Subcontracting

The Vetting Process

Jan 1, 10AM

Georgia

2019 an Overview

The Modern Process

The shortage of skilled labor has made it difficult for contractors to locate and keep a deep bench of quality workers, and there are no signs that relief is on the way. It stands to reason, then, since subcontractors provide so much of the labor on construction projects, that it has become trickier for many general contractors to find enough quality subs to meet the demand.

A survey sponsored by Autodesk and the Associated General Contractors of America found that 80% of contractors were having difficulty finding enough qualified craft workers.

This not only can put a great deal of pressure on project timelines but also can create a situation where contractors, both general and subs, are in danger of violating the clauses in their contracts that require them to provide enough labor to meet the schedule.  

So, where are general contractors really feeling the pinch?

Availability changes depending on the market and type of construction. For example, Allen Troshinsky, Mortenson’s vice president of operations for the company’s sports and entertainment group, pointed to electrical, drywall and glass and glazing as some of the more difficult subs to line up.

Englewood Construction in Chicago specializes in national brand retail projects across the country and, according to Chuck Taylor, the company’s director of operations, the biggest subcontractor challenge has been nailing down excavation, site utility and flooring subs in all specialties like vinyl, ceramic, wood and carpet, as well as glass and glazing companies.

David Thormack, chief operating officer of Suffolk Construction’s Northern California division, told Construction Dive that finding electrical subs is a particular challenge in that busy geographic market, as are sheet metal and other metal works trades. Wood framing subs are also hard to come by in the San Francisco Bay area. “That’s another [trade] where there’s not a lot of capacity,” he said.

“It’s really tough right now,” said Thormack about the effort to find subs in the Northern California area. ”A blistering hot market, record unemployment, a lot of opportunities and options for [subs] — there are a lot of reasons.”

Verifying potential subs

Once candidate subs have been identified, Mortenson, like many general contractors, starts off with a request for a proposal along with a qualification package that each sub must complete. The information subs turn in is independently verified.  

“[We ask] for information about their financial health, their safety performance, their record of quality workmanship, how they have succeeded in achieving or even surpassing goals set for community participation,” Troshinsky said. And, of course, pricing is a key factor in whether the sub will get the job.

Englewood’s initial qualifying forms are much the same and include a request for the sub’s experience modification rate (EMR), a measure that workers’ compensation carriers use to establish insurance premiums but that are also indicative of a company’s safety record. Taylor said that there is some leeway in this category.

“For a subcontractor to have a higher EMR — while it’s not a best-case scenario, it’s plausible because they run into more risk,” he said. “If you’re working with tools and equipment, you’re going to have claims, and claims are what affects your EMR.”

For those subs that are relatively small or disadvantaged-, woman- and minority-owned businesses, it’s not uncommon for Mortenson to break those scopes of work into smaller packages in order to make the tasks more manageable.

That is the approach that Hampton Road Connector Partners (HRCP) is taking as it tries to meet the diversity and inclusion goals for the $3.9 billion Hampton Roads Bridge-Tunnel (HRBT) expansion project in Hampton Roads, Virginia. HRCP is part of a public-private partnership (P3) with the Virginia DOT and is soliciting the local construction community in its quest to sign up a greater number of small, disadvantaged and minority contractors.

That in-depth reconnaissance that Mortenson does prior to procurement, Troshinsky said, informs how the company will structure that work. However, even if a sub has some blips on its credit or some other less-than-desired response on a questionnaire, he added, it’s not necessarily a disqualifier.

One of the few situations that will likely eliminate the possibility of working with Englewood, Taylor said, is a lack of experience. For example, he said, that might include residential contractors that have never performed the type of specialty commercial work that makes up so much of Englewood’s business.

If a sub, Troshinsky said, is facing challenges — i.e. financial health, safety metrics, record of quality, workmanship — someone from the Mortenson project team might sit down with the contractor and try to help it formulate a plan forward. “That might include training or more supervision or identifying what’s been the challenge over the last couple of years and making sure that they’re not repeating that,” he said.

“There’s always an opportunity to hear the contractor’s side of the story. We would certainly want that opportunity if someone was ever considering automatically excluding us from something,” he said. “I think in fairness, we have the responsibility to meet with people and understand really what’s going on and try to work with them.”

And having subs as partners can pay off through the entire project.

“Whether times are good or bad,” Taylor said, “we have to treat our subcontractors as partners whenever possible because, as a construction management company, subcontractors are the lifeblood of our projects and our revenues.”

“The best projects that we have,” Thormack said, “are the ones where the teams have formed really strong relationships.”

This feature is a part of “The Dotted Line” series, which takes an in-depth look at the complex legal landscape of the construction industry. To view the entire series, click here.

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