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What is a subcontractor and a subcontract?
Home » Homebuilding » Choosing Subcontractors » What is a subcontractor and a subcontract?A subcontractor is an individual or a business that signs a contract to perform part or all of the obligations of another individual or business' contract.
A subcontractor is usually hired by a general contractor (or prime contractor) to perform a specific task as part of the overall project. The most common concept of a subcontractor is in the construction of building and civil engineering, however the range of opportunities for subcontractors is much wider and it is possible that the greatest number of subcontractors now operate in the information technology and information sectors of business.
The incentive to hire subcontractors can be either to reduce costs or to mitigate project risks. In this way the general contractor receives the same or better service than the general contractor could have provided by itself, at lower overall risk. Many subcontractors do work for the same companies rather than different ones. This allows subcontractors to further specialize their skills.
A subcontract is a contract that assigns part of an existing contract to a different party.
An example of subcontracting is in the area of medical transcription in the U.S. Where large companies take on contracts for medical transcription services, they in turn then contract out the actual work to individuals or smaller companies, the subcontractor.
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