Subcontractor

One who takes a portion of a contract from the principal contractor or from another subcontractor.

When an individual or a company is involved in a large-scale project, a contractor is often hired to see that the work is done. The contractor, however, rarely does all the work. The work that remains is performed by subcontractors, who are under contract to the contractor, who is usually designated the general or prime contractor. Subcontractors may, in turn, hire their own subcontractors to do part of the work that they have contracted to perform.

Building construction is a common example of how the contractor-subcontractor relationship works. The general contractor takes prime responsibility for seeing that the building is constructed and signs a contract to do so. The cost of the contract is usually a fixed sum and may have been derived from a bid submitted by the contractor. Before offering the bid or before contract negotiations begin, the general contractor normally asks the subcontractors to estimate the price they will charge to do their part of the work. Thus, the general contractor will collect information from electricians, plumbers, dry wall installers, and a host of other subcontractors.

Once construction begins, the general contractor coordinates the construction schedule, making sure the subcontractors are at the building site when needed so that the project remains on schedule. The sequencing of construction and the supervision of the work that the subcontractors perform are key roles for the general contractor.

Subcontractors sign contracts with the general contractor that typically incorporate the agreement between the general contractor and the owner. A subcontractor who fails to complete work on time or whose work is not acceptable under the general contract may be required to pay damages if the project is delayed because of these problems.

A subcontractor's biggest concern is getting paid promptly for the work and materials provided to the project. The general contractor is under an obligation to pay the subcontractors any sums due them unless the contract states otherwise. Some contracts state that the subcontractors will not be paid until the general contractor is paid by the owner. If the owner refuses to pay the general contractor for work a subcontractor has performed, the subcontractor has the right to file a mechanic's lien against the property for the cost of the unpaid work.

When changes are made to the project during construction, subcontractors expect to be paid for the time and materials expended on the change. Subcontractors must receive formal approval to make the change and have a cost attached to the change before doing the work. Otherwise, when they submit a compensation request, it may be denied either because too much time has passed or because the general contractor or the owner believes the work performed was within the scope of the original project.