Subcontractor Management in Construction

Abstract

For a construction industry to have competence and valuable products, it has to work with people and companies from different settings. A construction management firm who may act as the universal contractor doing some of the work or as a construction manager who basically deals with the administration is usually appointed to ensure that there is harmony amongst the companies. In the construction industry management, subcontractors who are proficient in a specific job are used to perform precise parts of a given project. The involvement of these subcontractors helps to cut down project loss because it reduces the time that should be taken by the organization to be trained and be perfect in performance. While it is a good idea to incorporate subcontractors from other companies in the industry, it can also lead to other problems like enlargement of the project and increase in the number of appointed subcontractors and hence subcontractor management will not be efficiently achieved. This thesis studies the challenges faced in subcontractor management. It also discusses the factors that should be pursued to minimize the problems. Five people from different construction settings were interviewed about their experiences, views and beliefs on subcontractor management. The information gathered has been examined and prepared into a survey. The recommendations for subcontractor management will help future construction managers to know how to deal with subcontractor’s management.

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Introduction

Construction industry is very difficult and challenging and skills need to be incorporated from different subcontractors so that the projects can be accomplished efficiently and economically. For the project owners to coordinate the projects well they employ construction managers or general contractors. In order to have the costs low the managers use the skills of the contractors who are proficient to provide quality service to the project. The use of subcontractors minimizes the cost of the organization to train their employees how to tackle many projects.

Involvement of subcontractors is very important in the construction industry for it to have efficiency in its projects. They are sometimes cause problems between the management and the subcontractors which can cause a setback to meet the targets of the project like it can extent the completion of the project so that the targeted completion dates are not met. When a company uses multiple subcontractors, the problems tend to increase and hence it affects the whole project. The managers have to have thorough coordination of the subcontractors to ensure that the appropriate skills are used by the subcontractors. This close monitoring will help in diagnosing any problem that might arise and fix it promptly.

This thesis examines factors that can help to minimize the problems involving subcontractors. The construction manages should ensure that they lower their costs as compared to their competitors for the company to offer project. The construction industry is very competitive and hence subcontractor management is very crucial. Use of the subcontractors helps to reduce the bid price. When a project begins, the subcontractors have to work according to the work frame that is provided so that everyone can gain. Delays in the projects can lead to reduced profits. The reputations of the company is also affected which in turn affects the views of future work. The construction managers have to apply the best skills in management of the subcontractors to reduce problems and hence gain profit from the projects.

Background

Construction process makes uses of skills and abilities from people of different deals. The construction managers have to work hand in hand with the subcontractors for the projects to be valuable and to meet the set date targets. The managers have to make use of the subcontractors to achieve efficiency in their projects (Teets, 1976).

Success in the construction industry not only means completing a certain project, but also entails finishing the project according to the estimated time. Each company aim to gain profit and it should have enough capital for it to prosper. The construction manager’s subcontractors must come up with a project which is safe and of high value. When a company produces quality work and meets the target time to accomplish the project it improves the reputation of the company and gives it opportunities to get future job which is crucial for the success of the participating companies. The contractors venture into construction with the aim to complete jobs effectively and profitably (Melvin, 1979).

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When undertaking a certain project, multiple subcontractors may be given a chance to participate in the construction. In the construction industry, the subcontractors take majority of the work in a given project (Keats, 2008). According to Hinze and Tracy, general contractors end up subcontracting more than 80 percent of the work (Hinze, 2003). Because the subcontractors are proficient in specified area of the construction, the combination of their efforts helps to reduce the cost of production which includes money and time.

Involving subcontractors in the construction industry which has a lot of work helps the project owner to produce a high quality and satisfactory product (Design, Build, Own, & Operate 2008). This will demand of involvement of managers, laborers and engineers who can work together without any conflict. The construction managers should delegate responsibilities to all the participants and make them produce quality products. There as to be good management strategies which should help to improve the reputation of the manager which leads to attraction of future business and work with the skilled contractors (Design, Build, Own, & Operate 2008)?

The construction manage has the duty to handle any problem that might arise in the organization (Thomas and Mike, 2005). Great skills and proper coordination have to be taken into consideration. The construction management has the capability to change so that profits can be realized and schedules be minimized. When the construction managers get new and better ways to handle the contractors the relationship between the parties and the project can lead to profits.

