How to Hire Subcontractors: A Practical Guide for Contractors

What is a Subcontractor?

A subcontractor is an independent business owner or external party that general contractors or builders hire to handle a specific aspect of a project. Unlike employees, they act as partners and work within the boundaries of their contract agreement.

Subcontractors are not considered employees. They are also legally obligated to fulfill the job scope in the contract agreement. Deviation from the contract’s guidelines can attract legal action from the general contractor or builder. 

Generally, subcontractors do not communicate directly with the client. Instead, the contractor speaks directly with the client and takes responsibility for any mistakes a subcontractor makes.

Why Do General Contractors Hire Subcontractors?

General contractors usually hire subcontractors for the following reasons:

• It’s a quick fix for worker shortages: Subcontracting helps general contractors quickly get additional help for large projects without dealing with paperwork. This also gives general contractors more time to handle other business aspects.

• It's simpler than hiring employees: Hiring salaried employees takes time. You still need to fill out a lot of paperwork, do background checks, find work to keep them occupied, navigate legal issues, etc. Conversely, subcontractors simply complete W-9 forms, provide proof of insurance, sign the contract, and invoice after the project.

• It delegates training: Subcontractors are responsible for training their workers. Therefore, general contractors often get top-rate talent to execute projects without investing in training programs.

• It reduces equipment costs: Hiring subcontractors who bring their own equipment to job sites allows general contractors to minimize the costs of renting, maintaining, and repairing their equipment.

• It’s a way to adapt to seasonal demand: Hiring subcontractors allows you to scale your workforce up or down in response to seasonal demand. 

What is The Process for Selecting Subcontractors?

The best subcontractors are valuable partners who will go all out to deliver projects by agreed deadlines while still conforming to customers’ quality standards. They also gladly take ownership of your projects without engaging in underhanded tricks like stealing customers.

Finding such subcontractors, however, demands a systematic approach. That’s how you pick the best options from a sea of applications.

Here’s an image that breaks down that approach:

Now for a detailed breakdown of each step.

1. Determine your needs

Subcontractors must fill a gap in your resources, or the money you spend on them will probably be wasted.

So, audit your project to determine its scope, the tasks and budget, and the resources required to complete it.

Now, compare the requirements identified by the audit with the people you have available and their skills and expertise. If it looks like you need backup, proceed to the next step: finding a best-fit subcontractor.

2. Conduct research

Now that you’ve defined your needs, search for subcontractors with the necessary expertise for your project tasks. 

Take advantage of Craigslist and Facebook ads, interviews with other contractors, and online communities. Also, look up niche communities, online directories, and local chambers of commerce.

When using the above sources to find subcontractors, create a detailed job description with a breakdown of the steps involved, scope, timeline, and estimated labor rate.

3. Create a list of subcontractors

During your research, use calls and reviews from other subcontractors to trim down the list. Before each call, look up the independent contractor’s reputation, job history, and specialty using social media platforms, their websites, and testimonies from other contractors.

Establish rapport with candidates during the call and invite the most promising ones for an in-person interview. They should come with their portfolio and licensing documents.

4. Examine their licensing and insurance

Hire only insured subcontractors with the proper licenses and certifications to protect your business. 

This shows they are financially stable and competent enough to keep project costs within the budget and comply with building standards. It also protects your business and prevents obstacles to the project’s completion.

Prospective candidates should bring their liability certifications to the in-person interviews. At the very least, they should have auto and general liability insurance coverage and workers’ compensation for anyone in their employ.

Tell them to come with documents if they specialize in industries with specific license, certification, and training requirements. Thoroughly peruse those documents to ensure they’re valid, up-to-date, and comply with industry standards.

5. Request bids and proposals

After the interviews, once you’ve explained the timeline and scope of the project, ask subcontractors to submit their bids and proposals. Ideally, get them to physically assess the job site to provide more precise estimates.

Allow them to ask questions and clarify any detail they wish to. Your responses should be transparent and honest. You don’t want to hide any detail that makes it impossible for the subcontractor to plan adequately and prepare an accurate budget.

6. Evaluate the submissions and pick one

Evaluate the submitted bids and proposals based on the applicants’ respective budgets, expected completion time, and previous experience as captured in their portfolio. Factor in any special requirements the customer has when deciding who’s the best subcontractor for the project.

After evaluating the submissions, select the right one and invite them to negotiate a contract.

7. Negotiate a contract

Start the contract negotiations once you’ve picked a subcontractor to work with. Consult a legal expert to ensure the contract is iron-clad and detailed enough to protect your company from legal issues.

Here are some details to include in the contract:

• Work hours

• Project scope, duration, and timelines

• Tasks and responsibilities

• Hourly rate and total payment

• Deal breakers

• Payment schedules

The contract should have fair rates and expectations so subcontractors are incentivized to give their best on the project and treat customers as you would.

8. Sign the subcontractor agreement

After agreeing to the contract terms, both parties should sign on the dotted lines. 

Before signing, reiterate the details captured in the agreement to ensure you and the subcontractor are on the same page and that nothing is lost in translation. Plus, ask how they plan to meet the requirements and deadline, including any extra resources they will need.

After signing the agreement, do a trial run. Directly supervise the subcontractor for the first few projects and only hand it off when you’re convinced they can deliver quality work and obey safety guidelines even when you’re not around.

What Are The Key Factors to Consider When Hiring a Subcontractor?

