Subcontractor Management: How to Work with Subs Successfully

Successful subcontractor management requires clear written agreements (scope, price, timeline), defined quality standards, structured payment terms (don't pay ahead of work), regular communication, and documentation of all changes. Poor sub management leads to delays, disputes, and cost overruns—problems that become your problems even if the sub caused them.

Why Sub Management Matters

Your Responsibility

When you hire subcontractors:

• You're responsible to your client — Sub problems become your problems
• Quality is on you — Client doesn't care whose fault it is
• Timeline is on you — Sub delays affect your schedule
• Payment flows through you — You're in the middle

Common Sub Problems

Before Hiring: Vetting Subs

What to Check

Insurance Requirements

Require proof of:

• General liability ($1M minimum)
• Workers compensation (if they have employees)
• Auto insurance (if driving to your sites)

Get certificates naming you as additional insured.

Red Flags

• Can't provide insurance certificates
• No references or bad references
• Lowest bid by far (something's wrong)
• Vague about scope or timeline
• Poor communication during bidding
• Cash-only, no paperwork

Subcontract Essentials

Must-Have Elements

Scope Definition

Be specific:

"Install 200 LF of 4" PVC drain line from point A to point B per attached drawing, including all fittings, hangers, and connection to existing main. Includes pressure testing and inspection scheduling."

Not vague:

"Install plumbing per plans."

Payment Structure

Recommended:

• No deposit (or small one, max 10%)
• Progress payments tied to milestones
• Retention (5-10%) until final completion
• Final payment after your inspection

Never:

• Pay 50% upfront
• Pay ahead of work completed
• Pay without inspecting

Managing Active Subs

Communication

Quality Control

During work:

• Visit job site regularly
• Inspect work in progress
• Address issues immediately
• Document with photos

Before payment:

• Formal inspection at milestones
• Written punch list if issues
• Don't pay until satisfied

Schedule Management

Set expectations:

• Firm start date
• Duration expectation
• Consequences of delay

Track progress:

• Regular check-ins
• Early identification of delays
• Proactive problem-solving

Change Orders

For any scope change:

1. Sub identifies change
2. You review and approve need
3. Sub provides written price/time impact
4. You approve in writing
5. Work proceeds
6. Change added to payment

Never allow "we'll figure it out later."

Payment Best Practices

Payment Schedule Example

Before Paying

• Work inspected and acceptable
• Milestone actually complete
• No outstanding issues
• Lien waiver received (for significant amounts)
• Insurance still valid

Lien Waivers

Get them:

• Progress waivers with each payment
• Final waiver with final payment
• Conditional (before payment) or unconditional (after)

Why they matter: Without lien waivers, sub can lien your client's property even if you paid them. This becomes YOUR problem.

Problem Resolution

When Subs Underperform

Step 1: Document and communicate

• Specific issues in writing
• Expected correction
• Timeline for correction

Step 2: Follow up

• Inspect corrections
• Document results
• Escalate if not resolved

Step 3: If not resolved

• Written notice of default
• Opportunity to cure
• Back-charge for corrections
• Terminate if necessary

When Subs Don't Show

Immediate:

• Contact sub (call, then text/email)
• Document communication attempts
• Assess impact on your schedule

If pattern continues:

• Written warning
• Find backup sub
• Consider termination

Disputes

Prevention is best:

• Clear contracts
• Documentation
• Regular communication

If dispute arises:

• Review contract
• Document your position
• Attempt resolution
• Involve attorney if significant

Documentation

What to Keep

Daily Documentation

• Who was on site
• What work was performed
• Any issues noted
• Photos of work in progress

Legal Protection

Contract Provisions

Include:

• Indemnification (sub covers their negligence)
• Insurance requirements
• Dispute resolution process
• Termination rights
• Flow-down of prime contract terms

Your Liability

You can be liable for:

• Sub's negligence (potentially)
• Unpaid sub wages (in some states)
• Unpaid sub's suppliers (mechanics liens)
• Sub's injuries (if inadequate safety)

Protection:

• Strong contracts
• Insurance requirements
• Lien waivers
• Job site safety program

Building Good Sub Relationships

What Subs Want

Being a Good GC

• Pay on time (this is huge)
• Communicate clearly
• Be fair in disputes
• Provide safe job site
• Don't bid-shop after award
• Give notice of schedule changes

The Payoff

Good sub relationships mean:

• Better pricing
• Priority scheduling
• Quality work
• Flexibility when needed
• Problem-solving partnership

FAQ

How do I find good subcontractors?

Referrals from other contractors, trade associations, supplier recommendations, and past experience. Vet thoroughly before first job—check insurance, references, and license.

Should I always take the lowest sub bid?

No. Consider quality, reliability, and past performance. The lowest bid often becomes the highest cost through problems, delays, and rework.

How much should I hold in retention?

5-10% is standard. Retention ensures sub completes punch list and warranty items. Release after final inspection and appropriate wait period.

What if a sub files a lien even though I paid them?

This shouldn't happen if you collect lien waivers with payments. If it does, you may need to pay twice and pursue the sub—another reason contracts and documentation matter.

How do I handle a sub who's behind schedule?

Document the delay, communicate expectations, assess impact, and have backup options. If chronic, consider termination per contract terms.

Do subcontractors need their own insurance?

Yes. Require GL and workers comp (if they have employees). Without it, their incidents become your liability. Get certificates and verify coverage.

The Bottom Line

Subcontractor management:

1. Vet thoroughly — Insurance, references, capability
2. Contract clearly — Scope, price, timeline, quality
3. Pay appropriately — After work, with waivers
4. Communicate regularly — Prevent problems
5. Document everything — Protect yourself

Your reputation depends on your subs' performance. Choose wisely and manage actively.

Related: Construction Contracts Basics | Getting Paid as a Contractor