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Best Practices for Managing Subcontractor Risk (Part Three)
- Communicate clearly to your primes: To effectively shift your subcontractor compliance program, your primes must be informed and on-board. Consider multiple communication channels such as in-person town hall meetings, webinars, and emails to help your direct contractors understand the new subcontractor program requirements.
- Be extremely clear in your new expectations: Alert your direct contractors that you have new expectations for your relationship with any subs hired to work on your projects, including that you have direct vetting and oversight. Talk about any new expectations you have of your primes and how the process for hiring subs for your jobs will change.
- Re-examine your contracts: Ensure your contracts specify the relationship dynamics between you, the primes, and their subcontractors, including provisions for direct interaction as needed.
Monitoring and Enforcement
Consistency is paramount not only in communicating strategy and standards, but also in execution. Even with the best risk management strategy, field leaders may be tempted to make small compliance exceptions to keep projects on track (such as telling a worker they can enter a site without proper training, if they take the training within the next week). Likewise, primes may want to circumvent your new requirements to get a sub hired quickly in a pinch.
The problem is that contractors talk, workers may push for more “small exceptions,” and the situation can quickly devolve into more relaxed requirements in practice. Even one unvetted subcontractor or untrained worker can have catastrophic consequences. Monitoring and enforcing subcontractor compliance is crucial to maintaining your safety and sustainability standards throughout your supply chain.
Conduct regular compliance audits, site visits and inspections, and other enforcement strategies to ensure proper qualification and compliance. This is especially critical in disconnected and global operations, to ensure visibility and avoid safety hazards, child labor, quality concerns, and other risks lurking within your extended supply chain.
Conclusion
Properly managing subcontractor risk is essential for all organizations outsourcing work, as almost one third of supply chain disruptions stem from lower-tier subcontractors rather than primes. Hiring companies must ensure direct vetting and oversight of all subs in their extended network, applying the same comprehensive compliance requirements as they have for prime contractors.
Clear, top-down standards, consistent expectations, and transparent communication are key building blocks to creating a strong subcontractor compliance program.
About the Author
Avetta is a SaaS software company that provides supply chain risk management solutions. Its platform is trusted by over 130,000 suppliers in over 120 countries. Visit Avetta.com to learn more about its subcontractor management tools, prequalification services, and marketplace offerings.