Originally published on nevadabusiness.com.

August 8, 2024 By Emilie Fairfield

In the contracting world where a single project requires a team of workers across a variety of trades, subcontractors play the foundational role of hands-on creators transforming a plan from idea into the world of reality.

A project’s overarching process helps clarify the roll of the subcontractor. Bret Loughridge, president of SR Construction, a Las Vegas-based general contracting company with offices in northern and southern Nevada, explains, “A general contractor, in a very basic sense, is the one who manages the project from start to finish. A subcontractor or trade partner is a company that does a specific part of the project.”

This can include electricians, plumbers, steel workers, fabricators, and more. “Some general contractors self-perform work and have their own people physically doing the work, framing, concrete, etc., but most general contractors subcontract everything to the trades themselves,” he says.

In essence, the difference between contracting and subcontracting is “managing the work versus doing the work,” says Loughridge.

Dean Gettman, CEO and co-founder of Platinum Contracting, elaborated on the process an owner might expect to encounter during a building project. “A lot of times, a GC [general contractor] will manage the whole scope of a project and then each trade will be its own subcontractor who specializes in that field,” he says. The owner chooses the GC, the GC plans the project, and the GC hires subcontractors to execute the project.

In short, Gettman explained that a subcontractor is “any contractor who is working under another contractor or working specifically on a small part of a large project.”

Selecting a Subcontractor

Victor Fuchs, president of Helix Electric, an electrical contracting company in both northern and southern Nevada, identified subcontractors as vital teammates within the construction process. “We define a subcontractor as strategic partner to our customers,” he said.

These strategic partners are tremendously important to a general contractor as the lynch pin to success, especially if the general contractor subcontracts all of the hands-on labor. Loughridge says, “In short, for us as a GC that does not self-perform any work, they bring everything to the table. The trades are the key to the success on any project. They’re the ones doing the work.

They are the ones that get it done.”

Choosing the partners for a job, then, requires careful consideration. Loughridge continues, “For us, choosing them just depends on who brings the most value to the project. That value can be determined differently depending on the type of project, the client, etc. It’s not just cost. Most people think of it as cost. But for us, our decision is rarely based on cost.”

According to Loughridge, having excellent subcontractors is more important than cost for SR Construction. “Cost plays a factor,” he says, “but it’s rarely the defining factor for what we do and how we do our work.” What are the defining factors? Those include schedule, quality of work, safety, experience, availability, and cost efficiency.

He concludes, “We want the men and women who team with us and buy into our approach on how we run our project [to be] the best. And they’re also the most knowledgeable about their craft. With our process, we bring them in and involve them a lot earlier and more often than would be typical in the industry. We want them part of the team. It’s not a zero-sum game. We can all win at the end of the day and that’s the goal. The quality workforce is really what we look for.”

Supply Chain, Qualifications, and Delayed Cash Flow

Contractors and subcontractors throughout Nevada may face a variety of challenges.

One key challenge is acquiring materials to complete the job. Loughridge elaborated on the effect of long lead times to acquire materials for builders, contractors, and owners as the low supply has raised demand, “Obviously prices have gone up. Costs on materials have gone up and they’re taking longer to get. That has started to ease in the recent months. The rate of increase of prices has slowed,” said Loughridge.

“I’m not going to say that prices have gone down or prices have stopped going up, but the rate of increase has gone down. We’re starting to see prices level off, and most materials are getting better with lead times and procurement,” he continued. While there are still sectors where the lead time is significantly longer, it appears lead times are finally beginning to shorten.

Fuchs has found ways to minimize the wait time. “We have established strong relationships with manufacturers,” he says. These relationships have resulted in efficient procurement for the projects of Helix Electric customers. He continues, “We have managed in the past couple years, with premium dollar or without premium dollar, to be put in front of the line.”

A secondary issue contractors and subcontractors may face is a lack of qualified and skilled workforce within the trades. Loughridge explained, “We have more people retiring than are getting into the trades. I think the number of personnel within the trade community is shrinking. That is definitely a challenge that the industry is going to have to solve.”

Another issue comes into play due to the often-complex web of contractors and subcontractors: delayed cash flow. Gettman elaborates, “There’s a lot of delayed cash flow issues for subs.” When owners are working with general contractors, general contractors are working with subcontractors, and subcontractors are working with sub-subcontractors, the transfer of money can become time-consuming and inefficient leading to delays in payment. This delay between work and payment can result in hardships for subcontractors.