The Description of Proposed research

This is a research which is conducted to come up with the problems or challenges in construction industry in dealing with subcontract management. It will come up with some basic practices that can be applied by managers to counter the problem of subcontract management. The research will interview individuals from different construction settings in order to know their opinions and their encounter with contracts. Surveys will also be conducted to help come up with sufficient data for the research. Once data is collected it will be analyzed and recommendations will be given.

Literature Review

Literature review usually provides other practices that help in subcontract management. There is still need to conduct further research on the same. Literature review gives information of what others say about the same topic.

Problems Arising During Subcontractor Management

Subcontractor management is very important in construction industry because it helps to move risks and problems from the general contractor to the other subcontractors (Maturana et al, 2007). Subcontract management encourages people to have proficiency in aspects of construction because in case something goes wrong they are the ones to blame. The subcontractors carry the burden of the whole project. For it to have good reputation, the subcontractors have to work to provide high quality products. Poor subcontractor management results when there is no adequate planning and effective coordination.The managers should provide effective coordination so that the subcontractors produce quality work.

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Since contractors come from different backgrounds and sectors, problems are inevitable within an organization. The subcontractors have different personalities and experience which affect the productivity in an organization. There are some subcontractors who have a higher experience may be they have more years of working experience that others, some may have inborn qualities of perfection and so sometimes they could differ in opinions and hence lead to problems in the process of tackling a certain project (Thomas and Mike, 2005). Once a problem arises, they should be fixed to avoid negative impact on the project.

One of the major problems is organizing and coordinating various trades. Because the contractors interact and communicate with one another, it is difficult to have trust in them but since they have to be involved in the projects they have to work together and so it is hard to have trust in them (Levitt and Nancy, 1993). If the subcontractors do not trust one another, it does not create conducive environment for work and it becomes hard to produce quality work.

The problem of lack of trust leads to many issues in the construction industry because each party that is involves in the projects have the mind that the right things are not done to them. With these mentalities, completion of projects and having quality products become hard to be accomplished. Developing trust in the group is very important and hence the managers should take time to create group trust so that issues can be solved promptly (Thomas and Mike, 2005).

Another problem is that when the subcontractors are given a certain project, they are usually interested in their own good and welfare. Some subcontractors work just to finish the job and get paid without taking into consideration the quality of work they produce. They do not concentrate to achieve the goal of the project because they need to use the most profitable method and tactics not bearing in mind it effects on other shareholders (Thomas and Mike, 2005). The management should ensure that all the parties in the project work towards the same target.

Lack of business knowledge is another issue which is a challenge in contract management. Some of the managers do not have managerial skills on how to manage their work (Sweet, 2004).If they lack the basic business knowledge then there will be no success in the projects that they take, there will be problems in management of funds and even coming up with a working schedule and a genuine budget.

There is the problem of scheduling in that the construction is a process where one step leads to the other. Once scheduling becomes a problem in an organization, it results to delay whereby the projects will not be accomplished at the expected date or time. These delays can be as a result of lack of equipments and materials to complete a certain project (Levitt and Nancy, 1993). The construction projects should have proper planning and scheduling for them to finish projects within the specified time and to work according to the specified budget.

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.Cash flow should be well organized in any organization. Delayed payments can bring problems into a project. When the project owner does not pay the general managers it means that the subcontractors will not be paid and they can end up breaking the project since the funds to pay the laborers and buy materials and equipments is not available.

Problems are all over the industries and the construction industry is not an exception. Problems will never end but the management should come up with solutions to solving problems with the contractors. If the management is good, the projects will be accomplished and the subcontractors will benefit out of the efforts and dedication to the organization (Levitt and Nancy, 1993).

Solutions to Alleviate Problems from Subcontractor Management

Communication and Cooperation

Communication and cooperation are important tools that can be used to improve problems in the subcontractor management (Proctor, 1996). The project managers should ensure that information is given to the right people at the right time. When the members can communicate and raise their concern in a good way, solutions to the problems is promptly sought. If the parties have problems to communicate, it leads to delays and poor quality products.

The managers should work together with the subcontractors so as to create close relationships and it ensures future work. It is good for the managers to listen and understand ideas and opinions of the parties for the organization to be efficient and effective (Thomas and Mike, 2005). Each party has valuable information that can help in the industry and it should be given a chance to air its views.

