8 Steps to Vet Construction Subcontractors

subcontractorAs a general contractor, it’s likely that you’ll use subcontractors at some point. Subcontractors can be an efficient way to outsource work. As specialists, they’ll often do a better job than a generalist and their smaller size means they can work quicker and leaner.

However, the construction job is your responsibility. The performance of the subcontractor will reflect on you. To complete the job properly and satisfy your customer, you need to make sure your subcontractors will produce quality work in a timely manner.

Before you officially hire any subcontractors, protect your business and your customer by taking these steps to vet the subcontractor.

1. Examine their past and current performance

Request information from the potential customer about their licenses, accreditations, history, and references. Look for any public data on lawsuits, disputes, complaints, or bankruptcies. Ask for the contact information of previous contractors they worked for. Then, search for references independently (without the subcontractor’s involvement) to get some unbiased and unfiltered information.

2. Look at their queue of work

It’s smart to make sure potential subcontractors can actually complete the work you need, so you’ll want to examine their log of previous, current, and future work. If the subcontractor seems too busy for their size, your job might overextend them.

3. Ask about their safety practices

Unsafe operations can leave you exposed to liability and force an inspector to close the job site, so make sure any subcontractors have clean or reasonable safety histories. They should also have ample safety protocols in place and a crew who is coached to prioritize safety.

4. Investigate the subcontractor’s employees

Ask the subcontractor about their team. Are they temporary workers, or do they work full time? Have they worked in construction before, or are they new? Does the subcontractor have the proper number of licensed professionals for the site? Do the workers have the right tools and reasonable workloads? Do any have serious felonies or drug problems that might make them unreliable? Answers to these questions will determine whether the subcontractor is right for your job.

5. Validate bonding and insurance

In most states, contractors are required to have bonding. In all states, they must be insured, including worker’s compensation insurance. If the subcontractor doesn’t have these protections in place, you could be held liable if there’s a problem. If the subcontractor doesn’t have these, reject them as candidates.

6. Investigate the subcontractor’s financial health

If your job is large, you’ll want to make sure the subcontractor’s financials are healthy enough to commit. You don’t want their employees to walk off the site one day due to lack of payment, or an inability to purchase materials. Request their annual contractor volume, two years of financial statements, and their total sales and net worth (you might have to sign a confidentiality agreement). Look for signs of poor health, like poor cash flow, a mountain of debt, or declining income.

7. Ask about their quality control process

In order to avoid rework and warranty work, you want your subcontractors to certify the quality of their materials and finished work. Every professional business should have a procedure in place to guarantee quality assurance. This procedure is rarely complex, but a successful business will have an answer to your questions.

8. Demand a written contract

It is shocking how many people work without a written agreement. As a contractor who is purchasing labor, you need to protect your investment. Every deal should be bound by a contract that clearly describes your expectations, including the scope of work, timeframe, and payment arrangements. Describe what you will provide and what the subcontractor will provide in terms of materials, warranties, and cleanup.

Hiring a subcontractor is like hiring an employee: You want someone who will represent your business well without adding drama, stress, or financial burden. If you follow the steps listed above, you’ll find the right candidate and build a lasting relationship.

Jonathan Belek
Risk Management Consultant
jbelek@srfm.com

Jon Belek

Trucking companies (or companies that just use trucks): Make the most of your industry associations

trucking associationStrength in numbers. The power of a team. A built-in support system.

No matter the size of your fleet, if you use trucks in any capacity, joining an industry association is a smart idea for your business. From big rig haulers to landscapers with a couple of light duty box trucks, the trucking industry has particular needs and a host of problems to solve, not to mention regulatory and legislative battles to fight.

Yes, you can go it alone, but why suffer through it solo when associations like the Motor Transport Association of Connecticut (MTAC) can help you “make things happen”?

Founded in 1920, MTAC is a fantastic, effective group that provides a host of services for its member businesses. Part of the American Trucking Associations (a federation of associations), its mission is to protect and promote the interests of the Connecticut trucking industry: In other words, your interests.

Obviously, the first step to success here is to join an organization like MTAC, but to really maximize your membership, you need to tap into the resources it provides. Consider being proactive in these five areas where an association can really benefit your business.

Education — Industry associations make it their business to know what you need to know to operate your business effectively. They can be founts of knowledge, with best practices information about issues such alcohol and drug testing, weight laws, driver qualifications, and vehicle maintenance, to name a few.

Driver Training — A best-in-class fleet has best-in-class drivers who are up-to-date on safety protocols and a wide variety of specialty areas, such as keeping cargo secure and knowing the ins and outs of braking systems. Industry associations offer the kind of training your drivers need to stay safe and productive.

