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4 Tips on Understanding The 27 Page Sub-Contracts You're Signing

If you don't want to read all this, all the same information (and more!) is in this video:

Tip #1 Make Sure You Have The Current Drawings & Full Project Schedule

It may seem insignificant, but drawings get updated. General Contractors are human, too! Even some of the biggest General Contractors utilize outdated tools like where the current drawings are only as current as the Project Manager felt like making them! Don't depend on that email you received two months or even two weeks ago - ask the question "Is the set dated 09.04.2021 the most current", get confirmation, and then start estimating.

While looking at the current drawings, here are a few things to think about:

  • Where is the building? Is it on a zero-lot-line? If you're building in a busy area, on top of a building, or in the middle of nowhere - you need to think through additional costs such as travel, parking, and supply logistics.

  • If you are the earthwork guy, the rest of the trades don't really matter... but for everyone else: read the drawing set AT LEAST (1) trade before AND after your scope. I mean, you'll be working with them theoretically, and anything that you *THINK* is the other subs job, needs to be added as an EXCLUSION on your estimate - no exceptions!

Another thing to make sure you have is the WHOLE project schedule. Without this, you won't be able to effectively estimate. We'll talk more about that later.

Tip #2 General Conditions can Kick Your Ass!

Those overwhelming pages of "safety this" and "payment application that" can kick your ass. General Contractors will hold you to these. Don't depend on your relationship with a Project Manager or Superintendent to get you out of these.

While reading the General Conditions, here are a few things to think about:

  • Are there required weekly meetings? Who is going to these? Are they already on site, or will they need to travel to the job site?

  • What does Safety Look Like? Do you need to buy new safety equipment? Do all of your guys need to be OSHA certified?

  • Are there any work restrictions? Don't miss something major like "no Saturday work" or work hours are "9AM-5PM". If you are used to working 12 hour days, you simply will NOT complete this project as quickly as you normally do. Adjust your expectations of completion, and adjust your estimate!

  • You'll see the term "competent person" over and over. If you're a small subcontractor, chances are that person is YOU. Not your foreman or a laborer.

  • Does the GC require you to utilize their software? Even if the software is "free", you still need to invest time learning the software and update your procedures for that job. If it's a specific accounting software, you'll need to figure it out, and if your company has an accountant, they will need to figure it out as well. Time is money, brother!!!

Tip #3 Take a Deep-Look at Job-Specific Insurance Requirements!

Man, if I've seen it once, I've seen it a thousand times. Insurance is EXPENSIVE, especially for the small construction guys! Don't get caught with your pants down - the second you get the insurance requirements, send them to your insurance agent so that you add the cost to your estimate. For small guys, insurance is NOT an overhead item, it's a DIRECT COST TO THE JOB.

While reading the Insurance Requirements, here are a few things to think about:

  • Big General Contractors require insurance coverage for the ENTIRETY of the project. So, if you're the dirt guy, even though you're done in a few weeks, you have to hold that specific COI for the duration of the project. Let's say the schedule says 12 months, and that the quote you received was $1,200 per month. Thats $14,400. Add a couple months buffer for a total of $16,800.

  • Workers Comp in Texas. I've seen subcontractors try to utilize a "statutory waiver" and fail over and over. Big General Contractors don't give a DAMN about your piece of paper. Be prepared to pay for Workers Comp.

  • Auto Liability for Small Subcontractors. I've seen subcontractors argue that "they have personal auto insurance" and try to get out of this requirement. Depending on the scope, you might get around this, but remember to get exceptions IN WRITING before you start the project.

Tip #4 Understand the Lingo

Just so we're on the same page, I'm not a lawyer and none of this is verified with any type of authority LOL.

  • Waiver of Subrogation Insurance Endorsement. When you add this to your Certificate of Insurance, it basically means that your insurance company HOLDS THE GENERAL CONTRACTOR AND OWNER OF THE PROPERTY HARMLESS. So lets say, you have a claim on this job - your insurance pays it out. After, your insurance company wants to go after the General Contractor (or Owner) to reclaim some money. With a waiver of subrogation in place, they cannot.

  • Arbitration. You'll see this in the fine print of contracts. It means that if you (subcontractor) and the general contractor get into any type of legal dispute - the court case will be in the city they choose. 99% of the time it's not in the city where the project is. You can (and should) request the location to be changed to the city the project is in; general contractors will generally accept.

  • Retainage. If you're just getting into bigger projects, you probably aren't used to having retainage held. Retainage is money thats held until the very end of the project, not just the end of your scope. Retainage is held by the Owner from the General Contractor, and held by the General Contractor from the Subcontractor. In Texas, retainage is typically 10%. So, if your a concrete subcontractor and your contract is for 100K (and you complete it in one billing cycle), you'll bill the general contractor for the full $100,000.... however you'll only get $90,000. You will have to bill for retainage once the ENTIRE project is complete, sometimes a year later!

Our mission at Broven is to help small Texas contractors operate like the Big Dogs.

We hope this helped.

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