How to Manage Subcontractors on Construction Sites: A Practical Guide

The Reality of Subcontractor Management

I've spent over fifteen years in the construction industry, and I can say without hesitation that managing subcontractors is one of the most critical — and most neglected — aspects of running any project. I'm not talking about large developers with dedicated procurement departments. I'm talking about the medium-sized construction firm with 10 to 50 workers, delivering residential, renovation, or industrial projects, and subcontracting almost everything: structural work, installations, joinery, painting.

On a project I managed in the Barcelona metropolitan area, with 22 active subcontractors running simultaneously, we ended up with three duplicate invoices, one subcontractor paid for uncertified work, and two others who stopped showing up because they hadn't been paid in two months. That wasn't bad luck. It was the direct consequence of manual management — spreadsheets and phone calls — with zero traceability.

This guide is what I wish I'd had back then.

Types of Subcontractors and How They Affect Management

Not all subcontractors are alike. Understanding the typology helps you design different control flows for each case.

By Specialty

• Structural subcontractors: reinforcement steel, formwork, concrete. Usually have well-defined measurements and clear certifications.
• MEP (Mechanical, Electrical, Plumbing) subcontractors: more complex to measure on site. Progress inspections are demanding.
• Finishing subcontractors: plastering, painting, carpentry, tiling. High turnover, highly variable performance.
• Civil works subcontractors: earthmoving, paving. Strongly tied to schedule and weather conditions.

By Contract Model

• Fixed price (lump sum): the subcontractor takes the measurement risk. Safer for the main contractor but tighter margins for the subcontractor.
• Unit price with measurement: the main contractor measures and certifies. Higher control but more administrative load.
• Cost-plus (time and materials): the subcontractor bills actual hours and materials. Useful for unpredictable work, but requires exhaustive daily tracking.

Legal Requirements You Cannot Ignore

In Spain, Law 32/2006 regulates subcontracting in the construction sector. It is not optional. Non-compliance carries serious penalties.

Key requirements every construction firm must have under control:

• Subcontracting log (Libro de subcontratación): mandatory on projects with an execution project. Must be on site, kept up to date, and available for inspection at all times.
• Subcontracting levels: the law limits subcontracting to two levels by default. Exceeding this requires express authorisation and justified cause.
• RERA registration: the Register of Accredited Companies is mandatory for any firm acting as contractor or subcontractor. Verifying your subcontractor is registered is not bureaucracy — it is your legal obligation.
• Safety coordination: every subcontractor must receive the site safety plan, sign the coordination record, and submit their own risk assessment specific to the project.

Documentation to Request Before Work Starts

Document	Mandatory	Update Frequency
Valid RERA registration	Yes	Annual
Public liability insurance	Yes	Annual
Social security contribution records (TC1/TC2)	Yes	Monthly
Site-specific risk assessment	Yes	Per project
Safety coordination record (signed)	Yes	Per project
Tax compliance certificate	Recommended	Quarterly
Social security compliance certificate	Recommended	Monthly

If any of these documents are missing, the subcontractor should not set foot on site. Full stop.

The Certification Process: How to Get It Right

Certifications are the mechanism by which executed work is measured and approved before payment is released. Done properly, this process saves you enormous headaches. Done poorly, it is the source of 80% of subcontractor disputes.

The Certification Cycle

1. Site measurement: the site manager measures what has actually been executed — not what the subcontractor claims, but what you have verified yourself.
2. Draft certification: the subcontractor submits their measurement and valuation proposal.
3. Reconciliation: you compare their proposal against your measurement. Differences are discussed and resolved with supporting documentation.
4. Approved certification: once agreed, the certification is signed. This is the authorisation to issue an invoice.
5. Invoice: the subcontractor issues the invoice based on the approved certification. Never the other way round.
6. Payment: according to contract terms (30, 60, or 90 days, with retention applied, etc.).

The most common mistake is letting subcontractors issue invoices without a prior approved certification. When that happens, you lose control of what you've paid and what you haven't, and reconciling against the budget becomes a nightmare.

Retention Amounts

It is standard practice to withhold 5% to 10% of each certified amount as a performance guarantee. This retention is released after the defects liability period (generally 12 months after completion of works). Always document retentions clearly and ensure they are reflected in the contract.

