Creating World Class Subcontractor Relationships

According to a Washington State University Study in 1991 by Currie, Sweeney & Hafner, approximately 80% of the dollar value of construction is accomplished under subcontracts. In today’s current market, it can be reasonably assumed that this number is much higher. Therefore for the past 30 plus years, general contractors (GCs) have self performed less than a quarter of their work. This means that general contractors have essentially become subcontract managers. As with any management discipline, the key factor in determining success is how well the interpersonal relationships are handled. So what does the aforementioned study teach us about the current state of relationships between GCs and Subcontractors?

The 1991 study asked various subcontractors to rate the importance of over 10 factors on the relationship between their company and the GC they are working for. The rankings were also supported with anecdotes from the subcontractors. Of the top 3 factors subcontractors said most affected their relationships with general contractors, #2 was the general contractor’s project manager and #3 was the general contractor's superintendent. The anecdotal evidence that supports these rankings give insights as to why relationships may sour and what GC’s are able to do to develop strong rapport with their subs. 

In the study, subcontractors were quoted as saying, "When you have a project manager that just sends you nasty emails instead of trying to work out something … that’s an issue.” When asked about what they want in a superintendent, the subcontractors stated that a superintendent should be  “actually looking out for their subs, to take care of their subs…working with them so they can make money on the job, not at all a one way street.” Both a bad superintendent and bad project manager were cited as reasons why the subcontractor may raise their bid prices. 

Many general contractors outwardly say that they emphasize relationships and have a desire to see their subcontractors succeed, so why do so many subcontractors feel that the leaders of the projects (Project Managers and Superintendents) often want to take advantage of them?

There are two major factors as to why subcontractors and GCs have relationship problems. The first is a problem in human psychology. The second issue is a lack of understanding of self-perform work. 

Human Psychology

In the 1970’s, there was an infamous study known as the “Stanford Prison Experiment.” The study randomly selected college students to act as guards and other students would act as prisoners. The study was stopped after only 6 days due to the “guards” mistreating the “prisoners.” The results were shocking and showed how easily humans in places of power can start to “other” an outside group and treat them as if they are lesser than themselves. The study showed how truly powerful an “Us vs Them” mentality can be. 

In many cases, this same “Us vs Them” mentality can be seen throughout a general contractor especially when it is not challenged internally. One popular refrain in the GC world is “they signed the contract.” This line further reinforces the mentality that the subcontractors work FOR the general contractor and not WITH the project team. If the GC always believes that the subcontractors are lesser than themselves and need to be kept in line, then the result is often subcontractors who tend to be more combative and less cooperative as they feel used and not part of the team. This is highlighted by the simple statement in the study that if a superintendent is known to be a hard ass, subs will raise their bid prices. 

Lack of Experience

Managing subcontractors and self performing work require 2 different skill sets and knowledge bases. Self performing work requires detailed specialized knowledge that is often lacking at general contractors because GCs are often focused on the larger schedule and coordination of the project. In reality, both skill sets are needed for a successful project, however the lack of understanding of each party’s goals and objectives can stress the relationship on the project. 

General contractors are notorious for stacking bodies and equipment into as tight of an area as possible trying to maximize the amount of activities that are going on at once. This often causes a decrease in productivity from all trades as more time is spent moving materials and coordinating equipment. Trades are the most productive when there are clearly defined areas for each trade to work in, which will help reduce individual activity durations and move the schedule along effectively. 

The humility to admit what you do not know is one of the hardest things a person can do, especially someone who is in power. As a GC, this is especially difficult. As stated before, the GC and subcontractor relationship is often viewed with the GC as the dominant player. This can cause the GC to feel the need to control and direct the subcontractors rather than listening to their specific expertise and then evaluating the best path forward. As with anything in life, it can be difficult to have the humility to admit what a person does not know and GCs are no exception.

How Can GCs Improve Subcontractor Relationships?

The simple answer is that GCs must develop a culture of teamwork. Plenty of books and resources are available to help individuals to develop the mindsets and perspectives necessary to create high functioning teams. 

Never Split the Difference - Teaches how to effectively negotiate through listening. Vital for understanding what subcontractors are asking. The book also argues that the person with the most leverage in a negotiation is the one with all of the information. 

Extreme Ownership & Dichotomy of Leadership - Successful teams are built around leaders that do what it takes to accomplish the mission. Leadership requires evaluating both sides of every scenario and determining what action best accomplishes the goal. 

How to Win Friends and Influence People - The only book a person needs to understand human psychology. 

What Game Theory Reveals About Life, The Universe and Everything - Subcontractors are not perfect. Inevitably they will do something to try to work you over. You must recognize transgression, be fair and firm in response to ensure that you are not a pushover.

Overall, the project is a team. The GC is often put in a tough position of trying to satisfy the owner and the subcontractors. Historically, the GC has favored the owner at the sub’s expense. It may be impossible to please both parties every time, however a concerted effort to be fair to both sides will allow a GC to go further than its peers. The owner may provide work, however the subcontractors will ensure the GC will have an attractive price and provide a great product.