THE BEST PRACTICES FOR SUBCONTRACTOR MANAGEMENT IN CONSTRUCTION

THE BEST PRACTICES FOR SUBCONTRACTOR MANAGEMENT IN CONSTRUCTIONABSTRACT   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

1. Identify problems in the field of subcontractor management and the need for improvement.
2. Create a list of best practices to assist in subcontractor management.
3. 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