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Contractor

Are General Contractors Responsible for Subcontractors?

min read

In the world of construction, when it comes to complex projects like home or commercial building pursuits, the relationship and coordination between general contractors and subcontractors are important facets of the process. 

General contractor responsibilities in construction include overseeing the entire project and hiring subcontractors like plumbers, electricians and carpenters to help complete each component and stage of the job. 

The general contractor subcontractor relationship is, therefore, a vital synergy if each phase of the job is to be completed in a timely manner and the whole project finished by a prescribed deadline. As with any business relationship and especially when asking are general contractors responsible for subcontractors, there is much valuable information that both parties will want to retain before making commitments on either side of the equation. 

In what follows, we examine the general contractor subcontractor relationship and some of the nuances faced by each party in areas such as contracts, liability and insurance. 

What Are the Challenges in Relationships Between General Contractors and Subcontractors?

Just like a multi-faceted construction project, not everything goes according to plan when you consider the prime contractor responsibility for subcontractors. 

One of the biggest general contractors responsibilities is creating a mutually beneficial relationship with subcontractors, and some issues will be given higher priority than others when developing a strong bond. 

Payments 

Managing cash flow can be a hurdle for subcontractors. So part of the prime contractor responsibilities is assuring that subs get paid in a timely manner. 

Often, subcontractors will be putting out large sums of money before they even set foot on a job. These expenditures may entail the purchase of materials needed to complete the project, and once things are underway, additional funding is needed to pay employees. An otherwise reliable subcontractor that has trouble meeting payroll or paying suppliers might be reluctant to accept future work.

Customer expectations

Without the customer handing out work at the top of the food chain, the general contractor subcontractor relationship wouldn’t exist. And it can sometimes be difficult to keep the customer happy. 

Consider a developer that takes on a residential project and needs 100 homes built. With similar sizes and layouts, the customer might expect each home to be built roughly within the same time frame. If there’s a difficulty retaining skilled labor on the subcontractor’s behalf and delays enter the mix, not communicating and coordinating with the general contractor, and ultimately the customer, can damage reputations and have financial ramifications. 

Unfamiliarity

One of the prime contractor responsibility for subcontractor should also be knowing exactly who you’re doing business with. 

Before hiring and then having to face the issue of is a general contractor responsible for subcontractor negligence, it’s prudent to get some background information that involves the type of jobs a sub has taken on, its general financial condition and whether the company has faced continuing legal issues or lawsuits. Odd trends and patterns in jobs performed and cash flow or a history of disputes should send up a red flag when hiring subcontractors

What Are the Roles and Responsibilities of General Contractors? 

Sorting Through Red Tape

Before the job gets off the ground, general contractor responsibilities will ensure that all building permits are acquired and license requirements are valid and up to date. 

In addition, contractors insurance will need to be in place and the general liability insurance status of subcontractors should also be verified through certificates of insurance. A general contractor could be liable for negligence of a subcontractor if the sub doesn’t have the proper coverage in place. 

Managing the Worksite

With administrative duties completed, the focus shifts to the job site itself. 

Among the prime contractor responsibilities at the physical location are making sure the site is secure, and seeing that building materials are stored away from the elements and out of the sight of prospective thieves. If there’s general refuse on the property, disposal will fall under the general contractor’s purview as will providing sanitary facilities for workers to use. 

Assessing Liability

When determining are general contractors responsible for subcontractors, you’ll want to look at liability exposure first and foremost. 

If a sub causes damage to property or one of their workers incurs a workplace injury, the resulting dollar amounts could escalate quickly. Therefore, you must make certain that subcontractor general liability policies are valid and current. While you may not be a general contractor liable for negligence of a subcontractor, getting pulled into a legal investigation is not a prudent use of time and resources. 

Insurance Requirements

As a general contractor, you’ll want to make sure your own insurance coverages meet required standards. 

This is especially true if you have employees and need to maintain workers’ compensation insurance to insulate yourself from medical bills incurred through an accidental injury suffered on the job. If you’re wondering whether a general contractor is responsible for subcontractor negligence, the answer would likely be “no” if you ascertain that a sub’s insurance programs carry the amount of general liability insurance— per occurrence and aggregately  required in the contract. 

Reviewing the Contract

So that every party involved is duly informed of duties, rights and responsibilities, the contract should be thoroughly reviewed long before the job starts. 

It should contain the scope of work for both GCs and subs and should include a description of the project, applicable pricing, a payment schedule, an outline of each party’s responsibilities and legal language that describes handling disputes or terminations. Regardless of experience, all parties to the contract should consult with an attorney who can review the document for clarity and shortcomings. 

Stay on Point with the Details

You might want to focus on the physical aspect of the job and leave the administrative details to chance. However, don’t run the risk of suffering a significant financial loss if all the details of the contract and general contractor responsibilities are taken for granted. 

One small omission or wrongly worded clause could cause devastating harm and prevent you from securing future work. A properly designed insurance program for contractors is a key piece of protecting the assets and interests of each player in the game. At Next Insurance, you can contact us to tailor your insurance program to meet your unique business needs.

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