Selecting the right subcontractors is critical to project success. While price matters, the lowest bid isn't always the best value. Proper evaluation requires systematic assessment of scope coverage, qualifications, and risk factors.
This guide provides a comprehensive framework for evaluating subcontractor bids and making sound selection decisions.
The Importance of Thorough Evaluation
Subcontractor selection impacts every aspect of project delivery.
Consequences of Poor Selection
Choosing the wrong subcontractor can lead to:
- Schedule delays from performance issues
- Quality problems requiring rework
- Financial disputes and claims
- Safety incidents
- Project losses despite competitive pricing
- Damaged owner relationships
Value of Proper Evaluation
Investing time in evaluation delivers:
- Reliable project execution
- Consistent quality
- Fewer surprises and disputes
- Better relationships
- Predictable outcomes
- Repeat successful partnerships
Scope Evaluation
Start by ensuring bids cover the required scope.
Scope Comparison Process
Systematically compare scope coverage:
Step 1: Define Complete Scope
- List all work items for the trade
- Reference specifications and drawings
- Include coordination requirements
- Note interface points with other trades
Step 2: Map Bid Coverage
- Review each bid for inclusions
- Identify stated exclusions
- Note unstated items
- Highlight discrepancies
Step 3: Create Comparison Matrix
| Scope Item | Sub A | Sub B | Sub C | |-----------|-------|-------|-------| | Item 1 | Included | Included | Excluded | | Item 2 | Included | Per allowance | Included | | Item 3 | Excluded | Included | Included | | Item 4 | Included | Excluded | Included |
Common Scope Issues
Watch for these problems:
Missing Scope
- Items not addressed in bid
- Assumed to be included but not stated
- May be priced later as extra
Partial Coverage
- Labor only, no materials
- Materials only, no installation
- Per allowance items
- Unit price items requiring quantities
Exclusions
- Stated exclusions requiring coverage elsewhere
- Hidden exclusions in fine print
- Standard exclusions that may apply
Assumptions
- Conditions affecting pricing
- Access or scheduling assumptions
- Other trade completion assumptions
Scope Normalization
Adjust bids to enable comparison:
- Add cost for missing scope
- Adjust for allowance differences
- Include exclusion coverage
- Standardize unit price extensions
Price Analysis
Evaluate pricing beyond the bottom line.
Price Components
Break down pricing to understand:
Labor Costs
- Crew composition and sizes
- Productivity assumptions
- Overtime provisions
- Wage rates used
Material Costs
- Specified products quoted
- Substitutions proposed
- Delivery and handling
- Waste factors
Equipment Costs
- Required equipment
- Rental vs. owned
- Duration assumptions
Overhead and Profit
- Markup percentage
- Reasonableness of margin
- Competitive positioning
Price Reasonableness
Assess if pricing makes sense:
- Compare to historical costs
- Evaluate against estimating databases
- Consider market conditions
- Assess capacity and demand factors
Red Flags in Pricing
Watch for warning signs:
Significantly Low Price
- Missing scope likely
- May indicate desperation
- Quality concerns possible
- Financial trouble potential
Significantly High Price
- May not want the work
- Possible scope misunderstanding
- Capacity constraints
- High risk perception
Qualification Assessment
Evaluate subcontractor capabilities beyond price.
Experience Evaluation
Assess relevant experience:
Project Experience
- Similar project types completed
- Comparable scope and complexity
- Geographic experience
- Owner/market segment experience
Reference Verification
- Contact references directly
- Ask specific questions
- Verify claimed experience
- Inquire about challenges
Financial Assessment
Evaluate financial capability:
Financial Indicators
- Current financial statements
- Payment history with suppliers
- Bonding capacity
- Line of credit availability
Red Flags
- Slow supplier payments
- Mechanic's lien history
- Recent lawsuits
- Workforce payment issues
Workforce Capability
Assess available resources:
- Key personnel qualifications
- Workforce capacity
- Skilled labor availability
- Training and certifications
Safety Performance
Evaluate safety record:
- Experience Modification Rate (EMR)
- OSHA recordable rates
- Recent incident history
- Safety program quality
Risk Assessment
Identify and evaluate potential risks.
