The Top Subcontractor Management Challenges of 2024 and How to overcome them
General contractors face a difficult market. Critical labor shortages and increasingly complex projects create capacity issues. At the same time, rising costs for materials and labor are lowering profitability.
Within this market, effective management of subcontractors is key to maintaining profitability. After all, when your subcontractors are effectively managed, construction is more likely to be completed on time and within budget.
Here, we explore how subcontractor tracking, compliance, and management software can help general contractors optimize their processes and thrive in a difficult market. Let’s start by unpacking how other general contractors are currently leveraging technology to manage their subcontractors.
What Subcontractor Management Software can do for you
Subcontractor management software is not the same as project or people management tools. Rather, this software is tailor-made to improve construction finance processes, drive project deliveries, and avoid delays.
Our latest research report, written with Dodge, found that the vast majority of general contractors accessed a range of benefits from using software to track and manage subcontractors. For instance, 91% of general contractors reported experiencing higher productivity; 84% reported improvements in estimations and bidding; and 82% enjoyed better client relations.
While there are many important features to look for in a subcontractor management app, most general contractors seek solutions that can help them track and manage applications for payment, change orders, schedule of values, subcontractor payments, and lien waivers.
Despite this, 70% of general contractors don’t have solutions to manage all of their key business tasks, such as OSHA compliance reporting and tier vendor management. This is good news for contractors: there is more you can do to improve your business.
Related: For more insights on how general contractors are improving their business by adopting digital tools, read our report on Optimizing Subcontractor Management With Technology.
five key challenges overcome with subcontractor management apps
For general contractors, the ability to efficiently allocate resources can make or break a project. Balancing a growing number of subcontractors without overwhelming your administrative staff is a delicate art. The challenge only intensifies in the face of labor shortages.
Construction apps tackle this issue head-on by automating back-office tasks such as invoicing, exchanging lien waivers, and managing documentation. With the aid of these apps, you can work with more subcontractors without needing to employ additional back-office staff — a benefit that helps you overcome the labor shortage. Additionally, subcontractor management software offers clearer sightlines over projects, enabling you to dedicate the right resources to the right project at the right time.
Project and Cost Tracking
Budget overruns and project delays are nightmares for any general contractor. Without a clear overview of each project’s progress and expenses, these problems can easily spiral out of control.
Each project has its unique timeline, budget, and set of deliverables. Subcontractor software provides control by tracking the real-time status of each project along with updates on timelines, project milestones, and labor and cost allocations. Software can also track key factors like lien waiver status reports, retainage releases, and billing summaries. These features help you manage costs to avoid overspending while providing transparency on project progress.
Payment Application Management
Did you know that the majority (73%) of general contractors still rely on manual, error-prone processes to manage their payments? These manual processes are not just tedious, but they leave ample room for accounting and project management errors that can disrupt cash flow and delay work.
Subcontractor software offers a solution by automating this entire process, ensuring timely payments and reconciliation accuracy while removing the chance for errors to enter the system.
Subcontractor Compliance and Legal Issues
The landscape of legal regulations is a minefield, and the smallest oversight can result in significant repercussions. Compliance is not just a box to tick off but a vital aspect to safeguard a project and the reputation of a general contractor. The risks of compliance failures include increased liability, potential insurance complications, and the looming threat of substantial fines.
By using subcontractor compliance software, general contractors can securely store all essential compliance-related documents, from contracts and permits to insurance certificates. What’s more, these apps ensure that subcontractors are up-to-date with their required documents, even automatically reminding them before expiration.
Communication and Avoiding Conflict
Miscommunication is the root cause of many project setbacks. When collaborating with multiple parties, ensuring everyone is on the same page is both crucial and challenging. The ripple effects of a simple misunderstanding can lead to significant project delays and interpersonal conflicts.
Subcontractor management apps provide a single platform for seamless, transparent communication for all parties. These apps enable instant and easy sharing of project updates ranging from status reports to change orders. Features that document and track all communication ensure that agreements, changes, and instructions are recorded, reducing the chance of misunderstandings and disputes.
Transforming subcontractor management with the right market research
Using technology to manage subcontractors significantly improves project performance while also helping general contractors to overcome challenges that limit growth.
For exclusive insights on how contractors are using software to eliminate errors, streamline construction, and save time and money, download the Dodge Construction Network 2023 Industry Report today. This report is a comprehensive survey of US general contractors. It evaluates the current use of technology by these contractors and identifies areas for new adoption in the future.
Click the button below to secure your free copy.