When Your Subcontractors Are Too Busy
On today’s show we’re talking about what to do when subcontractors are too busy. The front end of a project contains the most uncertainty. This is when you are perpetually in waiting mode. Waiting for engineering drawings, waiting for permits, waiting for lenders, waiting for inspectors, waiting for quotes, waiting, waiting, waiting.
The process that was supposed to take only a few months. Just when you think everything is ready, one of your chosen subcontractors says that they’ve taken other work and can’t do your job after all.
What are your options?
Accept a higher priced bid? Restart the bidding process all over again?
In today’s market conditions, many subcontractors are busy beyond their capacity. The folks who are good are busy. The ones who aren’t busy don’t meet your quality criteria. They’re not the ones you want. These are the ones who will accept the work and then not deliver. They’re the ones where materials will go missing.
It’s easy at moments like this to feel trapped. Your general contractor has certain subs that they prefer to work with. Do you defer to your GC and accept anything they recommend? Do you search for another GC? At the end of the day, it’s difficult to over-rule your GC, because as soon as you do, they start to shift responsibility for decisions to you, and that’s not what you want.
You’ve negotiated a guaranteed maximum price contract with your GC, but that contract won’t be firm until the construction loan is funded and the contract is signed. Until then, it’s merely a draft. The draft is based on quotes that were valid for 30 days and more than 30 days have passed since the quotes were submitted. The subcontractors put a time limit on these quotes for a number of reasons.
- They know that material prices can change. A severe weather event like a hurricane can cause a local material shortage that can cause prices to jump. The current trade negotiations with China have caused material prices to fluctuate.
- They know that delays can happen. They know that new projects can show up. They don’t want to have to keep their crew in a holding pattern for months until your project is ready to break ground.
Unless you are large enough that you have complete control over your subcontractors, or can maintain some of the highest value subcontractors in-house, you are always going to be negotiating both pricing and schedule with subcontractors. When you’re bidding a project, the key item is price. But when you’re finally in construction, the key item is schedule.