Construction firms often do not have enough in-house employees to manage every aspect of each new project. They may hire subcontractors on a project-by-project basis to meet their needs. Those contractors may help to hang drywall, install tile or re-roof an older house.
Working with subcontractors is often efficient because it helps construction current firms minimize ongoing staff costs while simultaneously helping them connect with skilled and experienced professionals. However, subcontractors can also potentially do damage to a construction firm’s reputation and possibly its finances. The following are the two main ways in which subcontractors can prove to be a liability for a construction company.
They may provide substandard service
There is an expectation that subcontractors will do a good job when they bid on a project or sign a contract with a construction company. However, not every subcontractor will be as reliable as the next. Even those who have previously done excellent work on a project might do poor work on a future one. Their performance on the job will inevitably impact client satisfaction with the project. Therefore, proper oversight is crucial when using subcontractors. Construction firms generally need to include specific details in their contracts outlining performance expectations and how they intend to address issues with work that does not meet the company’s standards or the client’s expectations.
They could seek a mechanic’s lien
The law in New York allows subcontractors to hold homeowners responsible if the construction company that employed them fails to pay them their wages in full after the completion of the project. A mechanic’s lien prevents the homeowner from refinancing or selling the property until they pay for the materials delivered for services provided during a project. Even if the property owner has paid the primary construction firm in full, a mechanic’s lien is still an option when subcontractors have not received appropriate payment from the first that hired them. Property owners frustrated by unexpected litigation after paying for services could take legal action against the construction firm and could leave online reviews that damage a company’s reputation.
Construction firms, therefore, need to be very careful concerning how they manage their relationships with subcontractors, from the contracts that they execute with them to the payment they render for their services. As a result, recognizing the risks related to hiring subcontractors may make it easier for construction firms to avoid situations that could lead to financial losses or major reputation damage.