Learn best practice procedures for prequalifying subcontractors and managing subcontractor default risk.
Like a chain, a construction team is no stronger than its weakest link. In these uncertain times of increased demand for construction, stretched backlogs, labor shortages, and cost escalations, the risk of subcontractor default is at an all-time high. Subcontractor default is the weak link that can turn an otherwise successful project into an utter failure overnight.
This presentation will help people responsible for entering into and administering subcontracts to recognize the causes and telltale signs of high-risk subcontractors early in the constructive process. In some cases, default can be avoided by simply subcontracting with a different subcontractor. In other cases, proactive measures can be taken to avoid or mitigate the effect of terminating a high-risk subcontractor. This topic will explore some of the options available to general contractors, construction managers, and upper-tier subcontractors to avoid the project-destroying effect of subcontractor default.
Learning Objectives
- You will be able to describe the common causes of subcontract defaults.
- You will be able to identify the signs of impending subcontractor default.
- You will be able to explain the available options to avoid subcontractor default.
- You will be able to discuss effective plans to avoid subcontractor default.
Agenda
Introduction
- Overview
- What Is a Default?
Common Causes of Subcontractor Default
- Cash Flow Problems
- Too Much Work, Too Little Time
- Project Complexity and Inexperience
- Bid Busts and Defects
- Labor Shortages and Other Outside Factors
Early Warning Signs of High-Risk Subcontractors
- Effective Prequalification
- Performance Clues
Default Avoidance
- Effective Subcontract Terms
- Proactive Project Management
- Cure Notices
- Supplementation
- De-Scoping
- Mitigating Impact of Termination
Security
- Performance Bonds
- Default Insurance
- Other Forms of Security
Conclusion
Speakers
Scott D. Cahalan,
Smith, Gambrell & Russell, LLP- Partner in the construction law section of Smith, Gambrell and Russell, LLP, an AmLaw 200 firm
- Adjunct professor of design and construction law at Georgia Institute of Technology
- General counsel to the Georgia Utility Contractor’s Association
- Practice includes all aspects of design and construction law from drafting and negotiating prime contracts, subcontracts, and purchase orders to mediating, arbitrating, and litigating construction disputes
- Drafted form construction contracts for the Associated Owners and Developers, a national organization
- Recognized by Chambers USA and Georgia Super Lawyers
- Frequent author and lecturer on construction law
- Member of the State Bar of Georgia, Northern District of Georgia, and 11th Circuit Court of Appeals
- J.D. degree, with honors, University of Georgia; B.S. degree in construction engineering, Iowa State University
- Can be contacted at 404-815-3711, scahalan@sgrlaw.com, or scott.cahalan@gatech.edu
