Mitigating Risk When Working With Subcontractors

mitigating-riskWorking with subcontractors in any field can present a host of challenges, whether it be subcontractors installing incorrect materials, or installing materials from their supplier that malfunction, thus creating larger, sometimes unsafe, conditions. Unfortunately, things happen. That’s life.

But, in the design-build construction industry, unfortunate things can’t happen. That’s why ESI Group USA, Hartland, Wis., strives to mitigate risk when working with subcontractor suppliers, while still maintaining quality and putting the owners’ and customers’ needs first.

“We have to work through the subcontractor to protect ourselves from potential impacts due to difficulties or shortcomings caused by one of their subcontractors or suppliers,” says Andrew Ostrand, senior project manager. “We also need to be proactive before work begins to anticipate and prepare for as many potential unforeseen circumstances as possible.

quick-facts1The construction industry in particular experiences a range of challenges when working with subcontractors, including a lack of available materials, the sequencing of installation and ensuring the third-party vendor follows site rules and maintains adequate knowledge in food safety regulations.

Another challenge is the difficulties firms face in verifying payment and lien releases of subcontractors. In many states, lien laws allow lower-tier vendors to send notice directly to property owners in the case of delayed payment. Many times the general contractor and owners aren’t even aware of an issue until a legal notice is sent directly to both parties, says Ostrand. When this happens, ESI engages the subcontractor immediately for an explanation of what happened to cause the notice to be sent. Typically, these are a matter of timing.

“The best way to mitigate risk is to engage third-party vendors early and create an open dialogue to address risk factors as early as possible. This is always done in conjunction with the subcontractor, as they hold the contract with the vendors themselves,” says Ostrand.

Another great way to mitigate risk is to provide guidance for the subcontractor as they solicit third-party vendors for work on an ESI project, he says. This allows firms to suggest proactive ways in addressing risk. Another benefit that ESI has is a network of proven partners in specialty fields like structural steel, specialty floors, refrigeration and insulated metal panels.

“Ensuring all requirements, standards and protocols are well defined and understood prior to entering into a contract as well as planning ahead of time using excellent communication are the best tools to minimize outside risks,” adds Ostrand.



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