Experience the Cost of Inexperienced Contractors

The way in which a general contractor manages a project will directly impact a subcontractor’s bottom line. Today, general contractors are forced to spread experienced superintendents and project managers over the many projects they have in progress.

Because GCs spread their experienced people between many jobs, it’s likely that the job you’re on will have far more inexperienced people than experienced people, which is likely to impact your bottom line.

Although the construction unemployment rate is about 4.4 percent, meaning both subcontractors and general contractors are both finding it difficult to recruit qualified people, the general contractors role and responsibility is far more complex because they manage all aspects of a project, whereas a subcontractor manages for the most part their own work.

Qualified or Not

To my knowledge, the most widely used contracts between owners and general contractors are A.I.A. contracts. A.I.A. contracts have a lot to say about general contractor’s qualifications and I think it’s important for subcontractors to have an idea of what these prime contracts say, because prime contracts (contract between owner and GC) are often made a part of each subcontract. In other words, when you sign and agree to a subcontract, you are agreeing to the language in the prime contract.

Many A.I.A. prime contracts have language warranting to the owner that the GC will furnish efficient construction administration, management services, supervision, and an adequate supply of workers and perform work in an expeditious and economical manner consistent with the owner’s interest. As well, the GC warrants to the owner this; it is experienced in the construction of projects of similar size, scope and quality. In addition, all work shall be completed by a qualified, trained, experienced and competent personnel in a professional and workmanlike manner. Furthermore, the GC shall assign sufficient numbers of duly qualified staff to the project.

If you were to read, for example, an A.I.A. contract before you signed a subcontract, you would assume that that the general contractors team is qualified to manage the project you’re about to sign up for? What you don’t know is whether or not the team assembled to manage the project is truly qualified. Although a company can be qualified, it doesn’t mean the team (the people) selected to manage the project are qualified.

Similar in Size and Scope

Similar means “alike but not identical.” A doctor’s office or clinic is not similar to a hospital. A high-rise is not similar to a four-story wood framed hotel. A convention center is not similar to a warehouse. Similar in size and scope means much more than one would think. For example when an owner interviews a general contractor it’s important that the owner asks questions;

Do you have an experienced team that can build the type of building we’ve designed?
How many staff members do you think is needed?
Can you provide resumes for the proposed team?
How many post-tensioned high rises have your team members built?
How many floors?
What type of businesses occupied the building?
- Retail
- Office
- Hotel/Condominium
- Resort
- Healthcare
We have a big cafeteria in our building, have you ever built cafeterias before?
We want as much work as possible to be prefabricated. What projects have you been involved in where much of the project is prefabbed?
Will you assign an experienced estimator that has priced projects similar to ours?

Let’s say the owner wants to build a 20-story post tensioned high-end hotel and a general contractor fails to have similar projects under their belt, so they offer the owner a great deal to gain the experience. If the owner agrees to give them a chance, then the contractor cannot warrant to the owner they have done similar projects in size and scope. If there are problems, the ownership can only blame themselves for poor results.

However, what if the GC somehow sells the owner on having a highly experienced team who have completed many similar in size and scope projects and over time the owner learns that the team doesn’t have the experience and serious problems arise like the schedule extending out months, and subcontractors start submitting claims, change orders are flying and the job is out of control.

The likelihood of a job going out of control with a highly experienced GC team is less likely than with an inexperienced team. In other words, subcontractors really need to know if the job and the GC is a good fit or a bad fit in terms of experience and then make a decision to bid or not bid. Since subcontractors don’t always get to know who will be on the GC team, they can only assume the team is experienced or they can ask, or they can look at the prime contract to see if the GC is warranting to the owner that they are experienced.

Options

What options do subcontractors have if they sign up to do a project with an inexperienced GC team? I think the most important thing a subcontractor can do is to stay very close to the GC and collaborate with them and other subcontractors. In other words, once you identify the problem, get involved to the best of your ability or to the extent the GC will allow with scheduling/sequencing of the work.

The other problem to overcome is that when a GC team has minimal experience in estimating or managing a job, the teams morale declines and they begin blaming others for what has gone wrong on the project. Again, when the team’s morale declines and high anxiety exists, you should still try to stay as close as you can to the GC and collaborate with them throughout the day. Hopefully, they will begin to look at you as an ally and the “go-to” person or subcontractor. If none of these things work, hopefully you have documented the problems, and are issuing change order requests for the impacts?

Subcontractors do many jobs in a given year, and it’s likely that the quality of the GC team in terms of experience varies greatly from job to job. The ultimate price for a GC team not having the necessary experience is that everyone loses. In this market subcontractors should and can be very selective in the jobs they decide to go after. Make sure it’s with an experienced team.