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THE BEST PRACTICES FOR SUBCONTRACTOR MANAGEMENT IN CONSTRUCTION
ABSTRACT
To achieve efficiency and quality, the construction industry must have a number of companies and individuals from various backgrounds working together. To effectively allow for the coordination of these varying companies, a construction management firm is often hired. The management firm may either act as a general contractor, in which they perform some of the work themselves, or as a construction manager, strictly focusing on administration. It is common for both types of management to use subcontractors for specific portions of the project. These subcontractors focus in a precise area of construction, and as a result, gain an expertise in that specialty. Subcontracting minimizes project costs by eliminating the time needed to learn and perfect new trades.
Although it is certainly a benefit for a company to spread work among experts, many problems do tend to arise when combining the efforts of varying subcontractors. As project sizes amplify, the number of hired subcontractors usually increases as well, leading to problems in subcontractor management.
This thesis examines problems that exist in subcontractor management, as well the best practices that should be followed to alleviate these obstacles. In order to provide a guideline for managing subcontractors, five individuals from varying construction backgrounds have been interviewed and asked a series of questions pertaining to their experiences and opinions on managing subcontractors. The collected responses have been analyzed and organized into a survey. The five interviewees, along with five other practicing professionals, have taken the survey and rated the practices based on importance. The recommendations for subcontractor management have been rated and ranked in this thesis to serve as a guide for practicing and future construction managers.
Table of Contents
List of Tables vii
Chapter 1: Introduction 1
Approach 2
Goals of Thesis 3 Objectives 3
Reader’s Guide 4
Chapter 2: Methodology 6
Interview Subjects 11
Survey Participants 12
Chapter 3: Review of Literature 13
Introduction 13
Problems with Subcontractors 15
Solutions to Alleviate Problems from Subcontractor Management 17
Need for Further Research 26
Chapter 4: Problems with Subcontract Management –
Identified by Interview Subjects 27
Chapter 5: Analysis of Practices 32 Ranking of Practices from Online Survey 35
Chapter 6: Best Practices for Subcontractor Management 38
Subcontractor Procurement Practices 38
Subcontractor Management Practices 39
Expectations 42
Pre-qualification 43
Financial Pre-qualification 43 Safety Pre-qualification 44 Previous Work Pre-qualification 46
Pre-qualification Overview 46
Communication 47 Relationships 49 Submittals 51
Change Orders 53
Submittal and Change Order Management 54
Meetings 56 Payment 58
Training 59
Document Management Training 59
Safety Training 60
Project Review 62 Repeat Business 64 Contract Guidelines 65 Planning / Scheduling 67
Bonus – Penalty Clauses 69 Bonus Clause 69
Penalty Clause 70
Chapter 7: Conclusions 72
Bibliography 75
Appendix A: Example of Content Analysis 80
Appendix B: Interview Questions 83
Appendix C: Online Survey 87
List of Tables
Table 1: Interview Subject Profiles 11
Table 2: Survey Participants 12
Table 3: Online Survey Data 34
Table 4: Ranking of Practices 35
Chapter 1: Introduction
Construction is a demanding industry that requires skills from varying subcontractors in order to complete a project in the most efficient and economical manner. Construction managers or general contractors are hired by project owners to successfully coordinate each project. To keep costs low and complete a project as quickly as possible, construction managers utilize the skills of subcontractors. These subcontractors are experts in their trade and provide a valuable service to any project. Working with subcontractors prevents management from needing to train their own employees on how to complete numerous project tasks.
