"11 Tips For Managing Construction Subcontractor Risk," Law360

In an article published on February 24, 2022 in Law360, Adrien Pickard outlines top tips to mitigate subcontractor-related risk.

“A labor shortage in construction always means a subcontractor shortage, since both residential and commercial contractors rely heavily on subcontractors,” explains Pickard. “With no end in sight to this trend, contractors may feel an erosion of bargaining power with their subcontractors.”

Pickard further explains the ever-present risk of labor trends between contractors and subcontractors.

Below are 11 tips to mitigate this risk:

1. Clearly define the subcontractor's scope of work.
2. Clearly define the payment terms and conditions.
3. Include flow-down provisions in your subcontracts.
4. Establish the subcontractor's standard of performance.
5. Insist on receiving releases of liens and claim waivers.
6. Include "no damages for delay" provisions in your subcontracts.
7. Include broad indemnity protection.
8. Demand adequate record-keeping.
9. Include a limitation of liability provision that provides for a waiver of consequential damages.
10. Consider bonds and subguard insurance.
11. Anticipate claims and disputes.

“The subcontract should also include provisions that obligate the subcontractor to follow the same procedures for claims and disputes under the prime contract, at the subcontractor's sole expense,” said Pickard.

To read the full article, subscribers may click here.