Working with subcontractors is becoming increasingly common as construction projects become more global and complex. There are many strategic benefits to hiring a subcontractor, from bringing on expert talent to being able to scale operations during specific economic cycles.
Subcontracting is defined as a contractual process by which a contractor hires a third party in order to complete parts of a job under specified conditions while still keeping responsibility for the end product. If you’re considering hiring a subcontractor, take a look at some of the substantial benefits.
Bringing expertise to your core business
Subcontractors are typically experts in a particular field, and you can be sure they will produce high-standard results. If your in-house workers are not skilled enough to do the job correctly, hiring a subcontractor is an excellent idea. Adding those extra divisions to your company doesn’t make sense if you only require their services on an as-needed basis. It’s especially true for tasks that are not involved in the construction of a typical structure but are necessary for specific, complex projects.
Being able to focus on your strengths
Your core team has a specific set of strengths and skills, but by hiring subcontractors, you can expand your offering instantly without the need to employ more staff. This allows you to take on larger, more specialized projects without having to bring on permanent help. For example, complex construction projects involve a multitude of tasks that require a lot of planning and design. There are strict manufacturing requirements that make it impossible for in-house staff to meet them. Therefore, contractors often hire subcontractors for a variety of functions, which, in turn, allows them to perform their best in fields where they are most skilled and experienced.
Adapting to economic cycles
The cycles of demand tend to vary because every industry has its periods of contraction and growth. With the help of subcontractors, you will be able to adapt to these cycles by maintaining more flexibility – you can increase your staff numbers and not worry about having to fire workers when the work starts slowing down. For example, the 2008 global financial crisis has shown people in the construction industry that it is a lot easier to downsize with subcontractors than to turn to mass company layoffs. On the other hand, when there’s more work, hiring subcontractors that can begin work immediately is more beneficial than trying to recruit new people to adjust to the sudden increase in demand.
How can you avoid the overruns that come with large, complex projects? These projects are notorious for their cost overruns, which you can avoid by paying a subcontractor on a per-project basis instead of by the hour. When predicting the amount of time needed to complete a project, often the predictions are underestimated (this is a principle called “optimism bias”). Paying subcontractors on a per-project basis will put the burden of time and cost estimation on them instead of the main contractor. You are still in charge of the project as the main contractor, but the risks divide when you pass off the responsibility for a specific part of the plan.
Keeping overhead and labor costs low
When using subcontractors, the main contractor doesn’t have to worry about things like office space for permanent employees and equipment, employee benefits or staffing and training. It is especially beneficial in overseas markets with lower labor rates. So, you can rely on subcontractors to complete various tasks throughout the construction process while you focus on only a few key ones.
Avoiding long-term commitment
Hiring subcontractors could be a short-lived relationship or it could turn into a lifetime business partnership. However, you can always part ways once you don’t require their services any longer. You won’t need to pay benefits, which typically isn’t the case with permanent employees. This kind of relationship would bring more flexibility than if you were to hire additional permanent employees. Also, ending the relationship with full-time employees can be more complicated, as it may result in legal disputes and create considerable costs.
Limiting your capital investments
Without having to make financial investments, you can utilize subcontracting services and access to skill upgrades and capital equipment. When you compensate your subcontractors, they can use the money to upgrade their employee skill set and capital equipment, without you having to spend extra money.
Working with subcontractors benefits both sides, not only you as the main contractor. For instance, a contractor can bid on the projects that most subcontractors aren’t eligible to do. That way, subcontractors can build their project roster by being able to participate in larger projects. These projects are broken down into dozens of smaller parts that need to be completed, and small subcontractors don’t have the production capabilities or full-fledged design to be able to bid on them.
Principle contractors are the big picture thinkers because they work with clients throughout the entire project – from the idea phase to the completed construction project. Subcontractors, on the other hand, specialize in specific areas of the construction process (such as concrete formulation, large equipment operation, electricity and plumbing). And they come and go after finishing their tasks.
When enrolling in a large project, knowing when not to do something yourself is a valuable skill. Turning to subcontracting professionals is the best option in some cases, and you should keep this in mind when planning a commercial construction project. And the most important thing you need to do before anything is hiring a good and reputable contractor.
Feel free to contact ARC Construction because we have years of dedication to creating solid foundations! We are experienced in handling historical property renovation, commercial, industry and nonprofit construction work. With our trustworthy approach to construction, our expertise and our track record, we can bring your construction project to life!