Though subcontractors are both beneficial and necessary to successful bidding and timely project completion, they can be problematic. These problems, between management and subcontractors, have the potential to significantly delay an established completion date. When multiple subcontractors are involved in the construction, the risks for delays can increase exponentially and can have serious detrimental effects on the overall success of a project. It becomes the responsibility of the construction manager to coordinate and organize the skills of these subcontractors in the most efficient manner. If managed correctly, problems arising from subcontractors can be quickly resolved. This thesis explores practices that can help to alleviate the difficulties involving subcontractors. Due to the highly competitive construction industry, subcontractor management is an important issue. Construction management firms must maintain low costs in comparison to their competitors in order to successfully bid a project. Utilization of subcontractors aids in reducing a bid price. Winning a project, however, is only part of the process to making money. Once construction commences, subcontractors must perform the work according to the schedule so that everyone can financially profit. If schedule delays continue to arise, profits may be reduced and reputations can be ruined, diminishing the prospect of future work. Therefore, it is essential that construction managers utilize the “best practices” when managing subcontractors to minimize problems and thus allow all parties involved to benefit.
Approach
This thesis has been compiled based upon information from varying sources. The initial step in research collection was to conduct a literature review. Through numerous books, journals, and internet sources, a categorical content analysis was performed. Each source was identified for key thoughts and ideas. After each source had been analyzed, the ideas from all sources were grouped together based upon similarity. For the purpose of this thesis, key thoughts and ideas were identified as an introduction into subcontractor management, problems, and solutions to alleviate the problems related to subcontractor management.
Once all relevant information had been gathered through a literature review, five individuals were interviewed in person or via telephone. Each interview was recorded so that a second categorical content analysis could occur. In an effort to span the construction industry and include others who manage subcontractors, interview subjects were chosen from fields including commercial and residential construction as well as information systems and technology. Similar to the analysis for the literature review, each subject’s interview was dissected into key ideas and suggestions. After each interview
was categorized by relevant information, similar findings were grouped together. These findings were identified as either problems with subcontractors, or practices for successfully managing subcontractors.
Upon completion of both categorical content analyses, questions about several important practices were developed into a survey. The survey was taken by ten practicing professionals who were asked to rank the practices according to importance in subcontractor management. The principles were then ranked according to the averaged responses from the ten professionals. This ranking serves as the arrangement for practices throughout Chapter 6, starting with most important and finishing with least important.
With the combination of a literature review, interviews, and a survey, a list of
“best practices” for subcontractor management has been created.
Goals of Thesis
The goal of this thesis is to identify practices that will assist construction management firms and project managers to understand, manage and motivate subcontractors to perform to the best of their ability, while building relationships and completing the project on schedule. This thesis will identify performance enhancing techniques by analyzing experiences and recommendations of professionals in the field of construction management.
Objectives
- Identify problems in the field of subcontractor management and the need for improvement.
- Create a list of best practices to assist in subcontractor management.
- Provide a basis for further research in the field of subcontractor management.
Reader’s Guide
This thesis has been arranged into the following chapters:
Chapter 2: Methodology
The process of research collection is identified in Chapter 3. This chapter identifies the manner in which information was gathered through literature and from practicing professionals. Similarly to that for the literature review, a content analysis was conducted.
Chapter 3: Review of Literature
The second chapter introduces a review of literature. Books, journals, and internet sources have been utilized to gain an understanding of the process of, problems emerging from, and practices to alleviate problems with subcontractor management. A content analysis was conducted on all sources.
Chapter 4: Problems with Subcontractor Management
The fourth chapter identifies problems that have come as a result of subcontractor management. They have been identified by five practicing professionals. These problems identify a need to develop a list of “best practices” to improve upon subcontractor management.
Chapter 5: Analysis of Practices
The fifth chapter identifies the process of analysis that has been conducted to achieve a list of “best practices” for subcontractor management. The addition, removal, and reworking of practices from the original survey list is discussed in this chapter.
Chapter 6: Best Practices for Subcontractor Management
The Best Practices for Subcontractor Management are identified in the sixth chapter. In this chapter, practices are identified and explained in detail. These practices have come as a result of the varying forms of research collection.
Chapter 7: Conclusions
The conclusion of this thesis provides a validation of the practices. It also identifies limitations of this thesis and the research collection method. These limitations exist as a potential for future work, which is also explained in further detail in the conclusion.
THE BEST PRACTICES FOR SUBCONTRACTOR MANAGEMENT IN CONSTRUCTION
