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Sub Contractors: The Builder’s Greatest Asset

Author: KARL A. BERG, JR.

An attorney once told me: “The practice of law would be great if we didn’t have to deal with clients.” Probably more than a few homebuilders have expressed similar sentiments with respect to their subcontractors. Although there are a few subcontractors who are not conscientious in one or more respects, the vast majority of them take pride in their work and value their relationships with their builder clients. As such, builders should recognize that their subcontractors are important assets, integral to their ultimate success. This column will discuss a few ways in which builders can make subcontractors understand and appreciate their importance in the homebuilding process.

First and foremost, builders should develop and consistently use a subcontract which provides reasonable protection to both the builder and subcontractor. Too often, based upon the disparity in bargaining power, builders are able to have subcontractors sign overly burdensome subcontracts. While builders may correctly believe that such one-sided agreements will benefit them should a dispute arise, they may be disregarding the demoralizing effect such agreements have on their subcontractors which, too often, believe they are completely at the builder’s mercy. Further, unfair agreements probably diminish the subcontractors’ trust in the builder. Since trust is the basis of all successful relationships, it is thus in the builder’s best interest to treat their subcontractors fairly from the beginning of the relationship. Having a reasonable and fair subcontract will go a long way to convince subcontractors that the builder isn’t looking to take advantage of them should a dispute arise.

If a builder is well organized, particularly with respect to scheduling work, it shows the builder values their subcontractors. The statement “Time is Money” is especially true in construction. If a builder fails to properly schedule its subcontractors and requires that they repeatedly return to a site which is not ready, they will become frustrated due to the unrecoverable costs they incur. This may lead to inattention to the work or a rush to compete it which will adversely affect its quality. If either of these things occurs, the builder will ultimately pay a higher cost as a result of poor quality work and customer dissatisfaction. Therefore, builders should invest the proper resources to show subcontractors that they value them and recognize their subcontractors’ time is worth something.

Builders should avoid requesting subcontractors complete work outside the scope of their agreements without compensation or requesting work which isn’t legitimate warranty work. Based upon the leverage they have over subcontractors, builders may be tempted to request extras without paying for them. Implicit in the request is the possibility that if the subcontractor isn’t a “team player” by helping the builder out, the builder will find a subcontractor who will. This is unfair and only reinforces the subcontractors’ belief that builders will take advantage of them if they can. Likewise, in order to keep their customers happy, a builder may be tempted to have subcontractors do “warranty” work which work is necessary as a result of the customer’s (or their children’s) negligence or failure to properly maintain the home. This practice must also be avoided. While builders must be attentive to their customers, simply because the subcontractor will bear the cost of the work is not a legitimate reason to have it done.

Finally, builders should promptly pay their subcontractors. As many subcontractors cannot afford not to be paid, they will genuinely appreciate being paid on time.

Builders looking for long term success will recognize that loyal subcontractors are their most valuable asset. Thus, builders must treat them as assets rather than liabilities which is too often the case. If they do not, their subcontractors will become a liability which may ultimately lead to the builder’s failure.

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