Don't Get Nailed: Contracts Not Handshakes
Bringing in the right subcontractors, for the right work, at the right time, can be game changing for your construction business. But, things can always go south on a build, so never, ever, go without a written contract. Verbal agreements and handshakes, even when you know each other and have prior shared successes, won’t protect you from costly disputes and misunderstandings.
Tips for Subcontracting Wisely
Construction business coach, George Headley observes that wise subcontracting can make a big difference toward surviving and even thriving in change-filled times, and offers this encouragement: “Try subcontracting more portions of your work including self-performed labor. ….Work to cultivate a strong group of quality subcontractors who you trust and rely on….Good subcontractors are much easier to find and manage than the number of people it takes to self-perform work. Plus, when the job is complete, your payroll stops!” When subcontracting, however, don’t be in such a rush to get things done that you rely on a conversation and a handshake. Contracts remain an essential way to protect your business from disastrous legal and financial consequences. Reporting for Construction Dive, Keith Loria notes that problems that frequently arise related to sloppy subcontracting “include work delays, miscommunication or non-communication, lack of proper equipment or expertise or manpower, a failure to comply with safety regulations, or payment issues and delays….”
Pointing out that tailored legal solutions can be set up to address recurring contractual needs, small business law experts at slnlaw emphasize: “Never work without a written contract. It forces all parties to agree to exact terms. Small business owners may justify “handshake deals” because they are engaging known vendors and contractors. In practice, if an issue in these circumstances goes to court, it typically ends up as a “he said/she said” fight with no guarantee of how it will resolve.” To ensure a clear and enforceable contract, construction attorney Jeffrey Paul Lutz, encourages inclusion of: “the scope of work, deadlines, quality standards and penalties for non-compliance.”
It’s helpful to think about contracts as a blueprint for your working relationship, rather than a pesky formality to get out of the way. Without clear, comprehensive terms, you’re building on shaky ground. Follow these pointers for an agreement that ultimately protects both you and your subcontractor:
Comprehensive Scope of Work:
- Precise description of the services the subcontractor will provide.
- Clear outline of materials they are responsible for supplying.
- Specific project deliverables and the quality standards they must meet.
Clear Payment Terms:
- The total contract sum agreed upon.
- A detailed schedule of payments (e.g., outlining progress payments, any retainage).
- Specific invoicing procedures and payment timelines.
Defined Project Timelines and Deadlines:
- Specific start and completion dates for the subcontractor’s portion of the work.
- Any applicable penalties for delays.
Good To Do: Homework
In addition to putting effort into clear and solid contracts, it’s also important to really do research on potential subcontractors before jumping into action. Trent Cotney, attorney partner at a construction practice in Tampa, offers these reminders about avoiding problem subcontractors:
A ‘problem subcontractor’ would be any person or entity who consistently causes issues that would negatively impact a construction project….Common problems include work delays, miscommunication or non-communication, lack of proper equipment or expertise or manpower, a failure to comply with safety regulations, or payment issues and delays — all of which affect project continuity….“If a prime is smart, they will do their homework in advance … .Know what you’re getting into and don’t do work with subs that aren’t reliable or get into trouble. It’s worth paying more to have a professional subcontractor work with you.
Teamwork Makes The Dream Work
Teamwork is the secret sauce of most success stories—and Colonial Surety is here to help you succeed. Our Hometown Bond Program helps local builders get credit based underwriting bonds for up to $250k—no financial statements required.
Growing from there, construction business owners can get in on more action by qualifying for The Partnership Account® for Contractors. Once qualified, you’ll use our power of attorney to issue your own bid bonds, in minutes. Order performance bonds with speed and ease too. Plus, you’ll bid and win more than ever as you leverage your:
- surety line of credit—in writing;
- private digital dashboard;
- daily snapshot of single and aggregate limits
- ability to update work on hand
Surety Bond programs for construction businesses of every size are right here: Bonding Programs at Colonial Surety Company
Founded in 1930, Colonial Surety Company is a leading direct seller and writer of surety bonds and insurance products across the USA. Colonial is rated “A Excellent” by A.M. Best Company and U.S. Treasury listed. Let’s connect today: Colonial Surety.