When there is no communication in the industry, problems tend to be more, delays to meet the targets accumulate and resolution will be delayed. Each party should be given a chance to express its opinion concerning a problem so that the other parties can see the opposing ideas and beliefs (Melvin, 1979). To improve communication, a strong line of communication with the subcontractors should be developed.

Communication can be achieved by forming a plan for the parties to follow and understand (Terry, 2008). All the parties should be provided with details of what it is supposed to be done. The role of the subcontractors should be well outlined so as to achieve good results.

Communication can be quickly achieved though technology in that people can make phone calls other than going to meet the specific person. Internet gives room for contractors and subcontractors to communicate where drawings and plans can be exchanged and problems can be resolved within a short time though emails and chat sites (Terry, 2008).

Relationships

Another problem that arises in the construction industry is relationship between the management and the subcontractors. Teamwork should be encouraged among the subcontractors and the management should develop trust for the parties (Wallace, 2007).The outcome of any project depends on the relationship between the project managers and the subcontractors. There should be respect amongst the parties.

For the industry to develop good relationship, each party must know the abilities and limitations of others (Thomas and Mike, 2005). There should be fair delegation of duties and responsibilities to subcontractors and their value and contributions to the project should be acknowledged (Proctor, 1996).There should not arise a point where delegation of duties to the subcontractors is not fair. All the subcontractors should be valued and whatever they do in the project should be recognized and appreciated by the managers.

Bid shopping can cause relationship problems between the manager and the subcontractor (Hinze, 2003). Bid shopping lead the subcontractors to reduce their bid price on certain a project and hatred can happen between two parties (Arditi and Ranon, 2005). Bid shopping should be discouraged and the management should create and have trusting relationship with the contractors.

Contract Administration

Before beginning a project the management must come up with a contract that the subcontractors have to sign. The contract should have rules, regulations and guidelines that should be followed by all subcontractors so as to reduce problems placed on the construction manager (Gilbreath, 1992).

In case of problems that might arise, the project manager should make sure that the project is not affected by the problems. This can be achieved by planning a contract which shows the actions to be taken in case conflicts happen in the project. The subcontractors are expected to act as per the signed contract (Goldhaber, 1977).

Strict contract documents are important to solve conflicts and they help in legal argument. When debates are taken to court concerning a certain problem in a project, the judges find it easy to make solution to the problem if everything is contained in the contract documents. If the details are well outlined in the contract, then, it is easy to take legal action (Goldhaber, 1977). These strict principles act as an insurance for the parties in the project because the responsibilities are clearly outlined.

The contract should include a penalty statement that punishes a party when it violates a contract. The penalty such as what should be paid to the owner of a project if the project is not completed according to the contract documents. The payment usually depends on the expenditures of the project. The liquidated damages tend to threaten the financial welfare of the parties that are involved in the contract and so the subcontractors are encouraged to work efficiently to avoid the financial losses.

Submittal and Change Order Log

In order to keep records, all documentation that are received and sent to subcontractors, it is good for the construction managers to use submittal and change order logs which can be used for future reference. The log should show the specific dates when submittal is expected, the logs should be up-to-date and distributed when there are meetings for the parties to know the changes. The submittal and change order log should be well maintained (Strategic Construction Management 2008). Submittal forms should be universal for all subcontractors so as to provide ease when dealing with many submissions.

When there is a problem on the project the subcontractors and construction manager can make a change order to the owner of the project, the architect or even to the engineer to demand that the original contract documents be changed. It is very hard to manage submittals and change orders in a construction industry especially in large projects. There should be enough personnel who can organize the changes and submissions. The company can come up with an expert to deal with the submittals and change orders from subcontractors. This saves money and time for the project.

Review of Subcontractor Performance

Project reviews should be taken so as to analyze the subcontractors’ work. The management should take regular reviews of the work done by the contractors (Wallace, 2007). This allows the management to make correction of the work done. It also helps the management to advice the subcontractors to improve the quality of their work in case there is a problem. Project reviews leads to quality products. The management can have safety walks as a way of project review (Hinze, 2003). Submitting daily reports by each party of what happens is another good tool for project.

