This is more general, but many small to medium subcontractors do not have lines of credit, so I recommend that they get one set up before they actually need it, because it’s much harder to qualify for a line of credit when you actually need one. Having a line of credit in place will help prepare you for taking on public works projects.
CT: What significant risks do subcontractors have entering into a subcontract?
CC: The biggest risk for subcontractors is getting in over their heads or getting into trouble because they did not take the time to read or could not understand the fine print.
Subcontractors are at the mercy of the relationship between the prime/general contractor and the public agency. If there is a disagreement between the public agency and the general contractor and payments are held up, then you don’t have a lot of options. Neither the prime contractor nor the subcontractor has any lien rights on a public works project. However, that doesn’t mean that you have no avenues of recourse. You have stop payment notice rights, so that no one gets paid while the funds are on hold. You can if necessary file a claim against the general contractor’s payment bond. There are very specific processes to be able to enforce these rights, so you need to know what those are ahead of time.
Have a Construction Attorney or other appropriate professional review your subcontracts before signing, and ideally, take some time with that professional and take a class to become familiar with how contracts are worded and typical contract provisions, so that you can understand your rights and responsibilities as a subcontractor.
Don’t assume that you can’t change some terms of the contract -- it is perfectly legal to make some changes to a subcontract if both sides agree. Understanding this can help you avoid agreeing to terms that you cannot or should not practically fulfill. When you’re informed, you can instead request some revisions that help you fulfill the requirements. I offer classes through the San Francisco and Peninsula Builder’s Exchange on understanding contracts. If you belong to a trade or professional association of any kind, they will likely offer classes in understanding contracts, so get out there
(A Contractor's Guide to Understanding Public Works Contracts Part 2 continued)