13 Risk Management Tips for Subcontractors, by Subcontractors

Billd held a Subcontractor Meetup to address how subs can implement better risk management provisions in their contracts. Here's what 72 subcontracting executives from across the country said when asked for their best advice on the topic.

1. Treat Purchase Orders Like Contracts, Keep Them Simple

Purchase orders function as contracts and deserve careful review. Use simpler language to reduce misinterpretation risks. Insurance professional Drew Boyd notes that complex PO language makes it easier for lawyers to invalidate provisions. When starting work before a formal contract exists, itemize tasks clearly to outline exact responsibilities and protect yourself in disputes.

2. Draw Hard Contractual Boundaries When Taking Over Another Sub's Work

When assuming work from underperforming subcontractors, create substantial contractual protections. Add an addendum stating you're taking a high-risk role as a favor to the GC. Ensure you're only accountable for your own work, follow the PO as your basis, specify payment and insurance terms, and designate this document as superseding all other contract language.

3. Implement Limitation of Liability Caps and Mutual Waivers

Push for a limitation of liability cap with no carve-out for indemnity or insurance, if you can achieve that. Request mutual waivers of consequential damages to make the arrangement appealing to both parties.

4. Request the Builder's Risk Policy and Consider Installation Floater Insurance

Obtain a copy of the Builder's Risk policy and review loss provisions — you're an insured party. Consider installation floater insurance covering movable property during installation. This coverage typically remains active until materials are installed and pays you directly, often with lower deductibles than standard policies.

5. Rely on Professional Consultants

Always work with contracts lawyers, contracts managers, and insurance agents. Even experienced professionals should always assume that the ground is shifting under your feet since laws change and risks evolve.

6. Review These Critical Contract Points

Kyle Follet recommends jumping to these three framework questions:

• What are you responsible for?
• How can either party exit this contract?
• What are the payment terms?

Be wary of:

• How change orders are handled
• References to non-existent schedules
• Contractual privity issues
• Incomplete scopes
• Liquidated damages clauses
• Payment conditions

7. Make Your Proposal Part of the Contract as an Exhibit

Ensure all inclusions, exclusions, and terms from your proposal become part of the final contract. At minimum, get your terms and conditions added as an exhibit.

8. Establish Expectations Before Entering the Contract

Have forthright conversations with GCs about how you work and what you expect from them, so they understand your standards before signing.

9. Utilize Technology in Contract Review

Explore AI platforms like DocumentCrunch for efficient contract analysis. These tools can quickly identify the most important information relevant to your situation.

10. Make Additions Rather Than Just Redlines

Instead of heavily marking up contracts (which creates tension), propose additions that accomplish your objectives. This strategic approach is more palatable to GCs than extensive deletions.

11. Clarify Redlines in Contract Negotiations

Have one-on-one discussions with owners and GCs to explain proposed changes. Work with legal counsel to suggest exact wording you want included.

12. Combat “Pay When Paid” Conditions

If concerned about payment delays on “Pay When Paid” projects, address it directly and ensure the contract reflects your agreement. Communicate that after a certain time passes without payment, you'll exercise your right to lien the project. Include your right to stop work for non-payment.

13. Maintain a Non-Adversarial Tone

Address redlines diplomatically without confrontational language. Be polite and respectful. Comment on each condition while justifying your approach. Reference your project history and past incidents to demonstrate you're getting ahead of problems, not creating them.