Very few general contractors have the expertise or resources to self-perform all aspects of a major renovation project. As a result, subcontractors are utilized by general contractors for several very important reasons.
For one, renovation projects oftentimes have specialized skill sets within their work scopes requiring highly skilled and licensed professionals from various trades such as plumbing, HVAC, and electrical. Along with having a unique skill set, a good subcontractor is able to source materials and negotiate the best pricing with their suppliers, while also being very capable of completing their portion of the project without delays or problems. Also an established subcontractor will guarantee their work for a period of time.
Risk transfer is another valid reason for hiring subcontractors. When the owner hires a general contractor for a renovation project, the owner transfers risk to the general contractor. When the general contractor hires a subcontractor, the general contractor is able to transfer that risk to the subcontractor for work-related injuries resulting from the subcontractor's work.
In addition, employing subcontractors on renovation projects frees up the general contractor's workforce, allowing the general contractor the opportunity to bid and work on future projects.
Maintaining a deep bench of good, quality subcontractors provides a value added proposition to projects and builds efficiencies. It also increases the quality of the project as well as the level of trust. Having a team of qualified subcontractors helps to keep the bid process open and transparent, keeping the bidding process competitive.
Some general contractors participate in practices known as "bid shopping" with their subcontractors. This is a process where a general contractor uses low bids from their subcontractors as a leverage to get other subcontractors to come down on costs. This is very risky business and may result in cost-cutting measures on behalf of the subcontractor awarded the project resulting in inadequate work performance or poor quality of work. Bid shopping is a deterrent for maintaining a qualified team of subcontractors, as most will steer clear of any general contractor participating in this practice.
In many instances, subcontractors rely heavily on general contractors to secure future work. They've put in many hours acquiring all the information needed regarding the project to put together a solid bid. Once the bids are submitted by the general contractor to owners, feedback is one of the most important aspects of the bid process, not just for the project at hand, but all future projects. Not sharing information as to why a bid may have fallen short of an owner's expectations, is a disservice to those that have put in critical time and effort and usually at no additional costs to the owner. Sharing information helps those involved in the bidding process go back to the drawing board, and understand what areas need tweaking for future opportunities.
General contractors and subcontractors alike want to provide the best pricing available, but can only do so with open and honest dialogue