In a construction project, there’s many different companies that are usually involved in completing the job. Understanding the companies roles on the project can help you in the industry.
On a project you’ll have typically a general contractor and their subcontractors. There’s also specific projects that will a prime contractor or independent contractor.
In this article, I will key differences between the multiple types of contractors in the construction industry.
I’ll also give you some insight as I have had to opportunity to work for a subcontractor and general contractor. I hope this can help you in determining what type of contractor you would like to work for.
The role of the general contractor is to oversee and manage the entire scope of a construction project. They will also act as the main point of contact to the customer through out the life of a job.
Since they have a lot of work to complete they will usually have to incorporate a subcontractor to assist them. In order to bring a subcontractor onto the job, they will need to issue a subcontractor agreement.
You can learn how to fill out and understand a subcontract agreement here.
Now, you might be wondering why would the general contractor need to hire a subcontractor?
Well, as a general contractor, it’s difficult to keep multiple trades as full-time employees. The labor required is all dependent on the projects scope of work. Instead, it’s more cost effective to hire a subcontractor to bring onto your team.
As the general contractor, you’ll need to make sure that you bring on the team that’s required to complete the job. It will be your responsibility to ensure their work complies with the project plans and specifications as well.
This contractor has a heavy focus on the managerial side of the project. Occasionally, they will have some general laborers to complete the mundane tasks. They can also choose to keep other trades employed, but this is a business decision based on the work do.
If you want more information on what a general contractor’s duties are, you can check out the article from LevelSet here.
The subcontractor exists because they’re able to cover an area of expertise that the general or prime contractor may not. A construction company might decide they want to focus on just electrical work, or even HVAC.
As mentioned above, the type of contractor will depend on the specific project. Being in the role of the subcontractor, you will be reporting directly to the general or prime contractor. Get familiar with their team and develop relationships so they’re easier to work with.
Another thing to keep in mind is that a subcontractor will need to carry their own insurance policy. The contractor hiring your company will not take the liability should something happen on a job.
During the execution of the subcontract agreement, this is when a subcontractor will have to provide a certificate of insurance. This proves to the general contractor that they have an insurance company that they’re insured under. It also provides them with peace of mind should any property damage occur from a mishap caused by the subcontractor.
Their general liability insurance will kick in and absolve the general contractor from any fees.
In addition to the insurance policies, some customers will also require that the contractor provide a surety bond. With a surety bond in place, this protects the customer should a contractor fail to fulfill their contractual obligation. The company that issued the surety bond will likely need to compensate the owner for any loss as result of the default.
You can learn more about surety bonds from the NASBP.org.
Don’t be fooled, just because a subcontractor focuses on a specific trade, it doesn’t exactly mean they’re good.
It’s good to get some feed back from other people in your company before hiring a subcontractor. Ask if they’ve worked with them in the past and what the experience was like.
Also, if the price that they provide you seems too good to be true, it’s likely something was missed. Be sure to carefully review a proposal received from a subcontractor and discuss their scope of work. The last thing you need is for a scope gap to ruin your day and the project.
Working for a subcontractor can be a very lucrative job. The opportunity is there to make good money but also become an expert at what you do.
A prime contractor would typically step in for specific jobs where majority of the work can be covered by a single trade. There’s minor work that will require a subcontractor, but it does not require a general contractor to get involved.
This is not anything new in the construction industry either. While this is not always the case, you’ll have the occasional job where the prime contractor is not a dedicated general contractor.
For example, let’s take a project where the project requires that the existing HVAC system be upgraded. A job like this will have a heavy focus toward the mechanical trade. If the company decides that the complexity of the job is low, they can become the prime contractor.
Now, they will have a direct to owner contract and be responsible for hiring the electrical, drywall, and controls contractor to get involved. Issuing subcontracts and gathering submittals from their subcontractors and vendors.
The prime contractor will also need to maintain the construction scheduled and perform all the duties of a general contractor. They will also need to check the subcontractors work confirming that it meets the plans and specs of the job.
You can begin to see that the mechanical contractor has basically become the general contractor. When you think of a general and prime contractor, just know this main difference.
There’s the construction company that bid with the intention to be the general contractor for the entire project.
Where as the prime contractor could typically be a subcontractor. But due to the scope of work has decided to take on the role as general contractor.
The type of work this contractor will typically require specific skill sets. So you can think of them like a subcontractor with the role they might serve in a project. The major difference here is that this contractor will be hired direct by the owner.
I’ve really only seen this on smaller jobs where the owner has the capability to manage the coordination with an independent contractor. Their work is also on a contractual basis, but this will be a direct contract with the owner.
They will have the same contract requirements as everyone else on the job, so don’t feel as they might have the upper hand.
Sometimes the owner will bring on the independent contractor to save some money. If the general contractor were to hire this contractor, they will apply their own markup. This markup covers their overhead cost and time to coordinate with the contractor as well.
The owner might also decide to bring on the independent contractor due to their prior work relationships. They might find it’s easier to work with them directly.
For the large projects you might see an independent contractor come in the form of a commissioning agent. When the property owner hires the agent direct, they have better faith that they will inspect the work with their best interest.
Working for a General Contractor
I worked for a general contractor for about three years before deciding that I wanted to go work for a subcontractor. The main reason I decided to make this change was because I wanted to become an expert in a single field.
When you’re with a general contractor, the scope of work on each project can vary drastically. At the end of the day, you become a jack of all trades but a master of none.
But, I will say, if you don’t mind having a different scope of work every project. Then a general contractor might be right for you.
You’ll also be the customers main point of contact, so you’ll need to brush up on your customer service skills. You’ll have to maintain a relationship with the contractors on the job site and the owner.
Personally, working for a general contractor wasn’t for me. I also wanted to work for a contractor where I could apply my mechanical engineering degree.
Working for a Subcontractor
As a subcontractor, this is where I found the most enjoyment with my work. Technically, they’re just a contractor. It’s only when they’re working under a contractor would they become a subcontractor.
I was able to work on similar jobs for every project, small or large. I became very knowledgeable in the particular area that I was in, and I found great satisfaction in that.
The contractor I worked for also helped me to realize that I enjoy the HVAC industry. While I was in school I never got the chance to work with HVAC. But after experiencing my first chiller plant installation, I’ve been hooked ever since.
My suggestion is that you look at working for a contractor within your career path. If you’re an electrical engineer, then you could look at working for an electrical contractor. You will be able to take some of the concepts you learned in school and apply it in the real world.
While working as a subcontractor can be great, it does come with some pit falls. For example, sometimes a general contractor might not understand what is required for your scope of work. It’s your responsibility to make them aware, work with them on the schedule and come to a mutual agreement.
A general contractor may expect you to bend over backward for them since they hired you for the job. Remember that you’re only required to perform what is required in your contractual agreement. If they ask for more, then a change will be required.
It can also be difficult to find a company that has a track record of being a successful subcontractor on project. To determine this, it will require some research and some time spent in the industry. If you look around your area, you will quickly learn the contractors you can see yourself working with.
While I’ve only worked for small business owners, I was still able to get a taste of what it’s like to work on both ends of a project. As a construction contractor, your role can vary drastically. The contractor requirement can vary based on the scope of the project.
I hope you now have a better understanding of what it means to be a contractor vs subcontractor. You now also know that there are prime and independent contractors and what their role might be on a project.
Thank you for reading.
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