You should use these criteria as a checklist when vetting subcontractors to ensure you choose the perfect one for your project.

References

The best way to confirm a subcontractor’s ability is to check with the people they’ve worked with—other general contractors, companies, and subcontractors.

Ask subcontractors to submit at least three references and their contact information and call to confirm their validity. Listen for repeated complaints and commendations and urge references to explain the type of project they hired the subcontractor for.

Safety record

Construction projects are rife with safety hazards. So, you want to hire a subcontractor who takes safety guidelines seriously and always follows them. This will keep your project from being derailed by accidents and protect workers from injuries.

To evaluate subcontractors’ safety records, search the Occupational Safety and Health Administration’s (OSHA) establishment search platform for any violations on their recent projects. Simply input their name, location, and date range, and any safety violation reports for the chosen period will be revealed.

Track record

Any subcontractor you hire must have a solid track record of meeting deadlines without sacrificing customers’ quality expectations. Review their past projects and speak to previous clients to confirm if the subcontractor is reliable.

Reviews and testimonials

Use online reviews and testimonials to see what past clients say about the subcontractor. Look out for recurring complaints, unresolved issues, and customers who later changed their reviews after the subcontractor resolved their issues.

Where Can I Find Subcontractors to Hire?

The likelihood of picking a subcontractor with the right talent, skill set, and experience level increases proportionately with the number of people you interview. 

Plus, having more options strengthens your bargaining power. Here are different ways to find subcontractors:

• Online local directories: You can place advertisements or search for subcontractors on Yelp, Angi, and Craigslist. 

• Dealers in contractor supplies: Suppliers, vendors, and wholesalers of contractor materials and tools can refer you to a local subcontractor.

• Trade school directories: Local trade schools sometimes have a list of subcontractors with whom their students intern. You can contact them to suggest some subcontractors from their directory that they’ve vetted and can vouch for.

• Other subcontractors and fellow builders: Ask friends in the construction industry to suggest subcontractors they’ve worked with. This is a great way to find the best contractors for special tasks.

And when you do find your guy, don’t discard the other names that made your shortlist. If the subcontractor you hire turns out to be a disappointment, you’ll have potential replacements at your fingertips.

What Are The Benefits of Hiring Subcontractors?

Here are some benefits of hiring subcontractors:

• It makes it easier to scale up and down in response to customer demand.

• It saves you from paying for training employees since subcontractors train their own workers to deliver quality work.

• It eliminates the stress of paying salaries and completing the paperwork associated with hiring full-time employees.

• It relieves you of the cost of buying or leasing equipment since subcontractors always come with their own.

• It gives you more time to focus on the managerial aspects of running your business.

What Are Subcontractor Agreements?

Subcontractor agreements contain the guidelines and both parties’ obligations necessary for the successful completion of the project. Signing the contract is generally the last step of the hiring process.

Details in subcontractor agreements should be clear, detailed, and to the point. This makes it easier for both parties to understand, avoids loopholes that could be unfairly exploited, and helps in legal disputes.

A subcontractor agreement can include the following:

• Project scope and timelines: Subcontractor agreements contain a detailed breakdown of the project and dates by which certain milestones must be completed. This keeps the subcontractor accountable and prevents the project from exceeding the deadline.

• Payment schedule and amount: Give a breakdown of the payment schedule and hourly rates. You can stagger the payment or pay it in bulk at the end of the project.

• Debris-removal agreement: Lay out who will be responsible for cleaning up the job site after the project. This avoids the unexpected expense of hiring extra people to clean up the debris.

• Deal breakers: Spell out conditions that can justify terminating the contract, including failing to meet deadlines, skirting safety regulations, and refusing to perform a task contained in the contract. This can prevent legal disputes.

• Indemnity agreement: Some construction contracts include indemnity clauses that prevent you from paying for damages caused by the subcontractor’s negligence. This protects your business.

How Can ServiceTitan Help You Grow Your Contractor Business?

Contractors are like football coaches: they’re trusted based on the success of their last project. A contractor that screwed up in the last job, failed to meet deadlines, or overcharged the client will likely not get another project, especially if future customers research thoroughly before deciding who to hire.

Hiring the best subcontractor is one way to ensure your project's success. However, it is not enough to prevent issues and mistakes caused by manual and inefficient processes.

ServiceTitan is a digital solution contractors use to manage their businesses and eliminate inefficiencies. It has tools for:

• Marketing: You can use ServiceTitan to run email, direct mail, and digital marketing campaigns. It also records the exact revenue earned from each campaign using Dynamic Name Insertion (DNI).

• Financial management: Our tool allows you to track revenue entering and leaving your business. It delivers detailed reports that make it easy to maintain a stable cash flow and help you create accurate invoices.

• Job management: Contractors use our tool to assign jobs, dispatch techs, create estimates, identify sales opportunities, and manage organized pricebooks.

• Delivering quality customer service: ServiceTitan has a cloud-based CRM that centralizes customer details, making it easy to deliver personalized service. We also have tools that enable customer and contractor communication and empower users to track technicians’ real-time locations.

To discover ServiceTitan’s other capabilities, schedule a call to get a free, one-on-one tutorial on how the tool works and empowers contractors to operate efficiently and meet deadlines.

ServiceTitan is a software solution that helps contractors run their businesses more efficiently by automating essential processes like invoicing and customer management. Join over 100,000 contractors nationwide who use the platform to boost revenue.