Networking — Getting out of the office (and the truck!) and getting into seminars and gatherings is a great way to follow industry trends, find business partners and customers, and bounce ideas and concerns around with others who understand the industry. Trucking associations provide a full calendar of seminars, meetings, and other events that will help you make these important connections.

Lobbying — One of the most important services a trucking association will provide is lobbying on behalf of its members at the state and federal level. Though you don’t necessarily need to be climbing the Capitol’s steps, you do need to make sure your association understands your concerns. After all, they are there to represent you. Make sure your representatives know what’s on your mind!

Problem Solve — Industry associations exist to help your business thrive. They can help you work through thorny problems and they can help with things like supplying log books, driver qualification files, vehicle maintenance records and other compliance documentation.

Join your association, but don’t neglect it! Make sure you make the most of it.

P.S. Many of these offerings will help your business in one key area: keeping your worker’s compensation costs as low as possible. For more information, check out my recent [link] white paper, “How to avoid worker’s compensation claims in the trucking industry.”

Joe Pinto
Risk Management Consultant
jpinto@srfm.com

Joe Pinto

 

 

 

 

 

 

Should You Buy or Lease That Car?

buy or lease carCars are a big part of our culture. Many of us work in places where cars are required to get around. At some point, you’ll need to purchase a car that costs more money than you have on hand. You’ll ask yourself “Should I buy or lease that car?”

People have been purchasing vehicles forever, but leasing (the practice of only financing the depreciation of a vehicle, not its entire cost) was once only accessible to wealthy people or companies with generous budgets. That isn’t the case anymore. As vehicle costs continue to rise, leasing becomes an attractive solution for every segment of the car industry.

Some people will tell you “It’s smart to buy the car,” or “Save yourself the hassle and lease.” Truthfully, there’s no simple answer. Which option is better depends on your situation, your finances, and your needs? We’ve laid out the advantages and disadvantages of both options.

Advantages to leasing a car

  • Your lease payment is usually less than a finance payment would be.
  • You can have a new car every year if you wanted (with all of the new gadgets).
  • You can drive a better car than you can afford.
  • A lease can be written off business taxes, making it a good company vehicle.
  • Perfect choice if you’ll only be in the area for a year or two.
  • The leasing dealership issues a warranty that covers much of the repairs.
  • You aren’t making a purchase, so sales tax is less.
  • There is no trade-in vehicle to deal with.
  • If the car is worth less than the lease predicted at the end, it’s not your problem.

Disadvantages to leasing a car

  • At the end of the lease, you don’t own the car. You have to return it (although there is an option to buy, but it’s often not in your favor financially.)
  • Terminating a lease early can lead to expensive fees.
  • Putting too much wear or mileage on the car can lead to expensive fees.
  • If you plan to keep the car for years, leasing is more expensive than buying.
  • Lease contracts are made to be confusing so you pay more in fees.
  • Your mileage is often limited to 12,000/year, which is easy to overcome.
  • You can buy extra mileage, but it’s expensive.
  • Typically the lease requires you to have excellent credit.
  • Failing to perform basic maintenance can result in extra fees.

Advantages of purchasing a car

  • You can modify or augment the car in any way you wish at any time.
  • It’s cheaper over the long run if you plan to drive the car for a long time.
  • There’s no limit to how many miles or much wear you can put on the car (which is important for commuters who travel long distances).
  • You can tailor the loan term (length) and payment amount to your budget.
  • You can sell the car whenever you want for as much as you like.
  • Once the car is paid off, a big piece of your budget opens up.

Disadvantages of purchasing a car

  • Many dealers require you to pay a down payment before you can finance a vehicle. This is smart anyway, otherwise, you’ll be upside down on the loan.
  • Long loans can mean paying a lot of interest by the end of the loan.
  • The monthly payment is higher than a lease payment.
  • You are responsible for repair costs (unless there’s a warranty, but that doesn’t last forever).
  • At some point, you’ll have to sell it, trade it in, or junk it.
  • A car is a depreciating asset, so you’ll never sell it for what you paid.
  • Fluctuations in the car’s market value can affect your selling price (which you can’t predict).
  • If you need to sell your car but owe more than it’s worth, you would have to pay just to get rid of the loan.

Summary

When you’re trying to decide whether to buy or lease a car, look at it like this: A leased car is convenient, easy, and you get to drive something new all the time. A purchased car is far cheaper, and you have the freedom to use it however you please.

Before you make any decision, it’s important to understand the real financial implications. Use this calculator to understand your potential car buying options.

Jennifer Dwyer
Personal Lines Representative
jdwyer@srfm.com

Jenn Dwyer