Issues in Subcontracting Practice

Subcontractors are very important to the successful completion of most construction projects, yet the many issues involved in subcontracting practice are seldom acknowledged. A literature review indicates that these issues include the timeliness of payments by general contractors, the process of selecting subcontractors, subcontractor bonding, construction insurance, safety issues on the construction site, partnering arrangements with various parties, and productivity issues. A questionnaire survey was administered to subcontractors, general contractors, and construction owners to investigate these issues and to determine the differences in perceptions between the parties. The results confirm the existence of the issues identified in the literature and in addition indicate that (1) the practice of retainage withheld by general contractors seems to be acceptable to many subcontractors unless its magnitude is large relative to the size of the firm; (2) postaward bid shopping by general contractors is sometimes justified, particularly in cases where the scope of subcontract work is modified; and (3) current bonding and insurance practices are adequate unless the additional transferred risks are excessive. Recommendations are made on the basis of the findings to minimize the negative effects of said issues.