Things to Remember when Finalizing a Subcontracting Agreement

Posted by Administrator on January 29th, 2008

Participating in a subcontracting job can be a positive work experience, building up your resume as well as new industry contacts. It can also be a nightmarish mess of roadblocks, misunderstandings, and disputes. A big part of what can make or break your subcontracting experience is put in place before the work even begins: in the subcontracting agreement.

In a subcontracting agreement, attention to detail is key. Any area that is left vague, any agreement that is not in writing, is open for misunderstanding and bad feelings between the prime and the subcontractor. Since most prime contractors return to subcontractors they trust again and again, it’s important to keep this working relationship as friendly as possible. Once you receive the subcontracting agreement, be sure to look it over and go back to the prime contractor with any areas you feel are unclear and any concerns you have. Better to err on the side of caution beforehand than sort out a contracting dispute once the contract has started. Here are some areas to watch out for:

Double-Check your Subcontracting Agreement

Compensation: When will you be paid? When the prime is paid for the contract, or when the subcontracting work is done? Will you be paid hourly, or a flat fee? How will expenses be covered?
Hours: How long will everything take? What provisions are there for going over that time? If you are being paid on an hourly basis, what is the maximum amount of hours the prime is willing to pay you for, and how will that affect the project?
Deadlines: Are all deadlines final? Does the prime contractor want to review your work before the deadline? If so, make sure that concrete benchmark dates are set throughout the project timeline, and set up review appointments as far in advance as possible. If the prime doesn’t review your work until the night before it is due, there will not be enough time to make necessary changes.
Legalese: Be absolutely clear on the terms of any and all noncompete and nondisclosure agreements. It is really the prime’s responsibility to draft these, but have a lawyer look them over, too, and clear up any vague points before signing.
Communication with the agency: Some prime contractors will not want you to have any direct contact with agency personnel at all, while others will make provisions for you to receive necessary specifications, etc. from the agency. When is it OK to contact the agency? (Note: in instances of legal/ethical misbehavior, it may be permissible to notify the agency regardless of the subcontractor agreement).
Intellectual property: Does any intellectual property resulting from the project belong to you? The prime? The agency?
Default: What happens if you default on the subcontract? What happens to you if the prime defaults on its contract with the agency?
Liability/indemnity: Just as the prime’s contract with the government will have provisions for liability and indemnification should things go wrong, the subcontracting agreement will most likely also have those clauses. Make sure you are familiar with your liability risk under the agreement.