Once a project is accomplished, the management can take reviews of the work done by each subcontractor. This can be done by use of a rating system which shows the areas of achievement or failure for the subcontractor’s performance (Dream Builders Northwest). This rating system can help the management in selection of subcontractors in future so that they can work with the best contractors.

Rewards and Incentives

When contractors perform well and produce quality products, it is good for the management to reward them monetarily. The incentives and awards should be fair to the subcontractors. The manner of incentives should be well understood by the subcontractors on when such rewards can be given and the conditions to be met. The rewarding system should be made the project starts in order to prevent future conflicts on the amount to be awarded (Thomas and Mike, 2005). Rewards tend to motivate the subcontractors to produce their best skills so that they can get the reward.

Training

Safety training is advocated in construction industries to prevent accidents on the job-sites. Before starting a project, it is good to provide information to the laborers concerning the potential hazards and the correct measures that can be taken to tackle the problems in case they arise. (Hinze, 2003).The construction manager should provide the information so that all expectations regarding safety can be clearly stated to the workers.

The management can make document management training to the subcontractors on how to handle change of orders, request for extension time or even submittals. In order to create clarity to the subcontractors, project managers should take time to train them how to handle the documents. They can be taught how to fill out forms which will help the organization to save money and time (Hinze, 2003). Different industries have different ways of documentation and so it is advisable to train the subcontractors on the specific documentation to be used in a given company.

Meetings

It is important to have regular schedule of meetings so that the there can be communication between the management and the subcontractors. This helps in coordination of activities and gives the contractors the progress of the projects (Thomas and Mike, 2005). It also helps to improve the quality of work produced.

Management should conduct a meeting with all subcontractors prior to the bid. This helps to discuss issues such as objectives, communication, schedules and how to resolve conflicts (Levitt and Nancy, 1993). It gives the subcontractors the expectations of the work and helps in creating team mentality (Hinze, 2003).

Pre-qualification

This is the process of examining if the subcontractor has the capability and skills to take a project which is based upon particular company aspects. The construction manager has to conduct a historical research of a company so that the projects can be given to the best subcontractors who will produce high quality work (Lin, 2003).

When selecting subcontractors it is good to consider previous work pre-qualification (Lin, 2003).This can be done by assessing their previous work done and selecting subcontractors who are able to complete the project according to the schedule and the specified budget (Maturana et al, 2007).

Prequalification can also be done upon safety by coming up with subcontractors who have good safety records (Levitt and Nancy, 1993). Human life is very important and hence project managers should not save money at the expense of the workers. Human life should be regarded as the most important issue in any project. The project manager should select the subcontractors who have an established safety program (Arditi and Ranon, 2005).The project manager should take the responsibility to ensure that the employees have the basic safety procedures.

Construction managers should also consider financial pre-qualification. This deals with economic stability of the subcontractor’s company. The management should select the financially stable subcontractors. They should take financial checks of the subcontractors to make sure that they are stable. Having financial stability ensures that the subcontractors meet the targets and the specified schedule. Financial pre-qualification helps the company when it comes to meeting deadline and the work is not completed, the subcontractors should have money to increase the workforce to meet the targets. Sometimes machines break down need to be repaired which also demands money. The subcontractors should be people who can take quick responses even using their money.

Payment

The management hires subcontractors to complete a certain work and they should be fairly paid. It is good to pay them on time after they have finished their project and this should be according to the contract agreement. Subcontractors (Jackson, 2004; Hsieh,1998; Proctor, 1996). Timely payments create positive relationship between the parties for future jobs.

Research Questions

This study was guided by the following questions:

  1. What are some problems encountered when dealing with contract management?
  2. Which solutions can be prescribed to minimize the problems encountered when dealing with contract management?

The Design Methods and Procedures

Sampling

Interview subjects were chosen from fields including commercial and residential construction as well as information systems and technology.

Instrumentation

The data for this study was collected both from primary and secondary sources. The study used telephone interviews and person interviews. They also conducted a survey and the study used reference materials like books and internet sites. The researchers also used recorders to record information from the telephone interviews

Data collection

Data for this research were collected by interviewing five people from different construction settings. Data was also collected through a survey that was taken by ten practicing professionals. Eight of the survey participants were taken from field of construction management and the other two were taken from the field of Information systems, and technology. Online survey was also conducted in this study which also enabled the researcher to collect information online concerning the same topic.