The solution, according to Gettman, involves selectivity and good, old-fashioned concern for one’s neighbor. He says, “It’s picking the right clients – people that pay on time. You don’t want to stretch out the people that are working for you, and you want to make sure that who you’re working for is not stretching you out as well.” Ensuring everyone knows and agrees to the structure and payment plans ahead of time can help things go as smoothly as possible for everyone involved.

However, the challenge remains, “It’s just this long line of money that’s moving through a lot of hands before it gets to the last guy.” Gettman says.

Industry and Trends

In spite of these challenges, the industry itself is strong across many different markets. Regarding the residential work, Gettman says, “We have been lucky to see a really steady market this year.”

Fuchs points out that the contracting and building industry is strong in southern Nevada. “There’s still a lot of schools being built. There’s a lot of need for medical. Hospital work is coming to town.” Whether work is being done in medical construction, multi-family apartment buildings, affordable housing, or other work, involvement in a variety of markets helps create a broad enough base so that even if one market cools off, there are still plenty of jobs.

In the meantime, a certain amount of hesitancy is in the air due to the upcoming election. Loughridge notices it. He says, “On the private and commercial side, there’s a lot of hurry up and wait. I think a lot of projects are waiting on either interest rates, something to happen there, and/or the election, before the trigger gets pulled.”

Working with the Jurisdiction

Every job involves working with a municipality. Gettman points out, “Every contractor who is doing any type of public works or really any kind of contracting is working hand-in-hand with each governing municipality.” For contractors and subcontractors working across a variety of places, this requires extra know-how.

“There are differing standards between say Clark County, or Henderson, North Las Vegas, City of Las Vegas,” Gettman continues.

While this can be a lot to keep up on, the value lies in municipalities providing a check against faulty building. “They’re one of the only entities that’s really doing quality control at all,” Gettman said, and the quality control they provide the industry makes the time and energy worth it.

Part of working with the municipalities includes intentionally planning beforehand. “The more you can educate yourself ahead of time, especially on large projects, is key. You get out what you put in. So, the more effort you put into a quality submission ahead of time, make sure you check all the boxes, the faster it will move through,” Gettman explains.

Loughridge agrees and points out that knowledge is power. “First and foremost, [succeeding in working alongside municipalities requires] having an in-depth understanding of what’s required in each jurisdiction for each stage of the project. They all have their nuances of what needs to be turned in, how they want to see things, what can go concurrent, what can’t go concurrent, whether it be on entitlements or plan review or, towards the end of a project, with inspections and certificate of occupancy,” he shares.

And, again, excellent work and relationships go a long way. “In general, amongst all of them, relationships are key as well as submitting complete and accurate information in the form or manner that they like to see it,” Loughridge concludes.

Lean Development and Construction

Incorporated across many different business domains, lean philosophy focuses on waste reduction and optimization of processes to garner the best results for businesses and consumers. In construction and development, the philosophy encourages wise and effective use of resources. Many contractors and subcontractors across the board subscribe to this philosophy.

Gettman explains its value, “I think when it’s done properly you can really reduce your build time, reduce resource use, reduce your overhead internally, and then in the long run you’re delivering a better product to the customer, helping better understand customer needs, and hopefully saving money for the customer as well.”

Put simply, “It’s just a focus on eliminating waste,” Gettman continues. Whether working with piping, framing, insulation, electrical, or developing systems, a company must be “making sure that we are preplanning ahead of time to eliminate that waste ahead of time. You also see that tie into trying to use more renewable products when it comes to natural heating products or cooling products. The more preplanning we can do, the more aware of the exact needs of a project, the more waste we can eliminate,” Gettman continued.

Loughridge shared the value of lean construction for SR Construction, “By doing that, we can provide our clients with more certainty, better value, schedule costs, everything is just a better product at the end of the day, and it’s a more enjoyable situation than just fighting the old way.”

“A lot of construction is about me, me, me, me, me, and I’m only going to do what’s good for me because it’s good for me,” he shares. “In lean, we try to optimize the project whereby then everybody is better off.”

At the same time, Fuchs explains how a lean philosophy includes providing the right tools for success on a project. “We do not short change on the cost of having the right tools for our people.” Having the right tools means a project can function at maximum efficiency.

For subcontractors, lean philosophy means they oftentimes play a larger role in the project helping to streamline processes and develop a team-oriented mindset. In an industry where a web of contractors, owners and subcontractors can become complex, this focus on efficiency, respect for the team as a whole, and reducing waste while maximizing output all contribute to success.