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Question DetailsAsked on 5/8/2016

why do large home improvement companies use subcontractors

I've had these large remodelers say they use their own employees when, in fact, they use mostly subcontractors. Why can't they just be honest about that?

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I don't think I have EVER run into a non-specialty home improvement who uses all his own forces, assuming you talking someone beyond a Handyman - and you did say "large" home improvement companies. Certainly specialty companies doing basically just one thing (gutters, roofing, foundation repair, painters etc) commonly do all the work with their one personnel, but very rarely ones doing work in several different trades.


Occasionally (quite rarely) homebuilders will use mostly their own forces, but remodelers and typical home improvement trades tend to be very much in a feast and famine business seasonally, sothey cannot afford to retain the staff during the lean season to do all the types of work - plus that means they have to have all the contractor licenses and certifications for their employees - can get QUITE expensive. Also, by using subs, he can be working several jobs at one time, using the subs available at that time, without having so much of the issue of jobs "bunching up" so he needs to have people working the same trade at different jobs at the same time.


Plus, if doing all the trades your insurance and worker's comp can get REALLY out of hand - for instance, if you do painting you might pay say 5-10% worker's comp premium on salary - but if your people do roofing that might jump to 25-50% or more - and many insurance companies rate based on the most hazardous occupation for small companies, applied to gross receipts - so a portion of the job that might be say 5-10% of your revenue might result in a 5-10 fold increase in your overhead cost. Extreme case, but can happen.


I remember one project I worked on, granted a fairly dangerous deep underground job which had already had a fatality and another near fatality on the jobsite, where we got a worker's comp rider for that specific job and it had a worker's comp premium of 300% of the wages - that's right - 3 times the actually labor wages/salaries, for the entire job. This is the sort of thing that leads to $100-250/hr and even higher billing rates.


As for being honest about it - they know homeowners want the convenience of one-stop service and none of the risk of dealing with unknown subs and having to worry about getting lien releases not only from the General Contractor and his suppliers but also from subs and their suppliers, so they say what the public wants to hear. If using his own forces is important to you, or you want the right to vet and approve his subs, that needs to be part of the contract.


That is another reason, out of dozens, why your contractor selection should be based FIRST on reputation and honesty of the potential bidders, then only getting bids from those who check out as long-term, reputable, honest contractors who do good work, finish it in a timely manner, and stand by their work product.

Answered 2 years ago by LCD




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