I worked as a subcontractor on an IT project last spring, and it went horribly for everyone. The client was a very large company, in a highly regulated industry. I worked for a consulting company, who was hired by a software company with no operations in the USA( The client’s HQ is in Europe, and they used this company at home), who was hired by this large company. Since the company we were hired by had no operations in the USA, all they did was add more bureaucracy and confusion. Work orders got lost, people got sent to the wrong places, all kinds of things went wrong. This went on for about a month and a half. Then another month went by where we had almost no work, and since the dispute was between the client and software company, there was nothing we could do. At the end of that month we all got fired. It seems like there must be a better way to get people for long term projects(this was supposed to last over a year) than by building a horribly broken chain of command.
I should add, this was a 10 man team covering the entire state. US getting sent to the wrong places on a regular basis was part of the reason for the dispute, since they had to pay us mileage.
Subcontractors are easier to fire than employees.
I know about how highly valued ease of firing is, but isn’t there a point of diminishing returns? My husband deals with the sub-sub-contracting issue, and it’s often a big clusterf*k like boffking describes. A lot of energy and time is spent on the bureaucracy and paperwork and miscommunication when all of those resources could have been spent getting the job done. Employment is at-will nowadays; why not hire competent people directly and get on with the work?
Government employment is not at will. If an employee stays longer than a year (roughly speaking) then they are usually eligible for FMLA. Despite right to work, most employees are under some protected class - the only unprotected workers are white males under 40 with no disabilities.
You also run the risk of losing good workers because of mistakes made far above them in the chain.
If you use a sub contractor it should be easier start up. In the ops case the contractor did not hove to co through many interviews to hire 10 new employees. Did not have to do the research after the interviews. Did not have to set up benefits. All he had to do is research one company. Is that company capable to do the work.
And if things go wrong then they are there to blame. I worked in a high rise building. To rebuild a chiller a contractor was always used. The management company refused to let us do that work in house. And I would have done a better job than the contractor for less cost. Why did they use a contractor? With mechanical equipment sometimes the unexpected does happen. If the AC failed for any reason the management company could always tell the tenants that the contractor made a mistake and is working on it now. Sounds better than just we are working on it now. Also there is budgeting. If they budgeted x dollars to rebuild and something happens after paying the contractor all that money they will demand that he come back and fix it at no additional cost. But if the work is done in house there goes the budget. So they will pay 2X to the contractor in the first place so the budget does not get a surprise.
Now a company that can not manage sub contractors well will still have a problem managing teams of employees. But they will not be able to blame the sub contractor.
Contractors are easier to fire, get lower wages/benefits.
It’s pretty simple. You have a project that you need done, but don’t have the in-house expertise to do it. It’s no different than hiring someone to retile your bathroom because you don’t have the skills yourself, and don’t want to “learn” on your own place.
That is inaccurate because many employers will have contractors working in the same job at the same company for years.
My company subcontracts because the workload is constantly changing. We’ve got one Physical Therapist on staff, because we can keep him busy; the rest are subcontracted. When we need a PT and our own has a full schedule, we call one of a half dozen PT companies and they send someone out. We pay them out of the single consolidated payment that Medicare pays us. When we have a low patient census requiring PT, we don’t have to worry about paying a PT to do nothing, or not paying a PT to do nothing and having him quit to find more work with another company. That’s the benefit to our agency.
Their company subcontracts with many different home health agencies who also have work only sometimes. Between their different home health agencies, they’ve got enough work. Working for just one home health agency, neither their company nor the PT would have enough work. So that’s the benefit for them.
Same thing for Occupational Therapists, Speech Therapists, Medical Social Workers and Home Phlebotomists.
The benefit to the patient is that our company will take care of finding them a nurse, PT, ST, OT, MSW and Phlebotomist, and we take care of paying all of them, so the patient only has to work through one agency to get comprehensive home health care.
It seems like the term “one of many scenarios” fits better than the term “inaccurate” in this instance.
I run a small medical education company that relies so heavily on contractors/freelancers it would be difficult to turn a profit without them.
We use contract writers, editors, proofreaders, layout and creative specialists, scientific content developers, and programmers. Most of our projects are short-term, between 2 weeks and 3 months. As an example, we may have enough project work to keep a writer busy for, say, 5 weeks, and then have nothing for them for 2 months. It is not feasible, nor smart, for us to have people on staff, especially highly skilled, highly educated, and highly paid people who are idle potentially 30% or even 40% of the work year, so we farm a lot of it out.
Contracting saves on payroll taxes and healthcare costs, even on internal equipment and utility costs as well as depletion of other resources as many of our contractors can work from home.
The contractors themselves have more flexibility than someone on staff, so they can take other work when our need for their services slows.
I think the root of the problem the OP expressed is bad project management, not the concept of contracting.
And in some places, contractors are hired to do the actual work, and the parent company takes credit for the work they did. People working at the parent company will claim the work as their own and get awards, accolades, and promotions, etc.
It’s particularly common for 8(a) contractors or small contractors to hire subs, since they don’t have the resources to keep full time employees on. The usual scenario is: bid the work, then hire specialty subcontractors once you find out you have the contract.
Companies have to perform tasks far beyond what they are good at doing or have the resources to do.
I provide a service, mostly for bigger agencies who can sell my service and handle the sales and customer support. I am terrible at sales and don’t have the resources to build a local sales team on the ground all over the country (or even in 1 city). I am, however, an “expert” at providing this one specific service that is considered an essential component in business. So, I let other companies sell my services at s significant markup. Then I can focus on my work and managing my team to do specific tasks related to our core business. And if 1 agency brings me 500 clients, for example, I only need to talk to 1 person (or 2-3) about those 500 accounts. Sometimes it feels like those agencies are just marking up my product and making pure profit, but they provide their own resources and also shield my health and provide insurance for my well-being.
This isn’t much different than my friend who is a building contractor bidding on components of other jobs. For example, he might be really good at doing kitchen cabinets, but he has a hard time closing sales on full kitchen remodels or house remodels. So, a local company that has brand recognition as “City Kitchen Remodeling” can get bigger jobs but hire him to just do the cabinets or just do the tile or whatever.
So from my/that perspective, it definitely helps subcontractors get work we otherwise could not. And in my case, agencies can offer my services while they do not have my expertise or access to Human Resources in the product niche- even though the product fits perfectly with their service and is considered essential- because that’s just how it is.
One consulting company I worked for would hire sub-contractors to do the heavy lifting; the employees of my company were mostly there to manage the sub-contractors. If everything went well, the company would share the wealth & the glory. If the project didn’t go well, they could throw the sub-contractors under the bus without getting mud splattered on themselves.
Then they fired me because I’m not a manager. But I’M NOT BITTER.
No doubt things have changed, but when they built the transcontinental railways in Canada, subcontracting was a way to enhance profits by doing nothing. You get a government contract to build the railway for, say, $20 million. You subcontract the job to someone (often another company you own) for $19 million, and you pocket a million before the ink on the contracts has dried. Rinse, repeat all the way down the line, until you have poor schmucks bidding on sub-sub-sub-subcontracts for 100 yards or less of track. It was an easy way to skim and scam. I’m sure that doesn’t happen today.
I had contractors like this working for me. The reason was that we managed on headcount and the contractors were not included in headcount. After about five years the management figured out that they were more expensive then regular employees, and we wound up hiring all of them.
This is pretty much it exactly - in theory. In practice once you hire the person to retile the bathroom you decide they need to do the kitchen and then paint the bedroom, and then do the floors.
Plus, managers get power based on their budgets, and once they get authorization for a bunch of contracting money they don’t want to give it up.