Knowledge Corner

There are several factors that a General Contractor (GC) will look for when hiring a trade contractor for work on a construction project. Here are 4 prominent components:

1. Experience
   Understanding a project type, having previous experience with that project type, and being familiar with the project location are all important components of a trade contractor’s experience. In addition, the size of the project and the trade contractor’s particular scope will be reviewed. 
   
   A couple examples of this would be:
   • If the largest project contract a trade contractor has ever completed is $1M and they would like to bid on a contract scope worth $10M, there will be a lot more scrutiny on the trade contractor’s ability to complete the project.
   • If the trade contractor was based in Chicago, does all their work in the greater-Chicago area, and decides to bid on a project in a rural part of Oregon for the first time. This would cause scrutiny as well.
   
   Finally, the trade contractor may need to use subcontractors and vendors for certain parts of their scope of work. These lower tier trades/vendors will also need to be reviewed for similar experience.
   
   
2. Financial Stability
   A trade contractor’s financial stability is very important. The GC not only wants to be sure the trade contractor is paying their subcontractors and vendors on time, but that they are also financially stable to complete the project if there are onerous or unusual payment terms. There are also reviews of the trade contractor’s current backlog and how it coincides with the current project schedule, the stability of their financial statements/balance sheet, if they have a bonding company and what their associated limits (per project and aggregate) are.
   
   
3. Safety Programs and Records
   A safe trade contractor is certainly imperative for any project.  A GC will want to review the trade contractor’s Experience Modification Rate (EMR) over a 3-to-5-year period, with the anticipation that the EMR is under 1.00.  A GC will also want to review the trade contractor’s corporate safety program and project specific safety program.
   
   
4. Company Structure and Management Approach
   An important understanding of a trade contractor can be found by how involved their management team is. A GC will ask:
   • Do they “buy into” the project safety plan, DEI requirements, and project scope/schedule?
   • Are they known as a “team player”?  
   • Are they involved in project meetings and are they available to make critical decisions
   
   Each answer is reviewed to determine if a trade contractor is a suitable fit for the project during the pre-qualification period.
   
   

If you are a trade contractor looking to go after a larger contract. Make sure your company knows this information. It’s also important to make sure you have the proper insurance. Contact us at TSIB and let our Risk Consultants review your insurance policies. 

TSIB’s Risk Consultants are currently servicing the following locations:
East Coast: New York City, NY; Bergen County, NJ; Fairfield County, CT; Philadelphia, PA
Texas: Austin, San Antonio, Houston, Dallas
California: Orange County, Los Angeles County, Riverside County, San Bernardino County, San Diego County

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