CONSTRUCTION CONTRACTING
Higher worker wages won’t increase the cost of construction, because most of the money spent in construction goes to everything but the workers. Here’s how it works:
DEVELOPER / OWNER
-
Finances the construction and design of a project
-
Two models:​
​General contracting model: Developer/owner conducts bidding process to hire a general contractor​​
Construction manager model: Developer/owner hires specialty subcontractors and a construction manager to manage the project
Construction Manager
-
Under this model, the construction manager is hired to manage the entire project
-
Subcontractors are hired directly by the develoepr/owner and managed by the CM
General Contractor
-
Hired by the developer/owner and responsible for overseeing the project, developing a budget, and hiring subcontractors if necessary
-
Can employ its own workers for the project, but increasingly subcontracts out nearly every job on the project
-
Acts as the main point of contact between developer/owner and subcontractors
Subcontractor
-
Hired and paid by the general contractor or developer/owner in the construction manager model
-
Responsible for providing labor and supplies
-
Carpentry, drywall, electrical HVAC, structural and framing, etc are all examples of specialized labor that is subcontracted for construction projects
LABOR BROKERS
-
Hired by subcontractors
-
Functions as a temporary staffing entity that provides a labor force for the construction project
-
Commonly underpay workers, fail to take out tax deductions, fail to keep appropriate records, commit fraud, etc
Materials / SupplieS
-
Sourced and purchased by subcontractor
SUB-Subcontractor
-
Hired and paid by the subcontractor to help complete specialized tasks for the construction project
Sources:
https://www.procore.com/library/types-of-subcontractors-construction
https://www.procore.com/library/general-contractor-definition
https://www.jacksonlewis.com/insights/your-subcontractor-actually-labor-broker
Payroll tax evasion and workers comp fraud can occur through shell companies appearing as subcontractors