POLICY: Subcontract Agreement
PURPOSE: To have a written agreement, understanding, and commitment with individuals or companies providing labor or labor and materials to our projects.
RESPONSIBILITY: Project Manager
Failure to reach an agreement on all of the details of a subcontract, prior to signing, is the most frequent source of friction and poor performance. This is the “heart” of our business and requires “careful attention”.
A Subcontract is a written statement of an “agreement” reached between two parties. Reaching an “agreement” is the primary concern. The subcontract only confirms the agreement. Without an “agreement,” the subcontract is not very useful in managing the project.
The “agreement” is best reached in an open face-to-face meeting between the Project Manager and the contracting officer for the subcontractor. During this meeting there should be honest and open discussions not only above the specific work but about each party’s expectations.
(Only in rare cases with special approval from the Senior Project Manager or the President should a contract be mailed to a major subcontractor.)
Once terms are agreed, the Project Manager may have the subcontractor execute the agreement. At this point there is a binding contract, the Project Manager having acted as the agent or the contractor. Signing by the Carter & Carter Construction Management officer is a written confirmation of the “agreement” already reached.
1. No work is to be performed by a subcontractor prior to execution of a subcontract and the furnishing of the proper insurance certificate and bond (if required).
2. The Project Manager is to negotiate aggressively for discounts from subcontractors for early payment and include in the subcontract. Discount information should be included on Subcontract when possible.
3. The Project Manager will prepare the Subcontract in final form using the computer format available on Procore and the Policies and Procedures Manual on the company website.
4. The Project Manager will track the Subcontract number from the Buyout Schedule maintained in Procore documents. The Construction Coordinator will maintain the log.
5. After the Subcontract is complete, the Project Manager will complete the “Analysis of Purchase” for back up being careful to accurately analyze the amount of the purchase against the estimate.
6. Once the Subcontract and the Analysis of Purchase is completed, the Project Manager should print copies as follows:
- Vendor Copy
- Corporate Office Copy
- Jobsite Office Copy
- Accounting Copy
7. The Analysis of Purchase should be attached to the “Accounting” copy.
8. The Project Manager should produce the Subcontract to allow the drawings and specifications to dictate the scope of work and only include items under “Specifically Includes” or “Specifically Excludes” to provide clarification when conflicts or misunderstandings could exist. The Project Manager should include the Superintendent in the review of the Subcontract when possible.
9. The Project Manager should be sure that any items specifically excluded from the Subcontract terms are covered in other areas of the estimate or with other Subcontractors.
10. The Project Manager should aggressively negotiate discounts with Subcontractors. Discount information should be included in the subcontract whenever possible.
11. The Subcontract should be routed to the Subcontractor for execution. The accounting copy and handwritten back up is to be retained by the Construction Coordinator until the executed copy is received from the Subcontractor.
12. Once the executed copy is received, it should be checked by the Construction Cordinator and the Project Manager for stray marks or revisions made to the agreement by the Subcontractor. Any revisions should be resolved as indicated by the Project Manager’s initials on each stray mark prior to giving the document to the President. Any revisions requested to the standard terms of the Subcontract should be reviewed with the Senior Project Manager prior to execution by the President. The Project Manager should make every effort to negotiate the terms of the Subcontract without revision.
13. A complete package including all copies of the Subcontract with the Analysis of Purchase should be routed to the Senior Project Manager for approval. All signature blocks, revisions, and the Analysis of Purchase should have the initials of the Project Manager and Senior Project Manager prior to submission to the President.
14. Once the document is completely executed, the Construction Cordinator will distribute as indicated on the Subcontract. The Analysis of Purchase will be retained with the corporate office copy of the Subcontract.
15. The Subcontract will not be entered into accounting until the document is fully executed. No payments can be made to the Subcontractor until the agreement is fully executed and entered into accounting.