What to Check Before You Sub for Another Company

Why this matters

Before you sub for a general contractor or another shop, you are about to extend them credit: your labor and materials now, their payment later. Most subs vet the contract and skip vetting the company, and the company is where the loss usually comes from. A one-sided contract you can negotiate. A GC who does not pay their subs, or a project that runs out of money, you cannot fix after you have committed a crew. This card is the diligence to run on the company and the project before you sign, so you find the deal-breakers while you can still say no.

Check the company's payment reputation first

A contract promises payment. A track record predicts it. The most useful vetting you can do costs a few phone calls.

• Ask other subs who have worked for them. Trades talk. A GC with a name for slow-paying, short-paying, or nuisance backcharges will have left a trail. This one conversation is worth more than reading the whole contract.
• Check how long they have been in business and whether they have a stable operation, not a name that changes every couple of years.
• Look for the pattern, not the one story. Everyone has a disgruntled ex-sub. A chorus of them is the signal.

If you cannot learn anything about how they pay, treat that as its own warning and protect yourself with terms and preserved rights, or pass.

Vet the project, not just the payer

Even an honest GC cannot pay you from a job that ran out of money.

• Is the project funded? A GC on a shaky development is a payment risk even if they want to pay you. Where you can, get a sense of whether the owner and the financing are real.
• Private or public? This decides how you protect yourself if payment stalls. On private property you may be able to file a mechanics lien; on a public job you generally cannot lien and instead pursue a payment bond. Know which world you are in before you start, because you preserve different rights.
• Is the schedule realistic? A job set up to fail on time will generate delay costs and disputes that land partly on you.

Confirm what they will require of you

Subbing usually comes with obligations you have to meet to get paid at all.

• Insurance they demand. Most GCs require you to carry general liability and workers comp at set limits, and to name them as an additional insured. Confirm you can meet it and what it costs before you agree, not after.
• Lien waivers and pay-app paperwork. Many GCs condition each payment on notarized affidavits, updated certificates, or waivers from your own suppliers. Know the exact package so a missing form does not park your invoice.
• Bonding. On larger jobs you may be asked to bond your subcontract. Know whether you can, and price it in.

Read the deal terms, and hand the clauses to a closer read

Get the business terms straight up front.

• Payment terms and timing: when you are paid and on what condition. Watch for pay-when-paid versus pay-if-paid.
• Retention: how much is held back and when it releases, ideally at your scope completion, not the whole project's.
• Scope and change orders: clear scope, and a defined process for extras.

The clause-level traps in a commercial subcontract, indemnity, flow-down, no-damage-for-delay, and the rest, deserve their own careful review. Do not skim them. See related: The Red Flags in a Commercial Contract a Sub Should Catch.

Confirm it is really a sub relationship

Make sure you are being hired as an independent sub, not as cheap labor they can direct.

• You deliver a scoped result, set your own methods, use your own crew and tools, and invoice for the work.
• If they intend to control your hours and methods and pay you by the hour like a crew member, that arrangement risks a worker-misclassification problem for both sides, and it strips you of the independence that makes subbing worth it.

Weigh it against your own book

Diligence is not only about them. It is about whether the deal fits you.

• Can your cash carry the payment wait without threatening payroll? If not, take a small piece first.
• What is the opportunity cost? Subbing at a lower margin while turning away your own full-margin direct work is a poor trade unless the relationship leads somewhere.
• Do not let one payer become your whole book. Concentration is its own risk; if a single GC is most of your receivables, their slow month is your crisis.

The discipline to bank

The contract is the last thing to check, not the first. Vet the company's payment reputation, confirm the project is funded and know your lien or bond position, meet the insurance and paperwork demands with eyes open, and make sure it is genuine sub work that fits your cash and does not crowd out your own jobs. Run that before you sign, and the contract review is a formality instead of a rescue.

References

• American Subcontractors Association (ASA): subcontractor risk-management and payment guidance
• State mechanics-lien and payment-bond statutes (vary by jurisdiction)
• IRS guidance on independent-contractor versus employee classification
• See related: The Red Flags in a Commercial Contract a Sub Should Catch; You're Asked to Be Someone Else's Subcontractor: Decision Tree