AGC just released a must-read for construction professionals seeking to safeguard their projects and ensure successful outcomes: "Preventing and Managing the Risk of a Subcontractor Default - A Best Practices Checklist." This comprehensive checklist is designed to enhance your risk management strategy, covering key areas such as prequalifying subcontractors, using contracts to manage and reduce risks, and monitoring contract performance to mitigate defaults. It offers practical tips and actionable insights and was written by AGC’s Risk Management and Specialty Contractors Committees.
The document responds to the alarming trend highlighted by the 2024 AGC/FMI Study on key risks in the construction industry, which noted a significant uptick in subcontractor defaults. According to the study, 70% of respondents have observed an increase in subcontractor distress or defaults compared to the previous year, with nearly half experiencing project disruptions as a result. Root causes of subcontractor distress include financial instability, lack of skilled labor, and quality issues, particularly in the electrical, plumbing, and concrete trades. In response, construction risk managers are enhancing subcontractor prequalification measures, conducting more thorough financial and staffing evaluations, seeking new subcontractors, and increasing review frequency.
Also check out AGC’s Hot Topic Resource Library for papers, reports, and other resources on surety, insurance, and other risk transfer options for projects, along with protocols and procedures for managing business and operational risks in construction. For more information, please contact AGC’s Leah Pilconis.