Risk Flows Downhill: Why Subbies Get Screwed Down
Principal, builder, subbie. A contract at every link, and at every link the risk gets pushed down. The builder prices the head contract risk, then writes subcontracts that shift as much of it as possible onto the trades, who sign on a Thursday arvo to be on site Monday without reading a word. That asymmetry is the whole reason screwing subbies down is an industry norm done in broad daylight. It's also the exact problem I'm here to fix.
Transcript
In construction, risk flows downhill. You have the developer, the principal of a project, you have the builder and then you have the subbie and then suppliers underneath the subbie too. I look after subbies so I'm going to stop at the subbie for you. Is a contract connecting each together in a chain in a flow that goes downhill head contract builder here to the subbie here here's the thing principal holds all the risk at the start they haven't yet subcontracted out or given it to a builder to undertake the work for them for that project shift a lot of the risk onto the builder who's then going to price for that risk per that head contract and then complete that work for them.
Builder is then going to develop some hand them to the subbie to sign off on a lot of the time without the subbie even reading it the subbie is going to sit here quote the scope of works not even typically what happens is they don't even read the subcontract. They may read a few things like payment terms, key things but they miss a a lot of the risk.
Builder and all builders are in a position where they want to shift as much risk away from possible. They can make more money if can essentially shift all their risk onto other people, the subcontractors under them. And if they don't have to pay for that risk, then they are essentially keeping more of the money to themselves. The subbie here is taking on that risk, which they are when they're signing that subcontract because they aren't reading it and they don't have the time to read it the hands it to them on a thursday arvo and wants them on site the next monday sign off on that subcontract and they've only priced for the scope materials and a few other commercial things rather than the contract risk itself and that is why it is so common that basically sums up why it is so common in this
industry for the subbie to get screwed down there is risk asymmetry the builder chucks it all into the subbie, subbie signs it without knowing it. So they're a bit at fault for just signing off on it without understanding what they're signing, but in reality, they don't have the time to do that and it's still unfair the sorts of things the builder's pushing onto them. I will get into unfair contract terms in another video, so subscribe if you want that.
But yeah, so that is why down the subbie is such an industry norm here because the builder can get away with it without looking like such a bad guy. They do it in broad daylight but at the end of the day they point to the contract and they say contract written on paper you signed it you're at fault. In reality it is just an unfair dynamic of risk flowing downhill and the subbie not having the education to be able to or the know-how to negotiate and manage that before they sign off on things that they shouldn't which can potentially send them under cause so many disputes as we see and lead them to not being paid for like variations and all the a thousand other shapes that it comes that's why I exist.
Welcome, I'm glad you found me this is the exact problem I am here to fix. Wanna help the subbies get back on the level as the builder so that they can protect themselves as they need to at the end of the day, get paid on time and all the other disputes get resolved in their favor and with the builder's favor. But just with them being less screwed down.
If you're a subcontractor here in Australia, welcome. I hope you found that valuable. I'm gonna be sharing more insights just like this one in the future. Drop me a subscribe and we will keep in touch. You can follow me on LinkedIn, Instagram, all the relevant links you may need to free tools and whatever and my socials are in the description. So check that out I will see you in the next video.
Thanks for watching.
General information about Australian subcontracts, not legal advice. Get advice on your own contract and facts.