A subcontract is the agreement where a general contractor (GC) hands a slice of its scope to a trade partner: the electrician, the steel erector, the drywall crew. It defines scope, price, schedule, insurance, retainage, payment terms and how changes get priced. Most subcontracts “flow down” the prime contract terms, so the sub is bound to the owner’s requirements through the GC.
Why it matters
Most of the dollars on a commercial job run through subcontracts. Each one becomes a commitment in job cost, and every sub pay app, change order and lien waiver hangs off it. If the subcontract value in accounting is wrong, your cost-to-complete is wrong.
Worked example
On Riverside Medical Center (Job #24-118), Volt Electric holds the 26 Electrical subcontract. When CO #14 adds fire damper wiring, the GC issues a subcontract change order to Volt and the commitment goes up by Volt’s share. Volt’s next pay app bills against the revised value, minus 10% retainage, and the GC collects a conditional waiver before releasing payment.
Common mistakes
- Issuing owner change orders without matching subcontract change orders, so committed cost lags reality.
- Weak scope exclusions that turn into “that’s not in my contract” fights mid-job.
- Missing flow-down of owner terms like notice periods and liquidated damages.
How os.construction handles it
We’re building subcontracts as live commitments on the same record as budget, change orders and pay apps, so a sub change updates committed cost the moment it’s approved. We’re shaping this with founding contractors.