Any project today requires expertise for efficient and effective completion. The investor’s goal for the project is to complete the project within the specified budget and maximize resource utilization. The investors then contact contractors for the achievement of the objectives.
Understanding the role of the contractors and subcontractors is necessary for the optimization of your business project.
Contractors and subcontractors are essential for the success of your project.
Definition of Contractors and Subcontractors:
A contractor is an entity that conducts business by carrying out work described in the contract by the investor. A contractor is similar to being a business owner – You bargain on business projects, provide quality services, build a clientele, and receive a pre-agreed remuneration.
A Contractor has the expertise and the contacts of various fields that he performs for the client as per the agreed contract.
A contractor takes up all the tasks of the project. For example, a group of investors may hire a construction contractor to develop a shopping mall.
The investors will participate in the development process and will lay down their budget limitation and the construction contractor will:
- Develop a feasible architecture plan for the shopping plaza.
- Arrange for all material and the machinery.
- Maintain and record the inventory of material and keep the supply chain updated and active.
- Arrange for the human resource required to complete the building process. This human may include masons, carpenters, plumbers, glass workers, electricians, IT technicians, etc.
- Develop and test the project.
The theory is that general contractors generalize. It means they provide their services for a wide range of applications and purposes.
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Contractors of specific fields like construction or IT have complete knowledge of the process and resources required to complete the project effectively and efficiently. They have the means and the resources to arrange for the right man at the right job. These contractors work on a timed schedule and can complete the task within an estimated time frame.
Contractors are usually assigned to lead the project and are responsible for the control and monitoring.
A subcontractor is a secondary help hired by the primary contractor because of the subcontractor’s expertise in a specific field.
Subcontractors also work on a contractual basis with pre-agreed terms and conditions, and they also bring particular sets of skills that they perform for the contractor.
The chief consideration about subcontractors is that they are under contract agreements with the contractor, not with the customer.
Subcontractors often specialize in one specific project area and network with contractors who deal with broader projects that include this specialty.
Consider the construction project exampled above. The general contractor (also called the primary contractor) may contract a subcontractor to complete the plumbing system.
As per the agreement, the “subcontractor’s” assignment is to complete all the water, sewerage, storage, disposal of water. Again as per the contract, the subcontractor will finish all the toilets, bathroom, swimming, fountains, etc.
Attributes of Contractors and Subcontractors:
A primary/general contractor is essential for any construction project.
The chief function is to provide the essential coordination and control to complete the project within the estimated budget and time. Contractors will focus mostly on the customer/owner.
A contractor is in charge of hiring subcontractors and monitoring their work.
However, it is also possible that a developer hires a general contractor, a construction manager, an architect, or some other person on a project.
The primary contractor is the captain of the project, and subcontractors are the sailors.
The subcontractors are running the ship. And have the task to complete smaller goals for achieving the ultimate objective.
A subcontractor can be an organization or an individual. A subcontractor’s work is more focused on the task at hand.
Subcontractors are specialists and experts in trade such as plumbing, HVAC, roofing, etc.
Due to their expertise in a particular skill, they can deliver quality. Subcontractors know what resources are required, where to get them, and the time to complete the task, not to mention access to potentially expensive tools or equipment.
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Difference B/W Contractors and Subcontractors:
Contractors need referrals and prefer networking with clients to develop business.
Subcontractors are mostly working with the contractors. Contractors are far more customer-focused than subcontractors to function efficiently.
A contractor needs to see the broader image of a project. Contractors require a clear understanding of financials, profit/loss, cost accounting, time value, and a hell of a lot of minute considerable details.
Subcontractors specialize in one specific skill, like tiling, insulation, electronics, and other trades. Hence subcontractors deliver quality in their area of expertise.
Liability and coverage of Contractors and Subcontractors:
If you have read all the above, you now have a clear idea about the contractor’s responsibility. The contractors manage multiple projects at a time. There is a high possibility that any error or omission may occur, or there is negligence about the quality of work, other ethical and professional issues may arise.
The owner or the investor is in communication with the contractor. The contractor has a contract with the owner and hence is answerable for any discrepancy relating to errors, losses, and other professional misconduct.
The project owner will hold the contractor liable for the damages, not the subcontractor.
The contractor must have coverage for the protection of such claims from his clients. Contactors usually purchase professional liability and errors & omission insurance plans for projects. Such purchases are made in anticipation that the subcontractors intentionally or unintentionally can cause a grave mistake damaging the project.
There can be other causes as well. The contractor firm may suffer from management issues and cannot continue to work on the project. Abandoning a project can lead to grave financial consequences for the investor, and he may take the contractor to court for settlement. Insurance plans, in such cases, help you clear the claims without paying out of pocket.
If the projects are of high investment value, investors may require contractors to furnish surety bonds. Surety bonds are for the protection of the investor.
Contractors may also add subcontractors to the insurance plans concerning the project.
General Contractors Insurance Plan:
Since contractors face multiple risks of injuries, accidents, property damage, material losses, and quality concerns from the customers, that demands remediation plans, a type of insurance that can cover their general and professional liability.
The contractor liability insurance provides the following benefits to the contractors and assures their business is financially protected:
- Provides injury and accident coverage for the laborers and employees working on the projects
- Assists in court settlements and lawyers fee
- Provides coverage if the project owners prove and claim property and financial damages
- Provide many other options included in general business liability products.
For information and consultation concerning contractor liability insurance plans for your business, contact Betters Agency.
Betters Insurance is an independent insurance agency. We provide a wide range of insurance policies, catering to the business requirements of our clients. Our experienced professionals can help you select a comprehensive insurance package. We will evaluate your specific needs and recommend the right policy for your situation and budget.