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Subcontractors and Bidding

General Preparations | Building Lot/Property | Home Plans/Specifications | Engineering | Building Permit | >>Subcontractors and bidding | Lien Waiver | Contracts and Scheduling | Financing

The Basics
A subcontractor is a contractor who is under contract with the general contractor (or owner-builder) to complete a specified portion of the work. The general contractor or owner-builder is responsible to complete the house on-time, on budget and according to specs. Generally most of the work is done by subcontractors. Subcontractors generally specialize in one type of work. Competent owner can often do part of the work if the general contractor agrees. Some general contractor have a crew on his payroll that does some of the work. The remainder of the work is subcontracted out.
Builders must rely on subcontractors to be competent in their respective trade. Even though the home is inspected by the builder and the building officials, it is impossible to catch all of the mistakes that the subs might make. To a large extent the quality of the final product will be a reflection of the quality and competence of the subcontractors.

Finding Qualified Subcontractors

  • Find a sub contractor that has been recommended by a builder or a friend familiar with their work.
  • Meet with the sub to get an impression of them and their work
  • Inspect at least two examples of their current work.
  • Get a list of the last three jobs they have completed. Talk with the owner or builder of those jobs.

Get a FREE contractor questionnaire to qualify your subcontractors!

Bid package
The bid package are the construction documents required to build the house. The bid package usually contains the following:

  • Invitation to Bid (includes a scope of work, anticipated construction schedule and bidding deadline)
  • The plans
  • Sample contract
  • The specifications.

The specifications describe in detail the materials used and the methods employed to construct the house:
The description of materials form is a good example of specifications.

Get a Description of materials form

Bidding
A letter is sent along with the bid package to subcontractors. In most projects it's a good idea to get a minimum of 3 bids per trade.

Invitation to Bid- This letter gives the details of the project. When the project is to begin, location of the property, deadline for returning bids, and information and requirements for bidders. Bidders are asked to give information such as license number, bonding and insurance information at the time of bidding.

Choosing the subcontractors
All things being equal, choose the sub with the lowest price. However, it's never that easy. Be wary of a bid that is much higher or much lower than the others. Accepting an unrealistically low bid is almost always trouble. If you like a particular subcontractor but his bid is significantly higher than others, ask him why. There might be some good reasons.
Before choosing a subcontractor you will want to have done a thorough investigation of the company and their work. Subcontractors that come highly recommended by friends and professionals are generally the best bet. Even if a contractor is recommended follow the outline on our contractor questionnaire form.

Paying Subcontractors
The contract will specify how, when and the amount that is paid to the subcontractor. Here are the rules for paying subcontractors:

  • Don't pay any money to any subcontractor until the job is complete.
  • Never pay money upfront to a subcontractor... if the sub needs money for materials... get a materials list from him and purchase the materials yourself. NOTE: Most reputable subs have the means to purchase materials for their jobs, with the possible exception of lumber for rough framing.
  • Generally progress payments are not made to subcontractors for residential construction projects. The sub is paid for his work when it is completed.
  • Even when the job is complete, hold back 10% until the building passes local inspection and you (the builder) are satisfied that it is built to plans and specs. This gives him an incentive to return to make corrections or finish uncompleted work. This is stated in the contract.
  • Get Release of Lien Waiver from the subcontractor, and materials suppliers prior to payment. This must be stated in the contract.

Notes to the owner-builder
Do your homework before hiring any subcontractors. Getting competent subs is a sure way to save money. As mentioned previously, do not pay subcontractors for work that is not finished. A good rule of thumb is to pay the contractors for the work completed less 10%. That way there will always be an incentive for them to complete their work in a timely manner.

 

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