GCs — demand these risk management measures from your subcontractors

Subcontractor risk management

When a GC wins a bid, they make a promise to the owner that they will finish the project on time, within budget and to a level of quality they can hang their hard hats on. Breaking that promise not only puts the GC’s reputation on the line, but it can also force them into the red.

And while the GC is ultimately responsible for delivering the project as specified in their contract, an army of subcontractors, material suppliers and laborers makes it happen.

There’s inherent risk in relying on a third party to hold up their end of a contract. If even one subcontractor defaults, causes a safety accident or triggers a scheduling overrun, the entire project is at risk — of being late, over budget or becoming the subject of a lengthy legal battle.

Price might be the first concern GCs have when vetting subcontractors. But risk management needs to be a close second because, at the end of the day, it’s not the value of the penny that talks — it’s the quality of the job.

Let’s look at what you should demand from your subcontractors when it comes to mitigating the major sources of risk: Safety, scheduling, design competence and finances.

Managing safety risk

Unsafe job sites carry a hefty price tag in the form of inefficiency, increased worker’s compensation insurance, tarnished reputations and reduced bid opportunities.

While hard hats, glasses and gloves are a good start, true safety risk mitigation goes much deeper.

For our part, Spectra installation crews always treat the GC on-site safety requirements as their creed. But that’s only basic safety — we’ve also worked hard to establish an organization-wide culture of safety, forming an internal Innovation Team.

Comprised of Spectra representatives from throughout the country, the Innovation Team meets regularly to discuss how to improve upon our standard-operating procedures (SOPs).

The first issue they tackled was job-site safety.

They started with questions — What safety problems are we running into in the field? How can we better communicate safety information to our installers? — and then broke into small groups to develop answers.

They ended up revamping how we disseminate safety information (e.g., hard hats are required on this job) to our installation crews. Today, all information is centrally located in our project software. It’s easy for account managers to enter, easy for installers to access and uniform across locations — making adoption simple.

We’ve invested in this kind of continual improvement because we firmly believe that safe jobs are profitable ones, both for us and the GCs we work with.

What to look for when evaluating flooring bids — and what to avoid

Incomplete flooring bids with a flashy number at the bottom may be tempting, but can lead to frequent change orders and over-budget projects. Learn how to evaluate bids and set projects up for success.

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What to ask when vetting flooring contractors:

  • How do you ensure each of your field personnel is aware of our specific on-site safety requirements?
  • Do you have a continual improvement program in place to identify and troubleshoot communication roadblocks and safety problems throughout your organization?

Managing scheduling risk

The success of each subcontractor depends on the speed and quality of the work done by everyone else on the job.

And no matter what happens throughout the course of the job, the owner’s expectations for the finish date won’t waver. If the GC promised the restaurant would be ready for lunch service on January 1, the restaurant has to open January 1.

Because flooring is one of the last trades on a job, we know this all too well.

If a plumber didn’t install a drain correctly, and they have to come back when we’re slated to install floors, or problems with pouring the foundation footings pushed the rest of the trades behind — well, that means we need to work all night to make our own deadline.

But the bulk of scheduling risk management happens before anyone puts on a hard hat and walks onto your job site. It’s careful planning, adequate staffing and plain-old expertise that make the intricate choreography of job-site scheduling run smoothly.

Subcontractors don’t sell the installed flooring, pipes and wires — they sell the start-to-finish management of their portion of the project.

From our perspective, this means doing all the prework necessary to guarantee flooring materials are staged in your facility exactly when we’re scheduled to install them. It means staffing each project adequately to give you the client support you need and eliminate the possibility of disruption. It means providing on-site supervision so that our installers aren’t relying on you to create a pathway to completion.

The goal? A seamless, hands-off experience for the contractor — giving them the time they need to manage scheduling for the rest of the trades.

What to ask when vetting flooring contractors:

  • Can you give me an example of a time you went above and beyond to ensure you finished an installation on time?
  • When will you begin the procurement process to ensure the timely arrival of all materials?
  • How are you going to staff my project?
  • Will you provide on-site supervision?

Managing design risk

Design responsibility used to rest solely on the shoulders of architects and designers, but there has been a recent transfer of this responsibility (and the associated risk) to subcontractors.

According to the FMI risk management survey, 92% of contractors report drawings being “less complete than in the past.” More bluntly, Russ Johnson of Skanska said in the report, “If there’s anybody who tells you they’re not having a problem with more incomplete designs, then they’re lying.”

Subcontractors are left to fill in the blanks.

And this transfer of risk is happening concurrently with the overall increase in project complexity, making subcontractor design incompetence a huge liability on any project.

As a flooring contractor, we’ve witnessed this shift firsthand. It’s not uncommon for us to join a project that’s based on 60% documents and have our in-house designer coordinate product selection and approval with the GC and owner.

Even when products have already been selected, our team will verify that they will work within the context of the project, asking a whole host of questions.

Is there a different product better suited to the design preferences and performance requirements of this project? Will the selected products work together? — are there adjacent products that differ in thickness? Is there a similar product with a significantly shorter lead time?

But it’s the same in any trade — it’s up to the subcontractor to provide whatever design recommendations or engineering assistance is necessary to take the project through the finish line.

What to ask when vetting flooring contractors:

  • Do you offer product selection and design assistance?
  • How will you verify that the specified products will perform as intended in this facility?

Managing financial risk

Minimizing financial risk is about eliminating uncertainty. It’s about guaranteeing that, no matter what may come up, the subcontractor is financially capable of finishing their portion of the project.

GCs know this well, and it’s why they proactively evaluate the financial health of all subcontractors they work with. Still, with subcontractor default on the rise, pre-qualifying subcontractors based on finances is more important than ever.

Mike Bond of Zurich North America stated in an FMI survey that “juggling tighter cash flows and labor pools in this ‘new normal’ is pushing even large subcontractors out of business. This, in turn, creates heightened risk for general contractors and their clients.”

After all, if a sub has to choose between keeping their lights on or ordering the materials necessary to complete the job, which do you think they’ll choose?

And when it comes to finances, we’re bigger than your average flooring contractor. With the backing of Berkshire Hathaway, we have the financial resources and bonding capacity to deliver on even the largest, multi-million-dollar projects. Like this $2.5-million hotel flooring job, this $5-million airport flooring project or the $1-million flooring transformation we did for the Tampa Bay Lightning.

Not every subcontractor has Berkshire Hathaway on their side, but you should look for subs with a history of delivering projects of similar size and scope without defaulting.

What to ask when vetting flooring contractors:

  • Have you delivered projects of similar complexity and scope?
  • Do you have the financial bandwidth to handle all the projects slated to be completed concurrently with ours?
  • Can you provide proof of your financial resources and bonding capacity?

Managing subcontractor risk is one of the central challenges GCs face

Here’s our promise to you:

We engineer certainty into our installation process — meaning you’ll know exactly what to expect when it comes to schedule, cost, design and safety. And that’s one less risk to worry about on your next project.

To learn more about the value your flooring contractor should bring to the table, download this buyer’s guide.

A buyer’s guide to commercial flooring

How to get the greatest-value floor and select the right contractor for your project.