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3 key practices to follow when hiring subcontractors

By Toby Cushing

Hiring construction subcontractors is an essential part of the construction industry, so doing it the right way can help make a safer worksite and drive better business results. Hiring the right subcontractors with the right contractual terms and making sure their workers are qualified and safe can be a daunting task, but developing the right process can save millions in future losses. First, making sure your bid documents and subcontracts require the proper training and safety practices is the most important thing. Second, making sure the terms of performance/specifications and contractual risk transfer terms are present is critical to making sure the project will be completed successfully while minimizing risk to the general contractor and the subcontractor. Here are some hiring practices that can help you ensure a construction company completes projects correctly and safely.

Pre-Employment Screening of Subcontractors

While going through the selection process to find a subcontractor, take a close look at the candidates. If it is possible, perform a background check for construction laborers applying to work for the business. Ask the subcontractors to give a report on following: > Credentials > Management team > Experience > Expertise > Geographic reach > References > OSHA training This report can then be used to take a deeper look at a prospective employee’s work history and see if they have had any lawsuits, claims or bankruptcies. Don’t forget to look at the subcontractors' schedule and projects they are already working on. A general contractor or construction company will want to make sure the subcontractor will have enough capacity to meet the job’s demands in the required timeframe.

Job Site Safety

General contractors (GCs) should make sure their written safety plan is incorporated by reference into subcontracts and or bids, or that the most important parts of the GC’s safety culture and requirements are specifically identified.

According to the U.S. Bureau of Labor Statistics’ “2019 National Census of Fatal Occupational Injuries” report, the private construction industry had 1,061 fatal injuries, up 5% from 2018 and the sector's highest number of worker deaths since 2007. The 2019 rate of injuries per 100,000 workers in the private construction industry was 9.7, up 2.1% from 9.5 in 2018. Young and inexperienced workers are more likely to get injured during construction jobs. In fact, an analysis of The Hartford’s claims data revealed nearly half of all construction claims occur when employees have less than one year of experience on the job. This is why it is important to properly vet subcontractors and create a safe work environment. which types of drug panels or types of drugs) should be stated, and the time period within work to be performed should be stated. If the GC wants the testing to take place on site, or be completed again every six months, it should be specifically required. The specific types of PPE to be used on site (such as Cut3 gloves, glasses, safety vest) should also be stated in the contract. If the GC and or the owner are going to use any sort of IoT devices, like wearables, those should be laid out in the safety requirements also.

Contractual Risk Transfer and Insurance

The goal on any project is to have no injuries and no property damage losses. Because

worksite losses are inevitable over time, the GC should have an internal committee that reviews its contract and insurance requirement process each year, and which serves as a review board for any exceptions to the standard process. Using outside legal counsel, the insured’s specialized construction insurance broker and having a process to review with their insurance carrier in some circumstances can also be helpful, and should be called for in the contract process. The contract review process should always start with the GC identifying what risks it is willing to take and not take upstream from the owner. Items such as, placement of the builders risk insurance, waivers of consequential damages, requirements for commercial property insurance during the completed operations period/state of repose, and CPPI or OPPI insurance should be carefully considered. If the GC decides to take on risks, such as consequential damages limited to a certain liquidated amount or period, then the GC must consider whether to transfer any of that risk down to the subcontractors. The GC should also have a standard set of insurance requirements and contractual indemnification requirements that it is willing to provide owners, and require from subs, along with a process to review deviations from that standard. GCs should work with outside counsel and their specialized broker/agent to determine the needed insurance requirements and also develop a process for contractor retention and insurance certificate or policy retention. This is especially important for projects written on a project specific basis, outside of the GC’s normal practice policy. Most GCs have insurance certification tracking programs, but we are seeing a trend of GCs not being able to produce copy of project specific wrap up or CGL policies from prior projects. Working with a qualified outside legal counsel, a specialized insurance agent or broker with deep construction experience and an insurer with specialized underwriters and claim/legal resources can help identify where a business’ risks are. Hartford's risk engineering team, for example, consists of technical specialists who help businesses operate safely and efficiently. They work closely with construction clients and offer guidance on growth, safety and training. CCR

OSHA training or prior work experience, such as OSHA 10 or 30, should be required to be completed prior to the subcontractor and its workers showing up to site. Universal six foot fall protection with no OSHA permitted exceptions (unless specifically provided by the GC in writing) should be specifically set out in the contract. It is especially important that drug testing, including the type of drug testing (i.e.,

Toby Cushing serves as the Head of Construction within the Middle & Large Commercial business lines at The Hartford. He holds a BS in Biology and Chemistry from Houghton College, a Juris Doctor from Quinnipiac University School of Law, Masters of Law in Insurance Law from the University of Connecticut School of Law, and studied finance and accounting at the University Of Connecticut School of Business.