Subcontracting has its’ pluses and minuses. In this economy, more subcontracting is occurring and so it is a very timely topic.
Subcontracting happens for a few logical reasons:
1) The contractor doesn’t have the special skills to do the subcontracted job.
2) The contractor has found economy and profit in using the subcontractor.
3) The contractor can take on more work that is more central to the knowledge and expertise they own.
4) The contractor can develop a niche simply planning out work – start to finish, acting as a general contractor, with the actual work effort being done by an amalgam of subcontractors.
5) The contractor can take on much bigger projects that otherwise would be impossible, thereby obtaining large contracts with very large customers.
6) The contractor, by reducing direct labor can reduce workmen’s compensation claims.
Now for the downside of subcontracting, which are the diametric opposites of the above arguments:
1) Contractors don’t have the special skills to do the subcontracted job and so may be getting in over their head in risks that they do not even understand.
2) Contractors in the short term lose some economy due to the overhead of managing a subcontractor and in the long run may actually suffer losses due to errors of the subcontractor.
3) The contractor will never gain the expertise to do the job without a subcontractor and may be relying too heavily on the supposed knowledge of the subcontractor.
4) The contractor, acting as a general, still has liability as he or she juggles the work of many subs. They get accustomed to having fewer, but larger customers. Should any one subcontractor not do the job properly, the contractor may stand to lose a much larger project and suffer larger individual client loses.
5) In taking on more projects, since they are doing less of the work, the contractor’s mind is not as well focused, managing multiple projects without the on site presence. This can lead to sloppiness, errors, customer dissatisfaction, damage, liability.
6) The contractor, sometimes embarrassed or fearful to state that they use subcontractors at the time of sale, may be construed as being deceptive by not providing full disclosure.
6) The contractor, while reducing workmen’s compensation claims may increase general liability claims. (I think I’ve stated that already a few different ways).
There is no right or wrong here. It is as the contractor and customer choose.
They have chosen this path because for them, it keeps things, simpler, more controlled, with good quality from start to finish. Without knowledgeable resources to complete the project within the organization, it does not take on a task, and when they do so, one of their purchasing points is that they have a very strong command of the subject and task, they understand the job and the risks for themselves and their customers. Pricing is not always higher as a result of not subcontracting and the customer feels more assured since the company they hired is the one doing the job. Specifically in pest control work, subbing out a cleanout from birds, rats or mice is 90% of the work. Customers don’t realize that allowing the pest control company to sub out the work, they have basically gone to a general contractor who cannot represent the work done or the type of people who will be in and around the customer’s home.
Sadly, there are many problems in the labor force, from drugs and alcohol issues, to simple poor values, ethics and standards. There is no saying that the contractor has a complete and thorough understanding of his or her own workforce, but by taking in a sub-contractor, the picture of the labor force is more of a black hole.
Additionally, those who go to subcontractors are doing so, yes to find economy for the customer, but also for themselves, and in doing so, may be marking themselves as employers who cut corners at the expense of the customer who may or may not know that a subcontractor is on site or in their home.