Data Analysis

The individuals were interviewed about their experiences, views and beliefs on subcontractor management. Each interview was recorded and broken down into key ideas and suggestions. Findings which seemed similar were grouped together. These findings were identified as either problems with subcontractors, or practices for successfully managing subcontractors. The principles were then graded according to the averaged responses from the ten professionals. The ranking serves as the arrangement for practices starting with the most important and ending with least important

Significance of the study

There have been challenges in the construction industry when dealing with subcontractor management. This study is designed to provide the construction management and project managers to know how to manage the subcontractors. How to understand them and how to encourage them to works beyond their expectations to accomplish the projects on schedule and provide quality products. The study will examine techniques or practices that can be put into considerations when dealing with subcontractor management. The study will also give recommendations of the best practices that can be taken into consideration in subcontractor management.

Conclusion

Construction industry being a very challenging industry has to make use of skills and techniques from individuals who have different backgrounds, beliefs, religions, and experiences. It is good to have subcontractors which will help to finish the projects according to time schedules and work on a given budget. When dealing with these contractors problems have to be seen. The project manager should take the responsibility to provide quick solutions to the problems so that they cannot have negative impact on the projects. This thesis provides some practices that should be done on subcontractor management. They have been ranked from the most important to the least.

These practices are; develop a strong line of communication with subcontractors by sending frequent updates, regularly scheduling meetings, identifying key contact personal, and utilizing the same forms of communication; develop and maintain trusting relationships with subcontractors; do not practice bid shopping, it is unethical; establish a system for submittals to be followed by all subcontractors that includes a schedule with due dates; establish a system for changes orders to be followed by all subcontractors.

You should do not pay for changes to work where there is not proper notice; maintain a submittal and change order log; required notice for any changes performed by Subcontractors should be made, meet with subcontractors at a minimum of once every two weeks; pay subcontractors on time according to contract documents; provide subcontractors with training on how to manage documents, prior to construction; require toolbox safety meetings; provide subcontractors with safety training, prior to construction; use a score card to rank subcontractor performance periodically or at the completion of a project; conduct safety walks regularly to check for proper safety practices and ensure good housekeeping; explain potential of repeat work with subcontractors if expectations are met or exceeded; follow contract provisions accurately ; require superintendent or foreman to fill out Daily Field Reports to assist in project review and finally include lead subcontractors in development of schedule.

References

Arditi, D. and Ranon C. ( 2005). Issues in Subcontracting Practice. Journal of Construction Engineering and Management, 131 (8), 866-876.

Gilbreath, R.D. ( 1992). Managing Construction Contracts: Operational Controls for Commercial Risks. New York: John Wiley and Sons.

Goldhaber, S. (1977). Construction Management: Principles and Practices. New York: John Wiley and Sons.

Hinze, J. (2003). Closure to The Contractor-Subcontractor Relationship: The Subcontractor’s View. Construction Engineering and Management 121 (3), 333-335.

Keats, J. (2008). Subcontractor Management. Dekker Trakker. Web.

Levitt, R.E. and Nancy M. (1993). Construction Safety Management. New York: John Wiley and Sons.

Lin, H.(2003). Decision Support for Subcontracting Procurement Based on Multi-Attribute Utility Theories. Construction Research, 120 (92), 1-7

Maturana, S., Luis, F., Pedro, G. and Mladen, V. (2007). On-Site Subcontractor Evaluation Method Based on Lean Principles and Partnering Practices. Journal of Construction Engineering and Management, 23 (2), 67-74.

Melvin, T. (1979). Practical Psychology in Construction Management. New York: Van Nostrand Reinhold Company.

Proctor, J.R. (1996). Golden Rule of Contractor-Subcontractor Relations. Practice Periodical on Structural Design and Construction 1 (12), 12-14.

Sweet, J. (2004). Legal Aspects of Architecture, Engineering, and the Construction Process. Toronto: Thomson Learning

Teets, R.L. (1976). Profitable Management for the Subcontractor. New York: McGraw Hill Company

Terry, M. (2008). Managing Subcontractors. Lowes Commercial Services. Web.

Thomas, G. and Mike, T. ( 2005). Construction Partnering & Integrated Teamworking. Malden, MA: Blackwell Publishing.

Wallace, S. (2007). Sub-contractor and Contract Management. The epm Book. Web.

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