Using Subcontractors Successfully
There are lots of reasons why companies subcontract or outsource work to third parties - from simply helping your business through a busy time to accessing skills and expertise that you can't offer in-house.
But outsourcing can be a risky business if you don't take steps to protect yourself and your business.
These top tips will help you stay on the right track with your subcontractors and avoid potential issues as projects develop.
1.
Put a written contract in place Sounds obvious doesn't it? But so many businesses still operate on handshakes alone.
Don't do it! If something goes wrong, you have absolutely no protection and no fall back - and it could cost you dear.
And of course, don't think that 'any old template contract will do'.
It won't.
Your contract needs to be specific to the project in hand and protect both parties against any and all possible disputes that could arise.
2.
Clearly define the scope of work 'Project creep' is a common problem with outsourced work.
And if the exact scope of work isn't clearly defined in your contract, you're leaving yourself wide open to it.
Break the project down into specific tasks and, if you want to, assign a deadline for each one.
Don't forget to include details and timescales for your own obligations too, e.
g.
providing information or materials to the subcontractor, or reviewing or supervising their work.
Make sure the targets set for both parties are realistic and achievable - and remember that setting a deadline or a schedule doesn't mean you have no flexibility.
It's always open to the parties to a contract to make changes to it by agreement, but without some initial framework, you could be left waiting much longer than you hoped for your work to be completed.
3.
Control change and variations effectively Often, projects change and evolve during the development process, potentially putting them outside the original scope of work.
So make sure your contract defines a robust process for dealing with any changes that are needed.
For example, you could state an agreed price for extra hours worked by the subcontractor over and above the number originally agreed.
Alternatively (for example, where additional services are requested), make it clear that further work can only be undertaken after a quote for it has been issued and agreed.
You should also consider what should happen if the project changes significantly - might a whole new contract be required? 4.
Set out a clear payment schedule It's in both parties' interests to have a firm grasp on how much money will be paid and when.
Staggered payment arrangements, such as 50% on contract signature and 50% on completion are fine, but avoid the temptation to pay 100% upfront, even if you're offered a hefty discount.
You might never see that money again - and you're wholly reliant on the subcontractor's goodwill to finish the project...
! Also, make sure the contract covers what will happen if the project isn't delivered on time, or the work supplied is substandard.
5.
Cover your cancellation rights What happens if you're half way through a project and decide you don't want to continue? It's acceptable for the subcontractor to be paid for the work they've already done, but should you be lumbered with a bill for 100% of an unwanted project? Largely, that depends upon the nature of the work, the reason for the cancellation and (where the cancellation isn't their fault) whether your subcontractor is likely to be able to find alternative work to fill the time set aside for your cancelled job.
However, it's certainly something you need to consider - from both of your points of view.
Intellectual property rights should also be considered here.
These would normally revert to the subcontractor if the project is cancelled before completion, but there may be exceptions to this, for example, regarding information you've supplied yourself.
In conclusion...
As you can see, there are lots of issues to consider when you outsource work to a third party - and these are just a few key points! So don't leave things to chance.
Take professional advice and put a watertight contract in place that protects you - and your subcontractor - from potential pitfalls.
But outsourcing can be a risky business if you don't take steps to protect yourself and your business.
These top tips will help you stay on the right track with your subcontractors and avoid potential issues as projects develop.
1.
Put a written contract in place Sounds obvious doesn't it? But so many businesses still operate on handshakes alone.
Don't do it! If something goes wrong, you have absolutely no protection and no fall back - and it could cost you dear.
And of course, don't think that 'any old template contract will do'.
It won't.
Your contract needs to be specific to the project in hand and protect both parties against any and all possible disputes that could arise.
2.
Clearly define the scope of work 'Project creep' is a common problem with outsourced work.
And if the exact scope of work isn't clearly defined in your contract, you're leaving yourself wide open to it.
Break the project down into specific tasks and, if you want to, assign a deadline for each one.
Don't forget to include details and timescales for your own obligations too, e.
g.
providing information or materials to the subcontractor, or reviewing or supervising their work.
Make sure the targets set for both parties are realistic and achievable - and remember that setting a deadline or a schedule doesn't mean you have no flexibility.
It's always open to the parties to a contract to make changes to it by agreement, but without some initial framework, you could be left waiting much longer than you hoped for your work to be completed.
3.
Control change and variations effectively Often, projects change and evolve during the development process, potentially putting them outside the original scope of work.
So make sure your contract defines a robust process for dealing with any changes that are needed.
For example, you could state an agreed price for extra hours worked by the subcontractor over and above the number originally agreed.
Alternatively (for example, where additional services are requested), make it clear that further work can only be undertaken after a quote for it has been issued and agreed.
You should also consider what should happen if the project changes significantly - might a whole new contract be required? 4.
Set out a clear payment schedule It's in both parties' interests to have a firm grasp on how much money will be paid and when.
Staggered payment arrangements, such as 50% on contract signature and 50% on completion are fine, but avoid the temptation to pay 100% upfront, even if you're offered a hefty discount.
You might never see that money again - and you're wholly reliant on the subcontractor's goodwill to finish the project...
! Also, make sure the contract covers what will happen if the project isn't delivered on time, or the work supplied is substandard.
5.
Cover your cancellation rights What happens if you're half way through a project and decide you don't want to continue? It's acceptable for the subcontractor to be paid for the work they've already done, but should you be lumbered with a bill for 100% of an unwanted project? Largely, that depends upon the nature of the work, the reason for the cancellation and (where the cancellation isn't their fault) whether your subcontractor is likely to be able to find alternative work to fill the time set aside for your cancelled job.
However, it's certainly something you need to consider - from both of your points of view.
Intellectual property rights should also be considered here.
These would normally revert to the subcontractor if the project is cancelled before completion, but there may be exceptions to this, for example, regarding information you've supplied yourself.
In conclusion...
As you can see, there are lots of issues to consider when you outsource work to a third party - and these are just a few key points! So don't leave things to chance.
Take professional advice and put a watertight contract in place that protects you - and your subcontractor - from potential pitfalls.
Source...