Subcontracting is a more formal version of outsourcing. It consists of entering into a contract with another business to perform a service for you that is part of a bigger job. When you subcontract work, you are still responsible for getting the work done and in a manner satisfactory to the customer. A common example of subcontracting is in the home construction industry in which a general contractor deals with the customer and administers the project. They have the responsibility for organizing and coordinating the work of the painters, plumbers, electricians and carpenters and paying them for their services.
As the prime contractor, you are ultimately responsible for the quality of the work and the timeliness of completion. To protect yourself legally and to ensure that your customer is satisfied, you need to spell out in a formal written subcontract exactly what work is to be done, the quality required and the deadlines that need to be met. While the job is in progress, it is important to check frequently to monitor that everything is proceeding according to the contract. It is easier to remedy problems before, rather than after, the work is completed.
You should think about subcontracting if you do not have sufficient expertise or capacity for a big job. Consultants often subcontract parts of projects that are beyond their own expertise. You may be able to bid for a job that requires larger facilities or more specialized equipment than you have by subcontracting part of the work. Your customer, however, only has to deal with one supplier because you are managing the subcontractors.
Subcontracting requires a carefully planned budget. Be sure that you thoroughly understand what it will cost to sub-contract. When choosing subcontractors, ask to see examples of previous work and ask for references. Remember that the lowest bidder may not be the best choice. Always ensure that the subcontractor has completed the job in every respect before you make the final payment.
