Weighing the risk

It's no secret the construction industry is struggling to find enough workers to keep up with demand. In 2018, 91 percent of more than 2,700 contractors, construction managers, builders and trade contractors surveyed for the Commercial Construction Index reported having a difficult or moderately difficult time finding skilled workers. As a result, construction professionals, including roofing contractors, increasingly are turning to subcontractors to fill their labor gaps. The most recent Bureau of Labor Statistics data indicate in 2012 subcontractor labor accounted for 44.2 percent of total labor hours in single-family construction, 74.5 percent in multifamily construction and 84.9 percent in industrial construction.

There are residential and commercial roofing contractors who tout the advantages of using subcontractors to complete projects and those who caution their use. Subcontractors can help you keep up with demand and take on projects outside your crews' skill sets, but they also may complete work that doesn't meet your company's quality standards—only you can decide whether the use of subcontractors is a risk worth taking to enhance your business.

Professional Roofing spoke to several roofing contractors to identify some of the advantages and disadvantages of hiring subcontractors.

Revenue

King of Texas Roofing Co. LP, Grand Prairie, had no need to use subcontractors until a workforce shortage in its area occurred.

"For the first 34 of our 36 years in business, we never used subcontractors," says Kelly Braddy Van Winkle, vice president—contracts for King of Texas Roofing. "However, during the past two years, we have had to work with subcontractors from time to time because of the labor shortage in our area."

One advantage to hiring subcontractors is that though subcontractors may be paid more for their work than your employees, you may find it's less expensive to pay subcontractors than to hire new employees. Subcontractors do not require an investment of time and resources to be properly trained nor do you have to account for company-provided benefits and equipment. In addition, subcontractors can be hired on a project-by-project basis and can be productive immediately.

"An advantage of subcontracting work is we have been able to align our company with some experienced roof system installers," says Suzie Boyd, vice president of Academy Roofing, Aurora, Colo. "Many have resigned from companies where they were employed for years, so they come to us with a lot of roofing knowledge. And, of course, profit margins are better on jobs where we use subcontractors. The many costs that come with hiring employees are eliminated, which allows us to perform better financially."

In addition, the use of subcontractors can allow you to accept projects that include elements beyond the skill sets of your crews. It's a strategic use of your time and energy to hire professionals for tasks your crews may not be as well-equipped to handle. Conversely, you could choose to assign subcontracted crews to work on a number of smaller, straightforward installations while assigning trusted employees to a larger project.

Quality control

When using subcontractors to complete projects, it's necessary to vigilantly evaluate their quality of work. Because your company is the one directly communicating with customers, it is your reputation—not the subcontractor's—that can be damaged by shoddy work. Correcting work that should have been done right the first time forces you to devote the necessary time and expense to resolve the situation.

Academy Roofing has found some subcontractors also don't adhere to the high safety standards to which the company holds its own crews.

"Safety is an afterthought for many subcontractor crews," Boyd says. "Getting the roof done and getting paid is what really drives the individuals on the roof, and following safety regulations just gets in the way of maximizing their pay."

Communication is a necessary component of any project involving a subcontractor. You should begin communicating with the subcontractor before a project starts and establish a clear chain of command to help ensure everyone knows how to relay information or communicate a problem. By communicating early and often with subcontractors, expectations are established without having to micromanage a subcontractor's workers.

Company culture

Although a subcontracted crew may work alongside your crew, the subcontracted team is not part of your company. This means the subcontracted crew could operate under a different company culture, which may affect a crew's work ethic and professionalism.

In addition, a customer can feel wary when he or she is told a subcontractor will complete his or her roofing project. After all, the customer likely decided to hire the roofing contracting company he or she selected based on the company's positive reviews and reputation for quality work. Some roofing contracting companies may choose not to hire subcontractors because they don't want to risk damaging customer relationships.

"Since we started the business 45 years ago, we have strived to maintain relationships with our customers," says Timothy Blue, president of Blue's Roofing Co., Milpitas, Calif. "In 2018, 94 percent of our sales were to repeat customers, and we have maintained many of our customers for decades. We don't believe that would be achievable if the customers saw different subcontractors on each project."

However, if you work to build a strong relationship with each of your subcontractors, you will be able to vouch for the subcontracted crews when speaking with concerned customers. Developing trust in a subcontractor takes time, so you must decide whether to commit to the process. If you plan to use a subcontractor multiple times per year, the benefits of developing a strong relationship with the subcontractor are worth the investment of time.

Getting started

If you decide your company can benefit from using subcontractors for some projects, it's important to develop a process you can implement to find and hire good subcontractors.

Some subcontractors may seek out your company while looking for work in your area. There's also a possibility one or more of your former employees could start their own subcontracting company and come to you asking for an opportunity to work together. Other times, roofing contractors search for subcontractors by perusing social media for local companies with positive reviews or speaking to general contractors who may be able to make recommendations.

The process of hiring subcontractors will be unique to fit your company's needs and interests, but it's a good idea to incorporate basic protections, such as a subcontract agreement and policy discussions.

"We look for experienced installers, a commitment to safety, an owner who has some business acumen and a company with at least a reasonable insurance situation," Boyd says. "We have an application process, a subcontract agreement, an orientation session, policies and procedures for invoicing, and constantly monitor the quality of work that is performed and the safety of the installers on the roof."

Risk vs. reward

The roofing industry is experiencing a busy period with roofing work widely available in many areas. Hiring subcontractors to keep up with demand during the labor shortage may be the right fit for your roofing contracting company, but it's important to first determine whether the rewards outweigh the risks.

Sara Baldwin is Professional Roofing's editorial assistant.

Insurance considerations

When hiring a subcontractor, you must do everything you can to ensure the subcontractor has adequate insurance. The following steps can protect your company:

1. Ensure you have a written contract requiring the subcontractor to maintain workers' compensation, property and standard commercial general liability and policies with limits appropriate to the work as witnessed via a certificate of insurance issued by the subcontractor's insurance agent or broker. Have your agent or broker verify the certificate of insurance.
2. Add language to the contract stating the subcontractor's CGL policy is not to contain endorsements or exclusions that limit or eliminate coverage for torch applications, hot-applied roofing, open roofs, action over claims, breach of contract suits and residential buildings (if applicable).
3. Obtain a complete copy of the subcontractor's CGL policy and have your insurance adviser, risk manager or other qualified professional review it for nonstandard provisions and endorsements.

By following these steps and paying attention to details, you likely won't find yourself in a position with insufficient coverage.

Additional information is available in "Look out!" January 2019 issue.