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Plan & Protect
Reduce risks and enjoy peace of mind with these tips and insights to protect what matters most.
Even the best planned construction projects may have to weather the storm caused by outside events. Knowing issues early can help you manage risks with subcontractors.
The dot-com bubble created massive growth opportunities for construction companies in the late 1990s; then, in early 2000, the bubble burst. Events on September 11, 2001, affected construction projects: contractors and subcontractors endured project cancellations, massive job losses and bankruptcies.
Fast forward to the mid-2000s: construction rebounded with renewed vigor. Residential and commercial projects were plenty and money was readily available, until the Great Recession of 2008 caused massive disruptions to projects as credit markets in nearly all segments essentially evaporated.
For construction companies that survived the early 21st century’s economic recessions, lessons learned on proper subcontractor selection became well-honed processes for managing risk. And, until the COVID-19 global pandemic, construction companies enjoyed a nearly 10-year run of positive results, with their biggest concern being qualified trade partners who could help them complete projects.
A subcontractor experiencing trouble can cripple a project; knowing about their difficulties early is better, but it doesn’t eliminate the risk of default. Once a general contractor or first-tier trade partner recognizes that it is faced with a struggling subcontractor, four simple guidelines can help guide you:
Failure to recognize and manage struggling subcontractors properly often leads to disputes, claims, project delays and poor-quality work. Nevertheless, most issues can be resolved by working with the subcontractor, rather than taking drastic measures. If termination is the only option, follow the bond form’s protocol and the conditions to the subcontract or you may find yourself in more dire circumstances than when you started.
There is no shortage of issues that occur on jobsites, and mistakes will happen. Your role in this situation is to collect the information available, break the problem down into solvable segments, effectively communicate with all parties and make informed, calculated decisions based upon facts. The key here is to improve upon the mistakes made in the past and do better the next time around.
This loss control information is advisory only. Not all exposures are in this article. Contact your local, independent agent for insurance coverage advice and loss control information. Neither The Cincinnati Insurance Company nor its affiliates or representatives offer legal advice. Consult with your attorney about your specific situation.
The selection of a particular service provider is the independent choice of the policyholder. Service providers are not affiliated with The Cincinnati Insurance Companies. Cincinnati and its employees make no warranties and assume no liability for services, products or loss control measures provided by service providers.