Ask any contractor what his greatest business headaches are and they usually fall into one of two categories: 1) challenging clients, or 2) issues with vendors/subcontractors. While many of the following tips apply to both, there are certain nuances with vendor and subcontractor arrangements given the business-to-business (B2B) nature rather than the potential business-to-consumer (B2C) scenario which defines residential construction. Let’s dive right in.
Build Your Vendor and Subcontractor Management Plan
This starts with defining the selection process when choosing vendors, and continues through how you’ll handle the relationship between vendor and customer, or vendor and your company, as well as how you’ll handle disputes. Feels like an overwhelming task to develop, right? It can be daunting, for certain, however the best way to start is with your organization’s values. Look for vendors and subcontractors who share common values, such as safety, honesty, work ethic, and have a sound reputation.
From there, outline how you want the engagements to work: do they receive direction from you but are paid by the construction customer, or are you their customer? This can have varying implications, one of the more severe is whether or not they have the ability to file a property lien.
Define and Communicate Your Bidding Process
Whether you have your set subs or draw from a pool based on price and availability, regardless you’ll need to receive a bid from the vendor to create your master project proposal for the customer. While many vendors and subcontractors have their own bidding templates, if you run a large firm or source bids from a wide range of vendors covering all aspects of a job, receiving bids in a uniform fashion reduces your assembly time for the final proposal.
Contract negotiation goes back to the first point with the Vendor Management Plan. Bringing your own master agreement to the table when you start out with a vendor is helpful, however don’t expect everyone to sign on the dotted line. There will be some give and take, so be prepared with your concessions and your non-negotiables.
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