Relationships are vital in the commercial construction industry, specifically between general and trade contractors. While general contractors subcontract work to a variety of subcontractors, trade contractors focus mainly on projects given to them by general contractors, making this dynamic for both sides mutually advantageous.
The partnership between subcontractors and general contractors can be complex. General contractors typically require subcontractors to get prequalified before performing any work or being invited to submit bids on jobs. Subcontractors usually need to provide information to the general contractors, including safety records, finances, bonding capabilities, litigation history, insurance coverage, relevant work history, experience, and more. Trade contractors also perform their own vetting process to determine goals and ensure they are able to work with a reputable general contractor.
In both cases, information should be funneled to owners during pre-qualification or when securing the contract. All plan changes or specs should also be reviewed so extra work doesn’t add up down the road.
Clauses are generally what to look out for in contracts. Here are some examples:
Pay-when-Paid and Pay-if-Paid
These two main contract provisions should be analyzed intensely before any signature. Pay-when-paid contracts require the general contractor to pay the trade contractor when the owner pays them. Pay-if-paid requirements outline subcontractor payment if the general contractor gets paid. If they do not receive compensation, neither does the subcontractor.
Flow-down and Pass-through
While incorporating the terms of the general contract with the owner into the subcontract, the subcontractor assumes the same duties toward the general contractor as they would to the owner. Prime contracts should be reviewed if these clauses are on the table since they can help specify whether there are terms that should be avoided.
Change Orders
All work should be submitted in writing, and jobs should never be completed without an agreement from the owner. There should be a designated change order authorized person as well.
Indemnification Clauses
General contractors who are negligent will be disciplined accordingly due to this clause. For subcontractors, their indemnification should only require them to assume liability for their own carelessness.
Payment Bonds
General contractors are almost always required to post a payment bond to protect the owner, while private owners are also increasingly requiring them. If established, these bonds help to avoid liens filed against their property.
At Construction Bonding Specialists, we work with new and experienced contractors to find the most satisfactory bond solutions. As a distinct surety-bond-only agency with decades of bonding experience, we work to discover surety solutions for all types of cases ranging from ordinary to challenging. Call us at 248-349-6227 to learn more.
Written by the digital marketing team at Creative Programs & Systems: https://www.cpsmi.com/