Who are the Subcontractors We Hire?
In construction, a Contractor is a company hired by the homeowner or property owner directly. This party is often called the Prime Contractor, Original Contractor, or General Contractor (GC). So what are the differences between a contractor and subcontractor?
Sometimes, a GC completes all of the work on a project with their own crew. But on a typical construction project, the GC will hire subcontractors to perform specialized tasks under a subcontract. GCs also hire suppliers to provide materials necessary in the construction.
A subcontractor (sub) is anyone who provides labor or services on a construction project that was hired by someone other than the owner.
On a residential construction project, common subcontractors are carpenters, plumbers, or electricians. They are often self-employed or small business owners that specialize in a particular niche in the construction industry. They perform a portion of the work that contributes to the overall project. As a result, they often help reduce project risks, because they bring expertise that the GC may not have.
However, subcontractors aren’t defined by their business size. Subcontracting can be done by an individual who installs windows, or a multi-national corporation that does commercial or industrial electrical work.
What ultimately defines a sub is that they sign a subcontractor agreement. A subcontractor agreement divvies up the scope of work in the original contract and reassigns part of that existing contract from the GC to a subcontractor.
Similarities between Contractors & Subcontractors
In some ways, GCs and subcontractors are very similar in construction. They all contribute work to a property improvement using their own equipment and tools.
From the perspective of a property owner, a GC and subcontractor simply refers to a person or company who is not an employee. This designation gives the owner less responsibility under employment laws and tax laws.
The owner doesn’t need to provide health insurance or other benefits to the contractor or sub, and they don’t have to bother with payroll taxes or some other legal requirements.
GCs and subcontractors are entirely separate legal entities that collaborate to accomplish a project. On construction jobs, GCs and subcontractors will both require a proper license to perform their work. And they will have to run their businesses independently from the property owner.
As a result, both GCs and subcontractors need to provide their own liability insurance. If they have employees, they manage their own health insurance and other benefits.
Differences between General Contractors & Subcontractors
Generally, the key distinction between the GC and subcontractors comes down to the contractual relationship. GCs have “privity of contract” with the owner.
That sounds like a fancy legal term, but it’s pretty simple. In construction, having privity of contract simply means that the person was hired by the property owner.Subcontractors are typically hired by the GC.
Common Characteristics of General Contractors
A “general” contractor refers to a contractor in charge of hiring subcontractors and coordinating their work, keeping the job on track for timely and on-budget completion.
However, it’s also possible that a GC could be hired by a developer, a construction manager, an architect, or some other person on a project.
Regardless, one of the most valuable tools for any successful GC is their network of reliable subcontractors. Back in the day, many GCs were a one-stop-shop. They handled every aspect of a project, mostly in-house.
As time has gone on, the construction industry has moved more towards specialization. Back then, one GC may have performed a variety of different functions and taken care of the project all by themselves, top to bottom.
Today, these GCs more commonly hire others to perform specialized work. Which is where our subcontractors come into play.
Finally, who are the Subcontractors we hire?
Subcontractors are the ones in the trenches, getting the small objectives accomplished for the larger scale plan of attack. A subcontractor can be a company or an individual. They are not the GC’semployees. Rather, they are typically an independent contractor.
Compared to the GC, a subcontractor’s work is more narrowly focused. These are your specialists, highly trained in a certain trade such as drywall, plumbing, HVAC, roofing, etc.This helps GCs mitigate risks, keep the project running on time, and potentially reduce the overall costs of the project.
Finding the right subcontractor isn’t easy! A great GC should always vet and hire“all-star”subcontractors whose work is superior, meet not only licensing and insurance standards, but whose company values align with the GC’s! Subcontractors represent the GC in the field, and because of their expertise in a specific field, they are especially good at product and service delivery. They know exactly what materials they need, where to get them and the time required to accomplish their task. All of this with theultimate goal of creating happy homeowners!