Executive Insights on Working With Subcontractors

James D. Heuer, President, Heuer & Company

As a construction firm that does not regularly self-perform, we know that our success relies on the performance of our subcontractors. By maintaining good, professional relations with these partners throughout the contracting process, we set the stage for all to succeed.

We have been in the subcontractor’s seat at the contracting table and know from experience what it feels like to have an onerous and unfair contract shoved down one’s throat. With the power to award or withhold a contract, a contractor can feel entitled to make demands and stipulations that tilt unfairly in their direction. We prefer to take an approach that begins with reasonableness.

Can we clearly state what is expected of each party? Can we provide sufficient protective levers for both parties in the event one of the parties is not meeting their commitments? Can we draft a document that doesn’t require a law degree to understand?

Partnership with our subcontractors is a view that influences every aspect of the relationship and begins with the implementation of a fair and equitable subcontractor agreement.

Drew Hanish, Principal & Vice President of Construction, Pravo Construction

Different areas of a construction company will have various contractual concerns. Understanding each area’s most common contractual concerns will provide you with a broad view of mitigating risk.

Project management sees concerns with how the scope of work is defined in the contract. The scope of work needs to be defined for the correct size and type of project. Poorly defined, overwritten or underwritten scope could lead to a future contract dispute.

Legal counsel most commonly sees the verbiage of the indemnification clause as a concern. Your counsel must establish strong verbiage. If changes are requested in the subcontract, you consult your counsel, as this clause will set the boundaries for liability in a situation of harm or loss.

Risk management will validate that additional insured language is captured in the correct forms (historically CG 20 10 10 01; currently CG 20 10 07 04), limiting carves-outs of protections for general contractors and owners.