The success of a construction project depends on several factors, one of the most important being a healthy constructor and subcontractor relationship. Good team dynamics are essential in ensuring that everyone works toward one goal -- satisfying the client’s needs. The minute one of the involved parties decides to go their own way or even a little misunderstanding sets in, disputes can happen, and the entire project can suffer.
Several situations lead to disputes between general contractors and subcontractors.
● If the subcontractor does not perform their responsibilities well or does not understand what they are, this can become a major problem.
● Subcontractors may also disagree to do extra work, especially if it is not indicated in the scope of work and subcontractor contract.
● Payment issues can lead to disputes, as well. In the construction industry, payments typically follow a process that starts with the owner (who pays the general contractor), and often, the subcontractor is almost last in line. They have to wait for the general contractor to turn over the payment. Problems can arise if there is a delay in payments.
Without proper communication and dispute resolution, such problems can lead to the failure of the construction project.
Some disputes may even require legal action. However, such challenging situations can be prevented if you take the necessary precautions before starting the project.
What to do to prevent general contractor-subcontractor disputes
1. Secure a contract.
The general contractor and subcontractor contract should contain details of the project, roles and responsibilities and payment information, but also all legal requirements and provisions to keep the business or project safe. One of these should be general contractor insurance, which protects finances when accidents and injuries happen in the workplace.
Ensure that all concerned parties (including the subcontractor) understand the terms of the contract. If the scope of work is broad, the sub should request for it to be more detailed. Loosely defining the scope can lead to scope creep, which happens when the scope of work goes out of control and the project is affected, gets delayed and starts to cost more than expected.
Documentation is also important, especially those that pertain to payments, communication and performance. Keep records of everything.
2. Project expectations must be clearly stated in the contract.
Project expectations should be clearly indicated and emphasized in the contract. This mustn't be taken for granted as it is one of the most common causes of general contractor-subcontractor disputes.
If the subcontractor does not know or understand what the project entails, this can lead to disagreements. For example, your sub complains about the scope of their job because the general contractor gave extra work. If this is stated in the contract, they should abide by it. If it is not, the sub has a reason to complain.
As mentioned above, all concerned parties must be aware of and understand the contract terms.
3. Build strong relationships with all parties concerned.
It should not only be the contractor and client who build a relationship; the subcontractor should also be part of the connection. It should be one based on respect, honesty and understanding.
Additionally, the general contractor and subcontractor should be comfortable with each other and willing to work together (as a team). A strong working relationship will help build efficient communication, trust, reliability, and unity. It reduces the possibilities of delays, misunderstandings, poor workmanship, insurance problems and legal issues.
4. Keep communication lines open.
Communication always plays an important role regardless of the size or type of project. If the general contractor and subcontractor are not communicating efficiently, it can lead to misunderstandings and miscommunication that can cause problems such as dissatisfied clients, missed deadlines, contract misinterpretation, disgruntled clients and project delays, among others.
5. Consider the following alternatives:
● Negotiations between the general contractor and subcontractor can work for simple misunderstandings and disagreements.
● Most disputes are dealt with by bringing in a mediator or third party tasked to neutrally help resolve the issue.
● Expert determination is needed if the choice is to find a resolution related to costs. A third party with expertise in the field makes the decision.
● An arbitrator can act as the judge who looks at the details of the case and uses facts to decide on the issue.
● If both parties are still working on the project but are involved in a dispute, an adjudicator can help resolve it and come up with a decision for both parties.
● The last option is always litigation, challenging, stressful, and costly. Bringing the case to the court may take months or years to finish.
Don’t forget to indicate in the contract which dispute resolution alternatives you prefer to use.
Resolving general contractor and subcontractor disputes can be easy if you follow the aforementioned tips and suggestions.
