Subcontractor management is a process before it is a product: five steps a general contractor takes with every sub on every job, each leaving a document, and the software is only as good as the steps it follows. This page is the process for a small general contractor, worked on the $90,000 framing subcontract used across this site: how the sub is selected, what the subcontract has to say, how the sub is scheduled against the other trades, how the sub is paid against their schedule of values, and what close-out requires before the retainage is released. The subcontractor management software guide on this site is the tool side; this page is what the tool has to serve.
Selecting: the questions before the price
A sub is selected on price last. Before it: are they licensed where the state requires it, are they insured at the limits the owner's contract requires, can they be on site when the schedule needs them, and have they done this scope at this size. The IRS's guidance on independent contractor status, linked below, is the reminder that a sub who works only for you, on your hours, with your tools, may not be a sub in the eyes of the tax authority, and the relationship should be set up as one from the start. The record from this step is the sub's qualification file: license, certificate, references, W-9.
Contracting: the subcontract and the schedule of values
The subcontract states the scope by reference to the drawings, the sum, the schedule of values the sub will bill against, the retainage share, the payment terms including when the GC pays after the owner pays, the insurance to be maintained, the change order procedure, and the close-out documents required for final payment. On the worked sub the sum is $90,000 across four lines. A subcontract without a schedule of values is a subcontract whose draws cannot be checked, and the SBA's page on prime and subcontracting, linked below, is a plain account of what flows down from the prime contract to the sub's.
Scheduling and paying: the trades in order and the draw each month
The sub is scheduled against the trades before and after: framing follows the foundation and precedes the roof, the rough-ins and the drywall, and a sub who starts before the foundation is inspected or after the roofer has left costs everyone a week. Each period the sub submits a draw by share complete per line, the GC checks it against the work and the schedule of values, holds the retainage, collects the lien waiver, and carries the sub's line onto the owner's pay application. On the worked sub at 57.5 complete the period's draw is $14,175 with a tenth held. Paying the sub within the days the subcontract allows after the owner pays is part of management, not a favor.
Closing out: what releases the retainage
Close-out is the step most often skipped. The sub's final draw and the release of retainage wait on the close-out documents the subcontract named: the final unconditional lien waiver, the warranty, the as-built or product data where the scope requires it, and any inspection sign-off the trade carries. The GC's record for the sub is complete when those are in and the retainage is paid, and the subcontractor management software guide on this site says what a tool has to hold to make that a checklist rather than a memory. DrawScheduleWorks Pro keeps the five steps' documents against the sub and bills the GC's draw from the sub's lines.
Questions people ask about subcontractor management
What are the steps of subcontractor management?
Select on qualification before price; contract with a scope, a sum, a schedule of values, retainage and payment terms; schedule the sub against the trades before and after; pay each draw against the schedule of values with retainage held and a waiver collected; close out on the named documents and release the retainage.
What should a subcontract contain?
Scope by reference to the drawings, the sum, the schedule of values, the retainage share, payment terms including pay-when-paid days, insurance to maintain, the change order procedure, and the close-out documents required for final payment.
When is a sub's retainage released?
When the subcontract's close-out documents are in: the final unconditional waiver, the warranty, any as-builts or product data, and any inspection the trade carries. Retainage released before close-out is leverage given away.