It is important for everyone in the construction industry to determine your risk before taking the job and hiring subcontractors or suppliers.
Before entering into any contract, especially if it’s with a general contractor, subcontractor, or a supplier, it’s important to determine your risk and know as much information as you can about the other party. Once you enter into a partnership with them you are responsible for their actions and are liable for their mistakes, so meticulous selection is important. Here are a few reasons why determining risk before accepting a job with a general contractor or hiring subcontractors and suppliers is so important.
Imagine sitting at your desk at your construction company that has been consistently doing good work on small projects around your area. You get a call and are offered a multi-million dollar job, automatically accept, right? This seemingly amazing opportunity for your business could actually be its downfall. Your company would be carrying the costs of this huge project, and without determining your risk properly, it could send you under. You need to gather information on the other parties’ past jobs, revenue, years in business, credit reports, etc, before accepting the job and taking on that much risk.
Subcontractors can make or break a project. You are putting a lot of trust into a group of people based on their past record, so it is important to look at this record very closely. Say that you are deciding on a subcontractor for a job between two different people and one of them has a history of walking off the job and has judgments against him. The other might be a few hundred dollars more on his quote but could be well worth the investment. It is better to know this information upfront instead of after the less expensive one walks off your job as well.
Thankfully, there are companies out there that will help you evaluate your options and help you choose the jobs and subcontractors that are the most likely to leave you with money in your pockets. They will pull credit scores and job histories as well as help you manage your cash flow during jobs where you are carrying too much of the costs. Having a partner like this providing you with back office support services could be the difference for your company between growing and going under.