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Working with Sub-Contractors

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In today’s economy and business environment it is often necessary for service providers to cobble together a solution for their clients or customers by employing experts and niche providers as sub-contractors.  The approach used to hiring sub-contractors, management of sub-contractors, and compensation of sub-contractors is often in misalignment with the goals of the project and/or relationship between the two companies.

Hiring Sub-Contractors

Given that projects often require expertise that exceeds the subject matter insight or experience of any one service provider, it is becoming more common for sub-contractors to be hired in support of a project.  While having that resource assigned to the project can often ensure a better outcome; it can only happen if there are certain considerations employed:

  1. Knowledge, experience, and expertise – it almost goes without saying that a good outcome will hinge on the ability of the sub-contractor to meet the requirements of the job.  A first requirement for choosing a sub-contractor is ensuring that they have the “goods” to perform.
  2. Cultural – determining if the sub-contractor’s approach to business mirrors the needs of the primary contractor and the end-user customer.  In addition to the content expertise, there also needs to be a similar alignment culturally to how the project will be conducted.  Formal vs. informal, communication methods, frequency and duration of contacts, demonstrations of passion and emotion, etc. can all impact the success of a project if not consistent across all members of the combined team.

Management of Sub-Contractors

The roles and requirements of the project should be very clearly elucidated to avoid conflict or misunderstanding.  Given that the sub-contractor and contractor at times may collaborate on some projects and at other times may actually compete for business, it is necessary to consider how the project will be managed and what the tolerances are for sub-contractors to assume more responsibility, have “face-time” with the client, how they are introduced to the client (as members of the team or as sub-contractors, or other ways), etc.

Contractors that lie to sub-contractors harm the project and relationship.

Contractors that lie to sub-contractors harm the project and relationship.

Compensation of Sub-Contractors

A huge issue for contractors to wrestle with is how to compensate the sub-contractors.  A huge issue for the sub-contractor is compensation, too.  However, they do not share the same issues around compensation.  For the contractor, the issue is often one of how much to compensate or how to determine what is “fair value.”

For the sub-contractor, the issue is more often, when will the fee be paid and how reliable is the contractor in living up to commitments.  I have personally been on both sides of this relationship and can attest to the inportance of being able to trust that I would receive payment on time.  Once that promise is broken, the relationship is fractured and very hard to repair.

The outcome can often be in jeopardy then – the sub-contractor may choose not to perform on the project (can be harmful if the project is not completed), the sub-contractor may do sub-optimal work by assigning it to lower skilled and lower compensated employees as a way to reduce the exposure and costs incurred, and the relationship between contractor and sub-contractor will also suffer.

David Zahn

2 Responses

  1. David Zahn says:

    Wayne, I whole-heartedly agree with your point. Without the definition of scope, deliverables, and responsibilities – the relationship will splinter.

  2. Wayne Brown says:

    David, I concur. I would add that the contractor’s project scope-of-work should define the sub-contractor’s scope and deliverables. If all parties have respect for one-another and focus on the common goals of the project, then the relationship will go well. Otherwise, fractures in the relationship will certainly begin along with the “finger-pointing”.

    Wayne Brown M.B.A.