide you with bids in the future.
Treating subs fairly also means adhering to the subcontract provisions. GCs must live up to their commitments if they expect the subs to live up to theirs. They must also be reasonable when enforcing the contract and ensure its provisions are fairly administered.
The subcontract is a template for how the GC-sub relationship should work on the project. When applying its provisions in the field, they may need to be modified to meet the project conditions and needs. No one benefits when contract provisions that do not benefit the project or its stakeholders are enforced simply for the sake of complying with the contract.
Seek Win-Win Solutions
Looking for win-win solutions and being concerned about the subs’ success is critical to developing long-term relationships. If GCs have carefully selected their subcontractors, they will both have the same goal: to make a profit while constructing the project. As the project management team makes decisions, they should consider how each alternative affects the sub's operation and profit. Managers should look for alternative solutions that don’t hurt the GC’s profit while helping the subs succeed.
💡 This concept hit home for me when a sub asked who would be running the job before they gave me a bid. Some of our superintendents ran the job so that it was easier for the subs to make money, while others cost the subs money. When the superintendents or the GC’s management processes cost the subs money, they often raise the prices on their next bid, which hurts a GC’s competitiveness on future projects.
Pay Bills on Time
It is crucial that GCs pay their subcontractors’ invoices on time. If the contract’s payment terms state that they will be paid in 30 days, GCs must do so. Paying bills on time fosters goodwill and helps GCs get better pricing and service from their subs. For subcontractors, sound risk management includes assessing the likelihood of being paid on time and adding money to the bid to cover the risk of late payments.
A subcontractor’s cash flow is as important as their workers. Without cash, they cannot pay their labor; without labor, they cannot construct the job. That's why GCs should discuss with their owners the importance and benefits of paying the draws on time. It's easy for owners to think that they are saving money by reducing interest costs. but well-managed GCs and subcontractors incorporate the interest cost on the cash tied up by the project into their bids, along with a healthy profit for using their funds.
Final Thoughts
Most general contractors lack the cash and trained workforce to construct a project without the support of subcontractors. Successful GCs realize their success is partly due to developing and maintaining a pool of well-qualified subs who can perform the work at a competitive price. They invest time in the subs and create a company culture that facilitates strong relationships with their subs.
Further Reading: Foundations of Construction Management