Explicate the major risks involved in subcontractor contracts.
Three areas of risk are involved: 1. Legal 2. Quality control 3. Social
Legally, the main contract must be careful to make clear on paper where his (or her) legal liabilities end and where the subcontractor becomes responsible. This can be very tricky, especially in a complex job where installation of a subcontractor’s work is the responsibility of the general contractor. A simple example: Who is legally responsible for the failure of an air-conditioning system designed by a subcontractor but installed by a general contractor (or even another subcontractor)? Quality control. If the general contractor has high quality standards in place, with no short-cuts, but a subcontractor is in the habit of cutting corners (example: a subcontractor wants to use pre-formed struts but the general contractor is committed to custom-made building techniques) Socially often the general contractor has established a good, close working relationship with the customer, with good communication in place, but a subcontractor, less skilled in these area, insists on dealing with the customer face-to-face; another scenario: the general contractor suspects the subcontractor of taking short-cuts but is intimidated by the subcontractor’s reputation as a hothead. These kinds of complications require a general contractor with many skills besides simple engineering know-how.