Ask the Experts: Finding Qualified Subs

The labor shortage is a hot-button topic in the industry today, spurring numerous questions and discussions in CBO’s LinkedIn group about finding skilled tradespeople who are motivated, hardworking and capable of completing quality work. Pete Curtis, member of CBO’s LinkedIn group and owner of Mountain Peak Home Improvements in Council Bluffs, Iowa, asked the following question:

How do we find qualified subcontractors who will do the job with excellence?

Michael R. Strahan, CCIFP, CRIS Senior Vice President KPS Insurance Services Inc.

“Finding a database of subcontractors to reach out to for quotes is the easy part. Now, what do you do with that list of subcontractors, and how do you filter that list to find the most qualified? The most basic step is to ask friendly competitors who they use. If you are working at an installation or with an owner that has repeat work (i.e. federal military base), ask them who they routinely see and like to have on-site.

Also, you should see if potential subcontractors have a strong safety program and a favorable workers’ compensation modification factor. Try to get subs with modifiers under 100 as a maximum acceptable level. If you consider anything more than that, make them explain what happened and what changes have been made to the safety program to avoid injuries.

Review the Dun & Bradstreet (D&B) pay history on your potential subs and perform vendor references. A poorly trending Paydex may be a sign of financial stress and should trigger you to dig deeper into their financial condition.

Obtain a pre-qualification letter on surety letterhead that is signed attorney-in-fact with power of attorney and notary. In addition, what is the A.M. Best rating of that surety, and do they have a good reputation for responding to claims/disputes? What are their bond rates? If numbers are 2 percent of the contract price or higher, further explore their financial health and qualifications. For healthy contractors with good financial reporting and project performance, sureties generally don’t charge high rates. Look into the sub’s management team. How long have they been with the company? Do they have experience with the project size and scope you are requesting they bid? Does anyone at that firm have prior experience or a relationship working with your firm? Do they demonstrate an ability to value engineer to reduce costs or improve efficiencies? Lastly, consider requesting a financial statement to review. A CPA can provide a summary financial without all the detail normally provided in a full-blown review.”

Ben Ashburn Lecturer Murray State University Institute of Engineering

“As an educator, I don’t have to deal with this elusive issue every day in the same way I used to as an estimator. However, from my perspective, I find it is critical that students understand it well, to prepare them for the real world. Assuming the contractor has already done its due diligence with prequalification, the short answer is this: relationships. Contracting is relationship-driven. I believe there is no substitute for personally initiating and continually fostering good relationships. There are many avenues to initiate this first contact, like Blue Book, trade associations, LinkedIn, professional organizations and tons of conferences and networking events. The key is to use those avenues to identify potential fits and then establish relationships.”