On most projects, a very large share of the budget is executed through subcontractors. That is why subcontractor management is one of the most powerful levers for protecting margin: a poor selection or an ambiguous contract can cost more than any material variance.

This guide explains how to manage subcontractors in construction, from requesting bids to final settlement.

The subcontracting cycle

  1. Define work packages.
  2. Request bids.
  3. Compare bids on a like-for-like basis.
  4. Negotiate and award.
  5. Formalize the contract and documentation.
  6. Control execution.
  7. Certify and pay.
  8. Settle and evaluate.

Step 1: Define the work packages

Group the budget line items into coherent packages: earthworks, structure, masonry, electrical installations, plumbing, exterior carpentry, and so on.

For each package, prepare:

  • The budget line items and quantities.
  • Drawings and technical specifications.
  • Schedule and timing conditions. See project schedule with a Gantt chart.
  • Commercial terms: payment method, retention, penalties.
  • Resources provided by the main contractor (crane, scaffolding, site huts, water, electricity).

The clearer the package, the more comparable the bids.

Step 2: Request bids

  • Request at least three bids per package.
  • Send everyone the same documentation and the same response format (ideally, the budget with line items and blank prices, in Excel or BC3).
  • Set a deadline and a single channel for questions.

Step 3: Compare the bids (bid leveling)

The most common mistake is comparing only the total amount. Bids almost never include the same scope. You need to level them: add to each bid the cost of what it does not include.

Example: concrete structure package

  • Bid A: €210,000, everything included.
  • Bid B: €198,000, excludes concrete pumping (€9,500) and control testing (€2,000).
  • Bid C: €205,000, excludes perimeter scaffolding (€3,000).

Leveled comparison:

  • Bid A: €210,000
  • Bid B: 198,000 + 9,500 + 2,000 = €209,500
  • Bid C: 205,000 + 3,000 = €208,000

The apparently cheapest bid (B) is not the most economical: once leveled, the best is C. Besides price, consider:

  • Execution time and available resources.
  • Payment terms and accepted retention.
  • Experience and references on similar projects.
  • Financial standing and documentation status.
  • Track record with your company (quality, schedule compliance, safety).

Also compare each unit price with your cost budget: that tells you whether the package improves or worsens the expected margin. See unit price analysis.

Step 4: Negotiate and award

  • Negotiate with the two best leveled bids.
  • Clarify exclusions and doubts in writing.
  • Record the reason for the award (useful for audits and future projects).

Step 5: Formalize the contract and documentation

The subcontract

It should include, at a minimum:

  • Subject and scope (line items, quantities and prices).
  • Time frame and milestones.
  • Measurement and certification method.
  • Payment terms and retention (guarantee holdback).
  • Penalties for delay.
  • Health and safety obligations.
  • Required insurance.
  • Conditions for changes and contradictory prices (agreed new prices).

Legal requirements in Spain

Law 32/2006 regulating subcontracting in the construction sector, and its regulation (Royal Decree 1109/2007), establish, among other things:

  • Subcontracting companies must be registered in the Register of Accredited Companies (REA).
  • The obligation to keep a Subcontracting Book on each project.
  • Limits on the subcontracting chain (generally up to the third level, with exceptions provided in the regulation).
  • Requirements on preventive organization and a minimum percentage of permanent employees in the subcontractor's workforce.

In addition, you must manage coordination of business activities (CAE) for occupational safety and check labor documentation (social security registration, TC2/RNT payroll forms, safety training, medical fitness). Always check current regulations with your advisor.

Step 6: Control execution

  • Weekly tracking of the subcontractor's progress against the schedule.
  • Quality and safety control.
  • Record incidents and additional work before carrying it out.
  • Check the documentation of workers entering the site.

Step 7: Certify and pay

  • Certify the quantities actually executed cumulatively to date, using the same criteria used to certify to the client.
  • Apply the retention and agreed charges (utilities, cleaning, shared facilities).
  • Check that what is certified to the subcontractor is consistent with what you certify to the client.

The mechanics are the same as we explain in how to prepare a progress certification.

Step 8: Settle and evaluate

Upon completion:

  • Final settlement and release of retentions after the warranty period.
  • Subcontractor evaluation (quality, schedule, safety, collaboration). This information is very valuable for future awards.

How an ERP helps manage subcontractors

With a construction ERP such as BIM 2.0 for Odoo you can:

  • Generate service requests from the project budget.
  • Request and compare bids from suppliers and subcontractors in the purchasing module.
  • Register work contracts linked to line items.
  • Certify the subcontractor and control their payment statements.
  • See the committed and actual cost of each package against the budget. See project cost control.

Frequently asked questions

How many bids should I request per package?

At least three, to have a solid market reference.

What is the REA?

The Register of Accredited Companies (Registro de Empresas Acreditadas), in which companies working on construction projects as contractors or subcontractors must be registered in Spain.

How do I avoid paying for work not performed?

By always certifying cumulatively, with measurements verified on site and consistent with the certification to the client.

Conclusion

Managing subcontractors well requires clear packages, leveled comparisons, complete contracts, document control and rigorous certifications. Doing it within the same system as the budget and cost control avoids surprises in the margin.

👉 Request a BIM 2.0 demo and see how a bid comparison is managed.