The commercial construction industry relies on a number of mutually beneficial relationships. This is most evident is the relationship between general contractors and trade contractors. General contractors usually subcontract a variety of subcontractors in order to successfully complete construction projects. In return, commercial contractors depend on the general contractors to provide them with work on the projects they have been awarded. In a previous post, we discussed tips to avoid and deal with subcontractor default. Today we turn the script a bit and talk about how commercial contractors can ensure they find and build relationships with the right general contractors and hope they avoid the unscrupulous. Create a general contractor relationship – subcontractor do your homework. General contractors often require subcontractors to be pre-qualified to work with them before they are invited to bid or bid on projects. General contractors usually require information on the potential subcontractor’s safety record, finances, binding capabilities, litigation history, insurance coverage, relevant work history, experience, etc. Sharing this type of information should be a two-way street. It is fair that commercial contractors are able to conduct their own screening process to determine that they will work with a reputable general contractor should they be awarded a project. General contractors are often required to provide this information to owners, both public and private, either as part of a pre-qualification process or before a contract is awarded. Make sure you have a valid contract before starting any work. You are at great risk if you do not have a valid contract and start working on a verbal agreement or letter of intent. Ask the general contractor to provide the most recent set of plans and specifications along with the subcontract. The scope of work may have changed since you submitted your bid or submitted the rates. It is important that you review any changes to plans and specifications to avoid the obligation to perform additional work that is not included in your bid amount. Evil is in the details. Read and understand the contract carefully before signing. There may be clauses or clauses in the contract that you are not comfortable with. If the general contractor is unwilling to negotiate more favorable terms, it may be wise to walk away. Since it is assumed that the relationship between the general contractor and the subcontractor is mutually beneficial, this also means that both parties will share some risk. Risks must be distributed fairly, and are usually on the best end of their ability to manage them. Here are some of the clauses to pay attention to in your subcontract: Understanding the clauses in your subcontract clauses, Pay when you pay or Pay if you pay. Be very careful with payment terms when paying and avoid payment terms if they are paid like the plague. Pay on payment means that the general contractor does not pay the commercial contractor until the owner pays it. Pay-in-pay means that if the owner never pays the general contractor, he or she is not obligated to pay the subcontractor. Ideally, you want a payment schedule that requires you to invoice the general contractor by a specific date each month and to pay you within a specified number of days after receipt regardless of whether or not the landlord pays it. Stream or scroll phrases. These clauses usually incorporate by assignment the terms of the general contract with the owner in the subcontract. This means that the subcontractor has the same duties and obligations to the general contractor that the general contractor has to the owner. You should never agree to a flow clause unless you are provided with a copy of the base contract for your review. If there are terms in the base contract that you don’t like, you should ask the general contractor to amend or remove the flow clause to avoid unintended consequences. Change orders. A subcontract will generally require that any changes to work be submitted in writing. Never start any work on a change order until you get something in writing from the person authorized to issue change orders. Remember to submit claims promptly to the general contractor for all additional costs and extensions of time for revised work. Conditions of compensation. These terms will hold the commercial contractor responsible for any negligence on the part of the general contractor or others on the work site over which you have no control. The subcontract should only require you to take responsibility for your negligence and not the liability of the general contractor or any other third party on the job site. Payment vouchers. Almost all public projects require the general contractor to post a payment voucher to protect the owner. Increasingly, private owners also require payment bonds to avoid raising liens against their property in the event that the general contractor fails to pay subcontractors and suppliers. Commercial contractors must obtain a copy of the payment voucher from the owner for their review. If you must file a claim, make sure that it is fully documented and the guarantee notice in writing. Learn about any state laws that may override the terms in the bond contract to file a claim. The healthy working relationship between the general contractor and the subcontractor is based on mutual respect and respect. Both parties must work well together in order to complete projects on time and within budget. For this to happen, general contractors need to communicate effectively with their divers and treat them fairly. Subcontractors, in turn, must provide the general contractor with outstanding service and quality work. Start building connections with the new GCs today.