Construction projects involve a lot of moving parts — and a lot of moving people.
Because of this, it’s easy to get confused about who is responsible for what on the job, especially when terms like contractor and subcontractor are used interchangeably in the construction industry.
So, if the terms seem to be used so interchangeably, what is the difference between general contractors and subcontractors?
In this article, we’re talking about some of the differences between contractors and subcontractors, how they work together, and the different challenges each role might face during a construction project.
As a contractor, you want to ensure both you and your subcontractors are getting paid.
Likely, if you’re searching the internet for ways to improve your cash flow as a contractor, you’ve been stiffed out of a payment or two in the past.
It’s not uncommon for contractors and subcontractors to face the burdens of late or missing payments in the construction industry.
With a Flexbase subscription, you can say good-bye to all of your cash flow concerns. When you subscribe, you can count on:
- Streamlining your cash flow management processes, and
- Get money into your accounts fast
We provide a holistic cash flow management system for both general contractors and subcontractors. Flexbase was created to fix a flawed payment system, and with you in mind — which is why when you subscribe to Flexbase, we don’t get paid unless you do.
Contractor vs. Subcontractor: Types of Contractors on a Construction Project
In the construction world, a contractor essentially coordinates and supervises every aspect of a construction project. As a general contractor, it is your responsibility to ensure that the project meets all expectations and provides all of the agreed-upon deliverables in a contract.
In terms of what you’ll find on a contract, general contractors are often referred to as the “Original Contractor”, “Prime Contractor”, “General Contractor”, or, most commonly, “Contractor”.
Another key difference from contractors and subcontractors is this: Licensed general contractors are responsible for an entire worksite. For this reason, they must carry worker’s compensation and liability insurance.
In construction, a subcontractor is someone who has been hired by a general contractor to perform services from a specific niche or specialty — and is under contract with a general contractor or another subcontractor.
Subcontractors on a construction job are specialists like:
What Is the Relationship Between Contractor and Subcontractor?
Could a contractor hire his/her own team of professionals to complete all the different tasks on a construction project?
Yes — but it would take a lot of knowledge in many different areas, the time to training every employee, and large amounts of money.
The general contractor and subcontractor’s relationship is quite simple: the contractor hires the subcontractor with specific expertise to complete tasks on a construction project.
Although simple, it’s a very important relationship. In fact, a network of subcontractors is one of the contractor’s most valuable tools.
Subcontractors and contractors need each other’s business. Without a subcontractor, a contractor is unable to complete a construction project. On the other hand, without a contractor, subcontractors are less likely to see any cash flow.
General contractors and subcontractors work hand-in-hand to ensure that each phase of a construction project is completed efficiently.
The Difference Between Contractor and Subcontractor Roles in a Construction Project
General contractor vs. subcontractor — what exactly are the differences in the two roles? They both work on the same projects and have similar titles, what makes them so different?
Although they have similar titles and are easily confused, general contractors are seen as the managers of a construction project — they are overlooking every aspect of a construction site.
Unlike contractors, subcontractors are experts in specific fields needed to complete a construction project.
Let’s break down the two roles a little more in the following sections.
A general contractor wears many hats during a construction project, some of a general contractors roles include:
- Monitoring pay, schedules, and cash flow
- Determining what materials and equipment are required
- Meeting any and all legal and regulatory requirements
- Guarantee the health and safety requirements of the construction site are met
- Negotiating deals
- Having direct contact with property owners — the direct contractual agreement is through the general contractor and the property owner.
- Overseeing physical labor
- Assessing project plans
One of the most important things to remember about subcontractors is that they are not the contractor’s employees but independent contractors working for the general contractor on a specific project.
Subcontractors’ responsibilities are much more narrow than those of a contractor. Their prime responsibility is to meet all the needs and expectations agreed upon in their contract with a general contractor, their role involves:
- Estimating the cost of work — subcontractors may bid hourly costs for a construction project or they may bid one price for the entire project.
- Work without supervision — because a contractor is hiring subcontractors, it is expected that the subcontractor completes the work efficiently and correctly with little to no supervision from a contractor.
- Maintain communication with the contractor — subcontractors must stay in clear communication with contractors for the construction project to continue to run smoothly and efficiently.
- Report any safety concerns — subcontractors must report all safety hazards to the project contractor immediately.
General Contractor vs. Subcontractor: Payment Challenges
Although general contractors and subcontractors work together, they often face separate payment challenges throughout projects.
In the following section, we discuss the payment challenges that general contractors vs. subcontractors face and what those challenges look like.
2 General Contractor Payment Challenges
General contractors, specifically, face many challenges when it comes to receiving payments, but two stand out the most.
- Tracking lien waivers
- Managing retainage
Contractors already have what feels like hundreds of responsibilities, but ensuring that everyone on a project gets paid is probably one of the most stressful.
Requesting, collecting, and tracking lien waivers is one of the largest pitfalls in the construction industry — it can halt the payment process for everyone involved in a construction project.
Thankfully, when you use an app like Flexbase, tracking lien waivers is easy.
Instead of wasting time creating, sending, and tracking down lien waivers — we do the work for you.
Flexbase automates the process by…
- E-signing lien waivers
- Sending them to correct parties
- Forwarding each lien waiver to multiple stakeholders after the waiver has been signed.
… leaving contractors one less thing to worry about and the ability to get paid and to pay subcontractors faster.
Although this is a more significant issue for subcontractors (which we’ll discuss in the following section), it is often held from general contractors.
It’s not uncommon for two things to happen with retainers:
- Contractors to have to bend over backward in order to receive retainers from property owners, or
- Receive requests to change or provide discounts in exchange for a portion of the retainer.
These types of situations can lead to contractors breaking even, possibly even losing money on the job after paying subcontractors and employees who have worked on the job.
2 Subcontractor Payment Challenges
Contractors aren’t the only ones who face payment challenges. Subcontractors and those workers lower down the payment chain tend to be the workers who see the brunt of payment issues.
Subcontractors and suppliers only receive payments when the owner maintains their end of the contract and pays the contractor — but even then, subcontractors may still play a waiting game.
As payments make their way down the payment funnel, subcontractors can expect to wait a month, or even two months before they receive payment for the work they’ve completed and invoiced for.
Leaving subcontractors and suppliers burdened with the effects of non-payments and disputes. This forces many subcontractors to have to pay for project costs out of their own pocket until payday arrives — creating serious cash flow problems.
Worse than late payments is the threat of non-payment for subcontractors. Because subcontractors are the furthest away from the top of the payment chain, they become the most at risk for not receiving payments.
This can happen for several reasons, including:
- Missing or late paperwork — lien waivers or preliminary notices, for example
- Misappropriation of funds
- Lack of initial payment to the contractor from the property owner
Flexbase realizes that this is an industry wide problem, which is why we’ve created an invoicing system that makes it easy for contractors and subcontractors to…
- Send invoices
- Payment reminders; and
- Even legal notices
… so that the risk of non-payment becomes less of a reality.
Solve Your Cash Flow Woes With Flexbase’s Holistic Platform
Say good-bye to concerns over lack of payments and retainers being held against your business. Flexbase is here to take your woes away.
Flexbase gives you access to tools, including:
- Automatic payment reminders
- Optional discounts to property owners who pay their invoices early
- Payment notices; and
- Legal notices
Don’t let cash flow problems interfere with your day-to-day business any longer. With Flexbase, you can:
- Negotiating payment terms
- Avoiding costly payment delays
- Getting paid faster
Gone are the days of waiting months for payments on completed construction projects, with an app like Flexbase, you take control of your cash flow.