In today’s strained labor market, general contractors often find themselves forced to work with subcontractors who might not meet their usual standards. The nationwide shortage of skilled labor and increasing project demand has created a situation where even the most reputable GCs occasionally must hire subs that present risks to quality, safety, or scheduling.

Almost every GC has a story involving a problematic subcontractor — whether it’s incomplete work, missed deadlines, or outright no-shows. While many construction leaders prefer to work with trusted, proven teams, industry constraints make that a luxury rather than a guarantee.

The Post-Pandemic Surge in Subcontracting

Trent Cotney, partner and head of the construction practice at Adams and Reese in Tampa, Florida, said the use of subcontractors has grown significantly in recent years.

“A ‘problem subcontractor’ would be any person or entity who consistently causes issues that would negatively impact a construction project,” Cotney said. “Common problems include work delays, miscommunication or non-communication, lack of proper equipment or expertise or manpower, a failure to comply with safety regulations, or payment issues and delays — all of which affect project continuity.”

With increasing pressure to complete projects on time and under budget, Cotney stressed the importance of making smart hiring decisions even if it means paying more upfront.

“If a prime is smart, they will do their homework in advance,” he said. “Know what you’re getting into and don’t do work with subs that aren’t reliable or get into trouble. It’s worth paying more to have a professional subcontractor work with you.”

Due Diligence is the First Line of Defense

Jeffrey Paul Lutz, a construction attorney based in CM Law’s Atlanta office, emphasized that preventing problems starts long before a subcontractor steps on site.

“The lowest bidder means little if hiring them will cost you more in the long run through the change order process, corrective work, dispute resolution and/or the engagement of counsel,” Lutz said. “I advise all of my contractor clients to conduct detailed background checks, review past performance and verify references to ensure the subcontractor has a solid track record.”

Lutz said a strong subcontract agreement is the next line of protection. Detailed scopes of work, timelines, deliverables and penalties help keep subs accountable and reduce the chances of disputes or missed deadlines.

“A well-crafted subcontract defines expectations clearly to ensure accountability, quality and timely delivery,” Lutz said.

Communication and Oversight Throughout the Job

Even with careful selection and contract drafting, active oversight is crucial. Lutz encourages GCs to maintain a strong system for quality control and open communication throughout the project lifecycle.

“This can be accomplished through effective communication and maintaining open and transparent communication with subcontractors to foster collaboration and quickly resolve any issues,” he said. “While onsite, regular communication is critical, it is equally important to document your written directives in writing.”

Without a structured system for documentation and site reporting, even minor issues can escalate into major project delays or legal battles.

Contractual Clauses Can Provide Leverage

Contracts should not just outline responsibilities—they must also give GCs the leverage needed if things go wrong.

Chad Caplan, a partner at Hinckley Allen in Albany, New York, said well-drafted subcontract agreements can make all the difference. He recommends including time-sensitive language and setting strict conditions for submitting claims or change orders.

“The agreement must specify that certain conditions, such as claim submissions, are strict preconditions, outlining precise timelines, procedures and necessary documentation for claims, including backup materials,” Caplan said.

He also advises against vague liquidated damages clauses. Instead, contracts should state clearly that these damages are proportionate responses to missed deadlines or defective work.

“The agreement should allow liquidated damages to be assessed relative to the fault of the subcontractor,” Caplan said.

Remedies and Insurance Protections

Despite the best planning, problems can still occur. That’s where contractual remedies and insurance provisions become essential.

Thomas Cotton, a partner with Schenck, Price, Smith & King in Florham Park, New Jersey, said there’s no foolproof language that guarantees complete protection—but there are tools that can help.

“There should also be strong and express remedies for non-performance,” he said. “The agreement should, among other things, expressly empower the general contractor to terminate the subcontractor, with the maximum discretion to the general contractor, and further allow the general contractor to hire a replacement at the subcontractor’s expense.”

One critical provision Cotton highlighted is the flow-down clause, which ensures subcontractors are legally bound to the same obligations that the general contractor has agreed to in the prime contract. Without this, gaps can arise that leave GCs exposed.

Lutz added that subcontractors should also be required to carry adequate insurance and include GCs as additional insureds on their policies.

“It’s imperative that subcontractors maintain specific levels of insurance coverage to protect against potential liabilities,” Lutz said. “Also, indemnification clauses protect the GC from claims arising from the subcontractor’s actions. Payment and performance bonds can also be required as another assurance that a subcontractor’s failures will not lead to an overall project failure.”

The Bottom Line

While problem subs may be an unavoidable part of today’s construction environment, their impact can be minimized. By conducting thorough vetting, writing airtight contracts, maintaining clear communication, and having robust legal safeguards in place, GCs can mitigate risk and keep projects on track—even when a partner falls short.

Originally reported by Keith Loria in Construction Dive.