When can you subcontract a project?

By Raymond Dreyfack -- Plant Engineering, 7/1/1999

Plant Engineer Ralph English wrinkled his nose when Project Engineer Sam Sharpe presented the lab refurbishing cost estimate to him.

"This is much higher than I expected."

Sharpe shrugged. "The time and cost figures from the plant were double checked. Some of the guys on the crew are making big bucks. The job could run even higher if overtime costs aren't contained."

"It wouldn't be the first time. Let's get some estimates in from subcontractors."

"Subcontracting! It's a touchy subject. The crew'll have a fit."

"I'm sure they will. But if we don't bring this cost down, accounting will raise a ruckus with us."

"The question is, can we get away with it?"

"Maybe yes, maybe no. We'll see."

Question: When it comes to farming out bargaining unit work, "touchy" may be an understatement. What it usually boils down to is what the contract wording will allow.

English's decision: Three subcontractors were called in to bid on the project. When the plant engineer reviewed the figures, he took one in hand and told Sharpe, "Looks like a green light on this baby. If you're worried about opposition check page 146 of the contract."

Sharpe read the clause aloud. "Subcontracting will be permissible under this agreement if the work can be done for at least 18% less than it would cost if performed by the company's own employees applying standard cost accounting procedures."

English grinned. "No contest. This bidder is a reputable outfit and comes in at 22% less."