A recent article by Bill Motherway, president of the New York Operations of insurance firm Conner Strong & Buckelew, noted that while subcontracting construction projects may have certain benefits, companies must carefully evaluate these service providers to cover their exposure.
Motherway recommended that companies do not measure the viability of partnering with a subcontractor by cost alone.
Citing Occupational Safety and Health Administration figures, he said that on any given day, 6.5 million people work in 252,000 construction sites across the US. Furthermore, he said that fatalities in the construction industry are higher than the national average across all other industries.
Thus, he noted that subcontractor labour is primarily exposed to safety hazards, compliance issues, as well as personnel and business liabilities.
With litigations becoming more common in the construction industry, contractor credibility, compliance and safety data have become key exposure measurements, but safety programmes and relative workers’ compensation history should also standard requirements.
Furthermore, Motherway noted that workers’ comp is a costly line of insurance for subcontractors, as more claims result in higher insurance rates. Thus, the insurance for general contractors and construction managers have gotten so high as to become non-competitive.
Some indirect costs also include: third party liability, workers’ pain, legal fees, OSHA fines, wages not covered, administrative fees, and hiring and training of replacement employees.
He added that potential subcontractors should be evaluated based on their impact to the company’s reputation, especially during untoward events, as construction accidents are magnets for media attention.
