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Construction Subcontractor Agreement

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Construction Subcontractor Agreement

Updated December 19, 2022

A construction subcontractor agreement is between a general contractor who holds an agreement with a client (“prime contract”) and a subcontractor to perform a service. The contractor usually seeks the service of the subcontractor because they cannot perform the service themselves. This is common for basic trades like plumbing, electrical, roofing, carpentry, interior design, or any service the contractor decides to hire.

By Type (8)

Hiring a Construction-Subcontractor

Before a contractor can hire a subcontractor, they first will need to make an agreement for services with a client. Once an agreement is made (“prime contract”) the contractor will know the timetable, amount of funds, and the scope of work for the entire project. The contractor will need to coordinate with the subcontractor over the timing, responsibilities, and liabilities of their tasks as it pertains to the entire project.

Step 1 – Subcontractor Signs a Non-Disclosure Agreement

subcontractor signing non-disclosure agreement

Before most subcontractors will even talk about an agreement, they will need to see the plans between the contractor and the client. The subcontractor will commonly need to authorize a non-disclosure agreement stating that any plans they may view will remain confidential. Afterward, the contractor will usually accept bids from subcontractors for the work.

Step 2 – Viewing the Scope of Work

subcontractor and clients reviewing project schematics

The subcontractor will need to know the exact specifications of what the client and contractor are trying to build. This is often referred to as the “scope of work” which gives a layout of exactly the materials needed and build out. The subcontractor can then make an estimate, and submit a bid to the contractor in the hope of receiving the work among other subcontractors seeking the same job.

Step 3 – Coming to an Agreement

contractor and subcontractor negotiating agreement

The contractor and subcontractor will need to negotiate the details and liabilities of the agreement. This will require both parties to come to an agreement over who will be liable for the subcontractor’s employees, materials, equipment, travel, and any other responsibilities of the parties.

In addition, how the subcontractor is to be paid should be mentioned. If payment is by the hour, per job, or a combination of the job plus a percentage of the materials used, the subcontractor will be able to begin work on the start date specified in the agreement.

Step 4 – Providing the Service

subcontractor negotiating with client over phone

The subcontractor will be legally obligated to provide the service as outlined in the subcontractor agreement. If not, there could be legal and financial implications due to the contractor relying on the services provided in order to complete the entire project.

If there are any change orders, which are requests made by the contractor or client that alter the agreement, the negotiations for such changes should be in accordance with the agreement. This usually consists of no more than 3-5 business days or else the agreement can be terminated.