How to Manage Subcontractor-Related Problems

Nowadays, industries that don't have dealings with subcontractors or outsourcers are scarce. For example, in the construction industry, contractors can resort to hiring the services of a subcontractor if they don’t have the required time to carry out a given project themselves.

Doing so allows one to react to unforeseen circumstances, in addition to speeding up the completion of a project. This process is very effective given its technical and cost-effective advantages, reducing contractor-covered costs.

Subcontracting relies on 3 parties: the owner (the client), the primary contractor, and the subcontractor. A first contract will bind the owner to the main contractor, while a second contract will bind the contractor to the subcontractor.

In this article, we’ll focus on this second point, which concerns the contractor and the subcontractor. As a contractor, what are the possible fixes if the hired subcontractor doesn’t fulfill their obligations? How can you deal with the issue professionally? Keep reading to find out!

Construction Subcontractors: Back to Basics

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What’s a construction subcontractor?

A subcontractor is a separate company or independent worker who signs a contract to complete a specific aspect of a construction project, acting on behalf of the head contractor. 

They’re responsible for providing the required materials and necessary labour to carry out the work assigned while adhering to standards, deadlines, and contract specificities.

What are the three main reasons to outsource work?

The three primary reasons why contractors outsource work are as follows:

Specialty Work Subcontracting

This type of outsourcing is used when the company in charge requires a specific set of skills or knowledge that can’t be accounted for in-house. For example, in the construction industry, a company may hire a subcontractor for specialized work such as plumbing, electrical wiring, or roofing. Doing so allows the primary company to benefit from professional expertise while focusing on its core area of competency.

Short-Term Subcontracting

This type of outsourcing is chosen when the primary company must temporarily increase its production capacity or resources to face a peak in demand without having to invest in permanent hires. The reason behind hiring subcontractors is especially useful for managing seasonal shifts or exceptional work volumes. This strategy allows one to remain flexible and reactive to soaring demands while managing fixed costs. 

Management Outsourcing

Last but not least, management outsourcing comes into play when the primary company (or contractor) delegates significant aspects of the market or project to a subcontractor. This includes, and isn’t limited to, managing a construction project as a whole or rendering services throughout the project, such as long-term installation maintenance. In such a case, primary contractors often choose to hire subcontractors during large-scale projects or public contracts. It allows the primary company to focus on the global management aspect while entrusting smaller aspects to more specialized or better-equipped companies to carry out said specific tasks.

No matter the reason behind hiring subcontractors, it comes with advantages and drawbacks, and the motivation behind it rests on the needs of the primary company, the nature of the project, deadlines, the required skill set, and available resources.

Hiring a Construction Subcontractor: Your Duties as a Contractor

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There are several instances where disputes may arise between a client and contractor, but it might also be that the conflict develops between the contractor and subcontractor during a project. 

The rules as stipulated by the Civil Code of Quebec allow a contractor to award a contract to one or several subcontractors for specified construction or renovation work. The contractor and subcontractor are thereby bound by a subcontractor contract.

A subcontractor is a professional and your duty toward them has its limits. In theory, you aren’t mandated to supervise the work carried out by the subcontractor’s team, as the latter is solely responsible for their team. However, it’s your duty as a contractor to ensure the hired subcontractor is properly skilled to carry out the construction or renovation work that you’ve entrusted them. Also, it’s your responsibility to plan the workload based on provided timelines and regularly supervise the work that must be done.

As such, if the hiring client happens to find issue with the hired subcontractor, it’ll be your responsibility to remedy the situation since, contractually speaking, you’re held liable to the client in question who hired you to carry out specific work, which you’ve outsourced to a subcontractor.

Likewise, if a problem is encountered, you’re deemed, and can be held, legally accountable and may be subjected to a fine. Even though it’s up to the subcontractor to manage the progress and methods used to carry out the work assigned to them, the truth of the matter is, in the end, it falls on your shoulders. 

If a client decides to sue you on account of defective work during a construction or renovation project, you won’t have a choice but to take legal action against the subcontractor in question. Furthermore, your reputation is at stake here. Chances are, negative online reviews or bad word-of-mouth can negatively affect your business.

Spare Yourself the Trouble and Carry Out Meticulous Background Checks

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There’s no reason for a contractor to award a contract to the first subcontractor that falls in their lap. As a contractor, you have to carry out background checks, legal and otherwise.

As a matter of fact, the Régie du bâtiment du Québec (RBQ) requires contractors to verify licence categories and subcategories needed to carry out the work in question. Said verification can be done through the licence subcategories list. Another method of verification would be to consult the licence holder's repertory to ensure that the subcontractor has a licence and one that’s suited to the correct work subcategory.

No surprise here, but serious lawsuits may be filed against contractors who have entrusted renovation or construction work to unlicensed subcontractors. Furthermore, contractors may face serious fines as such a degree of negligence is comparable to working unlicensed.

Amounts Fined Based on the Offence and Offender

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In addition, since March 1, 2016, the construction industry as a whole must comply with a new law established by the Government of Quebec. This obligation requires contractors to obtain valid documentation from Revenu Québec as proof from their subcontractors when their combined contracts for the year are valued at over $25,000. This system was put in place to prevent various issues such as false invoices and individuals working off the books. However, beware as fines stipulated by the law range between $250 and $100,000.

Need help to determine how to take action against your subcontractor?

If you happen to have a conflict with one of your subcontractors, know that there are solutions made available to you online to swiftly obtain legal advice. Legalhood provides you with its expertise in construction law, providing an answer within the hour, at a reasonable price. Also, courtesy of this service, you can submit a formal notice or initiate negotiation procedures via their website.

Note: This article provides information regarding possible options for recourse in the event of subcontractor-related problems. This isn’t, nor should it, substitute legal advice. For specific advice regarding your situation, seek out a lawyer.