In construction, an owner hires a contractor to complete a building project, and that contractor may hire subcontractors to perform specific jobs as part of the overall project. While there are many similarities between contractors and subcontractors, they serve different functions as part of a project. So if you’re looking to understand the difference between contractors vs. subcontractors, keep reading for everything you need to know.
What is a contractor?
In construction, a contractor is an individual or company hired by the homeowner or property owner directly to complete a project. This person or party is often called the general contractor (GC), prime contractor, or original contractor, but most construction contracts simply refer to the “contractor.”
On smaller scale projects, a contractor may complete all of the work on a project by themselves or with a small crew. On most construction projects, however, the general contractor will hire subcontractors who perform specialized tasks in service of the larger project.
What is a subcontractor?
A subcontractor is anyone who provides labor or services on a construction project and was hired by someone other than the owner. Subcontractors perform a portion of the work that contributes to the overall project—for example HVAC, windows, or painting. As a result, subcontractors often help reduce project risks because they bring expertise that the general contractor may not have.
On a construction project, some common subcontractors include roofers, plumbers, and electricians. Whether these subcontractors are sole proprietorships or larger companies, they will sign a subcontractor agreement with the general contractor. This agreement will lay out the exact scope of work that the subcontractor is expected to perform.
Learn more: What are the types of subcontractors in construction?
Contractors and subcontractors: Similarities & differences
Contractors and subcontractors work together to complete a project, but they ultimately have different roles and responsibilities.
Because general contractors have a direct relationship with the property owner, they often act as a go-between for questions and clarifications that subcontractors have as they work on a building.
For example, subcontractors may write a request for information (RFI) that general contractors pass along to the design team, or general contractors may get change orders approved as subcontractors encounter situations on the job site.
| Contractor | Subcontractor | |
|---|---|---|
| Definition | Hired by a property owner to complete a construction or building project | Hired by a contractor (also known as a general contractor) to perform specialized construction work on a project |
| Roles and responsibilities | Hire and manage subcontractors, ensure that construction progresses on time, and act as a go-between for subcontractors and the property owner | Complete construction work according to scope and specifications, request additional information as needed, and suggest changes based on job site findings |
| Relationship to owner | Works directly with the owner according to details in the “prime contract” | Signs a subcontractor agreement with the general contractor, so does not have a direct connection to the owner |
| Licensing | Generally require a proper contracting license to perform work | Generally require a proper contracting license to perform work |
| Insurance | Responsible for liability insurance and worker’s compensation, with other insurance like errors and omissions also recommended | Responsible for liability insurance and worker’s compensation, with other insurance like errors and omissions also recommended |
| Bonds | Often need to provide a surety bond for their contract | Generally do not require their own surety bond (as their work is covered by the contractor’s bond) |
| Payment | Generally first to receive payment from the property owner, and is responsible for making payments to subcontractors and suppliers | Receive payments from their hiring party, may need to pay material suppliers or sub-subcontractors |
| Mechanics liens | Generally have the right to file a mechanics lien if they go unpaid, and they also collect lien waivers from subcontractors and suppliers | Generally have the right to file a mechanics lien if they go unpaid, and typically sign lien waivers in exchange for payment |
Contractors and subcontractors both aim to complete a construction project successfully, but their roles, responsibilities, and requirements vary greatly. In the end, this can especially effect how each of these parties gets paid when a project finishes.
How contractors and subcontractors get paid
Each party on a construction project is not only interconnected through the work done on the project jobsite, but also through the financial aspects of the project. Everyone, from the lender and GC to the sub-sub’s suppliers, is intertwined in an intricate flow of payment and security rights. We call this the “payment chain.”
A prime or general contractor is typically its own separate entity, and the contractor is a business that must look out for its own interests.
Then you’ll have all of the subcontractors, and they are also their own separate entities who are, first and foremost, looking out for their own interests.
This continues down the line of the payment chain to the sub-subcontractors, suppliers, laborers, and so on.
Learn more: The payment chain explained
Do you need a contractor or a subcontractor?
If you’re a large client working on a large construction project, you’d hire a contractor for the job — and on a typical construction project, that contractor will hire subcontractors to help perform specialty construction work and complete the project.
However, things can be a little different on a smaller scale, such as a residential construction job. This is where independent contractors come into play. An independent contractor is a type of subcontractor who works directly with a client (but of course, not all subcontractors are independent contractors).
For example, a homeowner might hire an independent contractor to do plumbing work in their bathroom. This independent contractor is a subcontractor who specializes in plumbing. In that case, the subcontractor is an independent contractor working directly for the client.
A general contractor might hire the same plumber subcontractor to work on a large project, like constructing an apartment building — which also involves other subcontractors with different expertise.
Check out: Guide to hiring and paying subcontractors
Tools to help contractors & subcontractors get paid
With the risk of nonpayment also comes some tools that can help keep that risk at bay. We’re talking about mechanics liens, bond claims, prompt payment rules, and last but not least, retainage laws. We could talk about any one of these topics for days (and at times, we probably have). Instead, here are some articles discussing each tool.
- Ultimate Guide to Getting Paid in Construction
- How to File a Lien – Overview for Any State
- The Basics Of The Payment Bond Claim Process
- How To Make A Claim Under Prompt Payment Laws
No one on the payment chain is helpless. If payment hasn’t been made, chances are the unpaid party can take some action to enforce payment. Keeping a project free and clear of payment disputes should be the top priority for everyone on the project.
