Subcontracting Comment – Using Master Subcontracts as One Part of a Strong Partnership with Subcon | Paul James, Sr. V.P. Risk Management & General Counsel, BOND
One of the most fundamental features of operating as a general contractor or construction manager (GC/CM) involves use of a wide variety of types and formats of contract agreements needed to deliver a project. Starting with the prime agreement with the project owner there are typically many subsidiary agreements with the various parties we contract with to fulfill our obligations to the owner. These parties range from consultants and service professionals to material and equipment suppliers and various specialty vendors and, of course, trade contractors typically referred to as “subcontractors.”
The relationship between a GC/CM and its subcontractors is manifestly critical. Typically, a very large percentage of the work on the project is performed by subcontractors and their success on a project is our success. At BOND, our subcontractor partners are an essential part of our business. Where possible, we seek to develop a stable and long-term focused relationship based upon mutual success. Toward this end, we have developed a subcontractor prequalification program to emphasize and serve these interests. We use a three-pronged approach: (i) a master form of subcontract we call a “Global Subcontract”; (ii) an annual subcontractor prequalification process; and (iii) annual confirmation of subcontractor insurance documentation requirements on a “blanket” basis v. on a project by project basis. We find that each of these prongs serves our goal to establish a stable and long-term relationship with subcontractors.
Master form of agreements are common in the construction industry and a number of our owner clients use them on the prime level. A lynchpin of our subcontractor pre-qualification process is the use our Global Subcontract.
Rather than issuing a new and separate subcontract for every project upon which we engage subcontractors, we prefer having a Global Subcontract in place which forms the basic framework and the applicable contractual terms and conditions used for all projects. For each individual project we then issue a Project Specific Work Authorization (PSWA) that is mutually agreed with a subcontractor containing the specific requirements and issues that need to be addressed. Typically, a Global Subcontract remains in place for several years until replaced by a newer version.
We find that this approach allows us to more efficiently move through the subcontracting process. It allows us to focus the corporate resources necessary to put the Global Subcontract in place initially, then to permit our project teams to take the lead in forging agreement on a PSWA that can be tailored as needed on a project by project basis. Our Global Subcontract process helps us serve our goal of maintaining a long view with our subcontractors while ensuring that the needs on specific projects are properly addressed.
About the Author
Paul is responsible for working with the BOND Executive and Project Operations Teams on risk management, contract, project administration, insurance and legal issues as well as conducting related professional training.