Foolproof Guide for Subcontractors Working Directly for Owners

If you have a contractual relationship with a GC you can’t work directly for the owners of the contract. You’d probably be in violation of your contract with the GC, and it makes for some very confusing situations when unwinding who did what, and who pays. If an owner approaches you on the job and asks you to do something for them directly, you should simply ask them to talk to the general.

What about working directly for owners after working for them as a subcontractor? If you value the relationship you have with a GC, then it’s a courtesy to check with the GC when an owner asks you to work directly for them. Here again, you could have a contractual obligation to the GC based on previous contracts you’ve done with them. But, even when that’s not the case, being upfront about it can help to safeguard your relationship.

It’s also best to understand the value you bring to a project to avoid taking on work you’re not suited for. A GC brings comprehensive value to a project through its bonding capacity, and broader project management and scheduling skills. A GC can also field a diverse group of craft workers. So, before saying yes to an owner, be sure you can deliver on everything required for the project.

With your GC relationships protected you can lay the groundwork for working directly for owners. A good way to start is to get your bonding, insurance and financials in order. But to do that, you need to decide what types of projects you’ll take on, and what size. Make a list as you consider:

• The delivery methods you prefer
• Types of buildings you want to work on
• What aspect of your craft specialty you want to focus on
• Dollar size of your portion of a project
• New construction, renovation or both
• Preferred project duration
• Project geography

When you finish, you should have a clear idea of what projects you’ll be looking for. That will guide you in selecting the bonding and insurance coverage you will need.

You’ll need to locate owners who need your services for the types of projects you’re considering. But first, know what you are not looking for in owners. There are owners in both the commercial side and the residential side who manage their own projects, in effect operating like GCs. The trick is to select the ones who know enough about what they’re doing so you can avoid the consequences of bad decisions.

Here’s who you’ll want to avoid:

• Owners who don’t bother to develop plans
• Owners who have project scopes that clearly outpace what they’re willing to spend
• Owners who think they know how to build because they watch DIY television
• Owners who want to build with other people’s money

Here are ideas for gathering information so you can make an informed decision about working directly for specific owners:

• See what else the owner has built
• Talk to other contractors in noncompeting trades who’ve worked for them
• Talk to suppliers within the same geography to gauge the owner’s track record
• Buy lunch for the owner to introduce yourself and gather information to help you understand their knowledge and motivations
• Talk to bondsmen, insurance agents and bankers

An important aspect of going to work directly for owners is understanding contracts. If you’ve only worked for GCs you’ve got a steep learning curve because the owners will most likely use contracts that favor them. The contracts they choose might also be written with language more appropriate for a GC. Involve legal counsel the first time you engage in one of these contracts. That way you can learn the nuances and get valuable advice on the clauses that could pose problems.

In a perfect world, you should be able to move fluidly from working for a GC to working directly for an owner. But, there are consistencies among GCs, and not so many among owners. For instance, most GCs will have safety programs that you can use on your own. Their programs will be unique to the job site, so you don’t have to spend a lot of time adapting your own program. Most GCs will use a similar payment process and will handle delays and claims similarly. But with owners, there can be wide variation in how they administer their projects.

A prudent approach is to start small when deciding to work directly for owners. Take the time to get expert advice where needed, and leave yourself some margin for error when you estimate and schedule.

Working directly for owners can lead to a variety in work, and can even propel you toward a GC role in the future.