What Types of Risk Should a Subcontractor Be Concerned About?

April 20, 2023by Jeffrey Davis

In a construction subcontractor agreement, the risks that pass through to the subcontractor may vary depending on the specific terms of the agreement. However, some common risks that may pass through to a construction subcontractor include:

  1. Scope of Work: If the subcontractor fails to properly perform the specified scope of work or if the scope of work changes without proper notice, the subcontractor may be held liable for resulting damages or delays.
  2. Scope Creep: Another risk is that the contractor may change the scope of work or add additional requirements that were not originally agreed upon. This can cause delays and extra costs for the subcontractor.
  3. Payment: The subcontractor may not receive payment in full or on time, which can cause financial strain and impact the subcontractor’s ability to complete the project.
  4. Liability: Subcontractors may face liability risks if they fail to perform their duties as specified in the agreement or if their work causes damage or harm to the client or property. It’s important to review the Prime Contract (if applicable) to see what liabilities and risks you as a Subcontractor are assuming.
  5. Timing and Delays: The subcontractor may be responsible for delays or issues caused by other subcontractors or factors outside of their control, which can cause additional costs and delays.
  6. Quality of Work: If the subcontractor fails to deliver work that meets the specified quality standards, they may be responsible for correcting the issues or for any resulting damages or losses.
  7. Compliance: The subcontractor may be held liable for non-compliance with applicable laws, regulations, and codes related to their work.

To mitigate these risks, it is important for the subcontractor to carefully review and negotiate the terms of the agreement, including payment terms, scope of work, timing and deadlines, quality standards, and compliance requirements. The subcontractor should also maintain detailed records of all work performed and expenses incurred, and communicate effectively with the contractor to address any issues or concerns as they arise. Additionally, subcontractors may want to seek legal advice to ensure that the agreement is fair and reasonable, and to better understand their rights and obligations under the agreement.