Friday, 9 November 2007

What Is Better? Own Work Crews or Sub-contractors?

The big question: Image Canstockphoto.comThe big question: own work crews or subcontractors?
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When doing a renovation or a construction project, what is the difference between using a general contractor with their own crew and one that uses sub-trades? There are a few differences and when making a choice between general contractors, you should be aware of these and of the benefits of choosing one over the other.

First... let's clarify what we are actually discussing. Your general contractor is engaged by you to do the work on your project. The question is does the general contractor use staff that work for him directly or does he subcontract to other tradespersons to do the work and how does that effect your project? Given the quality of apprenticeship programs in Ontario, there should be no difference in workmanship between the staff versus sub-trades. However, frequently customers notice that companies operating with their own crews tend to be unexpectedly slow to complete jobs. One reason suggested for this is that the more jobs that are started, the more efficient the general contractor's labour cost. So, by starting lots of projects, the general contractor is assured of having his crew fully occupied and, that is important to them because the staff crews get paid if there are jobs on the go or not. So, it is not uncommon for a crew to be pulled from one job to be put on a new job many times through the construction season.In contrast, general contractors who operate with sub-trades have options when they wish to start projects. Once the project is secured, they find the sub-contractors to start the project and should they find more work, they find additional resources for those projects. On the matter of time conflicts and delays from lack of contractor availability (and that is possible because a sub-trade may also try to secure multiple concurrent projects), if the project is not moving ahead as required by its contract schedule, another sub-trade can be assigned the work. General contractors with their own crews don't do this because it becomes an additional expense to their operation.

On the matter of cost, there are some direct impacts of using a company which employs its own staff versus using sub-trades. Employee trades need to have contributions by the employer for taxes that apply to all employers. They contribute to the employee's Canada Pension Plan, Unemployment Insurance and Workmans' Compensation. Sub-trades are self employed contractors to the general contractor. They are responsible for their own Workman's Compensation contribution, CPP and don't pay UI. This means that the price paid for a given trade will cost more for employee staff than for sub-trades and this is reflected in the prices quoted for your project. And, in almost every instance, the cost of labour is the largest component in a renovation or construction project.This description of the differences do favour sub-trades over staff crews, but, there are some advantages to hiring a company with its own staff crew. for the most part, there is a feeling that the general contractor has more control over the project. And, this is for the most part a reasonable expectation. However, if the general contractor is re-assigning his resources, the owner of the project is no better off for having made the decision to put their faith in a self-crewed project. But, is there a certain cohesiveness in a crew that is working all 'under one roof' so to speak? All projects are scheduled, so there is typically little un-needed overlapping of the trades. As an example, framers, dry-wallers and painters are almost never sent to the same site at the same time because their work is scheduled to be a sequential group of tasks. So, working as team though a good concept is not required. In fact, they could be non-related workman and if they are scheduled and co-ordinated well by the general contractor, they really need not be involved with each other.

In recommending to someone which choice is better for them it generally becomes a question of cost and risk management. Most often, the general contractor who uses sub-trades will be able to bid costs below the company who keeps resources on the ready and on staff. And, if there is a lot of work taking place in the local construction market, it is more likely that a general contractor using sub-trades will able to keep the project moving forward because they are not tied to one set of staff members. Given the ability to choose, it makes more sense to have a general contractor on your project who has the flexibility to get the resources needed versus the resources he has.
This article was contributed by Ari Berman, a Management Consultant from Toronto, Canada, with a specialization in operations and process change. He has helped companies spanning aircraft builders to soda drink manufacturers to increase their value - finding and improving important details that never got attended to in past. His work in the construction industry includes overseeing commercial construction projects in retail shopping malls across Canada. He can be reached at 647-235-8181 or via e-mail on

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