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What is a Subcontractor?

A subcontractor could be explained as a dissimilar type of contractor. More logically, a subcontractor is an individual that contracts with the main contractor to complete work on a construction project. A subcontractor is an element of a bigger project & usually offers additional dedicated services to the customers than the contractor. We can say that subcontractors work for the contractor. Subcontractors’ specialization permits them to take part in dissimilar construction projects at the similar time. Once subcontractors have fulfilled their job, they can continue to another project.

On the other hand, to differentiate a subcontractor from a materials supplier is not always effortless. That difference is vital with regards to claims that lower-level subcontractors or materials providers might have on installment bonds, for example, those given by prime contractors on federal and state public works projects.

Here, it's really important to keep in mind that lower-tier subcontractor or materials supplier might not be qualified from a payment bond in case its agreement is with a materials provider rather than a subcontractor. Thus, to recognize the jobs of any parties you may be contracting with you ought to always take time at the beginning of a project.

In the context of federal public-works projects, this distinction is really significant. For these projects, the Miller Act confines applicants on payment bonds to parties that have an agreement with a main contractor or parties that have an agreement with a subcontractor and give notice of that agreement to the main contractual worker. If a specific gathering is a subcontractor or materials provider, courts take a gander at the "complete relationship" between parties to choose. Courts have connected a balancing test to do this that looks for certain tell-tale signs. A portion of these is viewed as characteristic of a subcontractor relationship and a portion of a materials-provider relationship.

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Let’s have a look at the signs of a subcontractor relationship:

  • A supplied product is specially created

  • A close financial relationship with the major contractor

  • A supplied product is a multifaceted integrated system

  • An enduring relationship with the main contractor as evidenced by the necessity of shop-drawing approval by the main contractor or a necessity that a supplier’s spokesperson be on the job site

  • The term “subcontractor” is utilized in the project agreement

  • The supplier’s contract constitutes a substantial portion of the main contract

  • A contract for labor as well as materials

  • Any materials supplied don’t come from accessible inventory

  • The materials supplier is necessary to post a performance bond

  • The supplier is essential to supply all the material of a specific type used on the project

  • There is a system of balanced or progressive fee payment

  • There is a back-charge for any cost of correcting the materials supplier’s mistakes

Alternatively, the indications of a materials-supplier relationship are:

  • A purchase order form that’s utilized by the parties

  • Supplied materials come from obtainable inventory

  • An item supplied is comparatively easy in nature

  • The agreement with the main contractor accounts for a small percentage of the total construction cost

  • In the contract price, sales tax is included

As this outlines, choosing whether a party is a materials supplier or subcontractor for the purposes of a claim on a Miller Act payment bond is by no means simple.

However, since recognizing subcontractors and materials suppliers can directly affect which organizations approach payment bonds, these sorts of judgments ought to be made, to the extent possible, at the beginning of projects. In case recovery from a payment bond is barred or seems doubtful, a prudent contractor will take additional steps to safe payment.

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