Performance Risk
Likelihood of performance issues:
- Past performance problems
- Current workload capacity
- Management capability
- Quality track record
Financial Risk
Potential for financial issues:
- Company stability
- Contract-to-capacity ratio
- Payment dispute history
- Bonding limitations
Schedule Risk
Ability to meet schedule:
- Current commitments
- Workforce availability
- Track record for schedule
- Recovery capability
Relationship Risk
Working relationship factors:
- Communication quality
- Problem-solving approach
- Dispute history
- Responsiveness
Evaluation Framework
Apply a systematic scoring approach.
Weighted Scoring Model
Create evaluation criteria with weights:
| Factor | Weight | Scoring Criteria | |--------|--------|-----------------| | Price (normalized) | 30-40% | Lower is better | | Scope coverage | 15-20% | Complete coverage preferred | | Experience | 15-20% | Relevant experience | | Safety | 10-15% | EMR and program quality | | Financial stability | 10-15% | Demonstrated capability | | Relationship factors | 5-10% | Past experience, communication |
Scoring Methodology
Apply consistent scoring:
5 - Excellent: Exceeds requirements, strongest qualification 4 - Good: Fully meets requirements, strong qualification 3 - Acceptable: Meets minimum requirements 2 - Marginal: Some concerns, risk factors present 1 - Poor: Significant concerns, high risk
Overall Evaluation
Calculate weighted scores:
- Multiply each score by weight
- Sum weighted scores
- Rank subcontractors by total
- Use ranking to guide decisions
Interview and Clarification
Gather additional information before deciding.
Bid Clarification Questions
Address unclear items:
- Scope questions
- Pricing assumptions
- Schedule capability
- Resource availability
Subcontractor Interviews
For significant trades, conduct interviews:
- Meet key personnel
- Discuss project approach
- Understand management philosophy
- Assess communication style
Reference Checks
Verify claimed qualifications:
- Contact provided references
- Ask probing questions
- Verify specific claims
- Request additional references if needed
Making the Selection Decision
Use evaluation results to decide.
Decision Factors
Balance all considerations:
- Total weighted evaluation score
- Absolute price competitiveness
- Risk tolerance for this project
- Strategic relationship considerations
- Capacity for this specific project
Selection Documentation
Document your decision process:
- Bid tabulation and leveling
- Evaluation scoring
- Interview notes
- Reference check results
- Rationale for selection
Notification
Communicate decisions appropriately:
- Notify selected subcontractor
- Provide timeline for subcontract
- Inform unsuccessful bidders
- Maintain relationships for future
Common Evaluation Mistakes
Avoid these typical errors.
Focusing Only on Price
Problem: Selecting lowest price regardless of qualifications.
Impact: Performance issues, quality problems, schedule delays.
Solution: Use balanced evaluation considering all factors.
Ignoring Scope Differences
Problem: Comparing bids without scope normalization.
Impact: Selecting bids with hidden scope gaps.
Solution: Thorough scope leveling before comparison.
Skipping Reference Checks
Problem: Assuming qualifications without verification.
Impact: Discovering problems during project execution.
Solution: Always verify key qualifications through references.
Last-Minute Decisions
Problem: Rushing evaluation on bid day.
Impact: Poor decisions, missed issues.
Solution: Start evaluation early, don't wait for final bids.
Frequently Asked Questions
How many subcontractor bids should I get?
Target 3-5 bids per trade for meaningful competition. Fewer than 3 limits comparison; more than 5 adds evaluation burden with diminishing returns.
Should I share competing bids with subcontractors?
No. Sharing bid amounts or shopping bids damages relationships, reduces future competition, and may be unethical. Evaluate bids confidentially.
What if the best qualified sub is significantly higher priced?
Weigh the value of reliability and quality against price difference. Calculate cost of potential problems with lower-priced alternatives. Sometimes paying more delivers better overall value.
How do I handle a sub I've had problems with before?
Document past issues, score accordingly in evaluation, and weigh heavily in decision. Consider whether problems were one-time or systemic. Be willing to reject based on performance history.
When should I request financial statements from subcontractors?
For significant subcontracts, request financial information as part of prequalification or evaluation. The threshold varies, but subcontracts over 10% of project value typically warrant financial review.
Conclusion
Thorough subcontractor bid evaluation is essential for successful project delivery. By systematically assessing scope coverage, pricing, qualifications, and risk factors, general contractors can select subcontractors who will contribute to project success rather than create problems.
Invest appropriate time in evaluation based on subcontract significance. Build strong evaluation processes and apply them consistently to improve selection decisions over time.
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