Risks to identify when subcontracting trade work

Risks to identify when subcontracting trade work blog

Field service projects can’t always be done by a single general contractor. Oftentimes, Australian companies rely on subcontractors’ specialised expertise and skilled workforce to meet project goals. However, there are many risks to identify when subcontracting trade work, such as legal disputes, inconsistent performance, and safety issues. To ensure that these problems don’t sneak up on your businesses, proactive risk identification and management are vital. 

What is risk identification?

Risk identification is the process of pinpointing all the potential issues that could disrupt your projects, operations, and workforce. Any identified risks are then recorded in a risk register so managers can track and prioritise their risk management efforts. This process should be done as early as possible, preferably before commencing a project so you can minimise the likelihood of issues before they occur. Keep in mind that new risks emerge over time, which is why risk identification should be an ongoing process. 

How do you identify subcontracting risks?

When identifying risks, you need the input, expertise, and knowledge of your team. Conduct a brainstorming session with all project stakeholders and list the risks associated with subcontracting work. The objective of these sessions isn’t to find solutions to mitigating risks right away, but to discuss the different scenarios that could impede your project goals. It’s also a good idea to review projects you’ve completed in the past to understand what risks you’ll likely face in similar projects. 

When subcontracting trade work, the most common sources of risks include:

  •  Project risks – Problems that often derail your projects, such as delays, scheduling and team conflicts, labour shortages, and slow productivity. 
  • Safety risks – Injuries and health issues that come with the occupation like overexertion, slips and falls, collisions, breathing problems, and electric shocks, among others.
  • Financial risks Events that affect your cash flow, such as equipment damage and cost overruns. 
  • Contractual risks Potential legal disputes with clients triggered by subcontractor’s failure to meet deliverables, deadlines, safety standards, or other contract breaches. 

After identifying and registering the risks, evaluate the probability of each risk occurring and the potential impact they will have. You could use a scale of 1–10 to score the probability and impact of each risk. This system helps you prioritise which risks to address first. For example, if subcontractors work at heights, the increased risk of fatal falls will undoubtedly be top of your priority list. Then, when you’re done ranking each risk, determine whether you can eliminate, minimise, or accept the risk.

How can your company manage its risk exposure?

There are several effective strategies to minimise your risk exposure to subcontracting trade work, including: 

Prequalify your subcontractors

Prequalification determines whether subcontractors have the capability to fulfil their end of a service contract. This involves asking subcontractors for details about their financial standing, number of employees, past projects, industry certifications, workers’ compensation insurance, and litigation history. You’ll also want to ask potential subcontractors for professional references and customer testimonials, which can attest to their quality and dependability. All this information helps you find the most reliable and qualified subcontractors for the job. 

Establish contract terms and conditions

Many subcontractor risks often stem from ambiguous instructions and accountability measures from the general contractor. After all, project issues are bound to occur when subcontractors are unclear on timelines, deliverables, and safety standards. To mitigate this, consult an attorney about writing a contract agreement that clearly details the following: 

  • Project scope and timelines, down to the specific qualitative and quantitative measures of completion.
  • The subcontractors’ responsibilities and expected job performance.
  • Compensation and budget details for the job.
  • Legal consequences shouldered by subcontractors if losses resulted from their performance, such as equipment damage, worker injuries, and missed deliverables.
  • Limitations or permissions on whether subcontractors can subcontract work to other parties.

WorkBuddy’s subcontractor management portals are incredibly effective in disseminating these contract terms to your subs. These portals even let you monitor subcontractor performance in real-time, so you can measure compliance.  

Create a thorough project plan to streamline workflow

Job templates outline the specific milestones and procedures involved in a project, so subcontractors know what they’re supposed to do. For example, standardised project templates for renovation jobs may include a step-by-step process for sourcing materials, procuring the right equipment, inspecting job sites, and dispatching technicians. In fact, with tools like WorkBuddy, you can use premade project templates or customise your own for similar jobs you do regularly. 

You can even automate scheduling processes so that the right technician is assigned to the job based on qualifications, availability, and location. By having everything laid out before even commencing work, subcontractors can mobilise quickly, minimising the risk of project delays and productivity losses. 

Improve workplace safety 

Managing safety risks requires you to set stringent protocols for how subcontractors should approach each project task. With job forms and checklists in WorkBuddy, you can detail the exact procedures subcontractors must follow to meet contractual and safety obligations. For instance, checklists could include safe work method statement policies like bringing the right personal protective equipment, undergoing appropriate safety training, and so on. Job forms can also be used to guide subcontractors through site inspections and hazard mitigation processes. 

There are various risks related to subcontracting work, but the right tools can make risk identification and management a breeze. WorkBuddy provides a plethora of risk management tools you can take advantage of — intuitive project templates, job forms, and subcontractor portals. We’re also launching a new risk register feature that allows you to track risks and plan out your management strategies. Book a demo today to learn more about how WorkBuddy can help you reduce and address risks.

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