Payment Control: The Weak Point of Many Construction Firms

Payment problems with subcontractors run in both directions: either you overpay (certifying work not executed or paying duplicate invoices) or you underpay or pay late — and they walk off your site to work elsewhere, stalling your project.

In Spain, the Late Payment Law (Ley 15/2010) sets maximum payment periods. For business-to-business transactions in construction, the maximum payment term is 60 days from receipt of invoice. Missing this deadline automatically generates late payment interest.

Controls You Must Implement

• Certification register per subcontractor: what has been certified, on what date, for what amount.
• Invoice register: invoice received, supporting certification, amount, due date.
• Real-time outstanding balance: what you owe each subcontractor at any given moment.
• Due date alerts: so you never miss a payment deadline and accumulate interest charges.

Managing Delivery Notes with Subcontractors

On projects where subcontractors work on a time-and-materials basis or supply materials, delivery notes (albaranes) are the day-to-day control document. Without them, you will lose track of what actually happened on site.

Best practices:

• Every delivery note must be signed at the moment of delivery or execution, not afterwards.
• The person signing must have authorisation to accept on behalf of the main contractor — the site manager or foreman, not a labourer.
• Delivery notes must be cross-referenced with certifications: if a certification includes work that has no supporting delivery note, raise the alarm immediately.
• Store delivery notes in digital format, linked to the project and supplier. Paper gets lost.

Common Problems and How to Avoid Them

"This subcontractor is idle waiting for my decision"

Cause: poor planning of the work sequence. Solution: before hiring a subcontractor, be clear about what they need to start (access, prerequisite works completed, materials available). Plan weeks ahead.

"They've invoiced me for work that isn't in the budget"

Cause: verbal orders without documentary backing. Any additional work, no matter how small, must be formally confirmed in writing before execution. Verbal instructions are construction culture. In legal terms, they are worth very little.

"I don't know how much I've paid this subcontractor in total"

Cause: siloed management (invoices in the accounting system, certifications in a spreadsheet, contracts in a filing cabinet). You need a centralised system where the contractual relationship, certifications, and invoices are all linked.

"The subcontractor is threatening to leave unless I pay immediately"

Cause: accumulated payment delays. This happens when the main contractor has cash flow issues, but also when the payment schedule was not properly defined in the contract. If the contract says 30 days from invoice and you are at 60, they have a legitimate grievance.

Tools for Managing Subcontractors

For years, the industry standard was the spreadsheet. And there is nothing wrong with that for small firms with limited volume. But beyond 3 or 4 active subcontractors per project, or when you are managing multiple projects simultaneously, the complexity exceeds what a spreadsheet handles well.

The main options in the market:

• Generic ERP software (SAP, Sage, etc.): powerful but expensive and hard to adapt to the language and workflows of construction.
• Construction-specific software: platforms like Constrack, which integrate project management, budgets, certifications, and delivery notes in one place, using the terminology that construction professionals actually use.
• Tool combinations: project tracking in Notion or Airtable plus separate invoicing. It works, but the lack of integration creates blind spots.

The key criterion when choosing: can I see, in real time, what I've certified to each subcontractor, what I've paid, and what is still outstanding? If the answer is no, the system isn't good enough.

A Subcontractor Management Process That Works

After years of testing different approaches, this is the process I recommend:

1. Before hiring: verify RERA registration, collect all legal documentation, sign a detailed contract covering measurements, unit prices, payment schedule, and retention terms.
2. Project start: coordination meeting, safety plan sign-off, start-of-works record.
3. During execution: daily work logs (if on a time-and-materials basis), validate delivery notes on the spot, weekly progress meetings.
4. Monthly certification close: joint measurement, documented approval, invoice only after approval.
5. Payment: per contract schedule, with retention applied, logged in the system.
6. Project close: final account, release of retentions (when due), signed completion record.

Conclusion

Managing subcontractors well is not complicated — but it requires discipline and a system. The biggest enemy of good management is informality: verbal orders, invoices without certifications, documentation that will "come later." That informality carries a real financial cost that always surfaces at the end of the project.

Construction firms that have implemented clear processes and the right tools for managing subcontractors don't just have fewer disputes — they run more profitable projects. And at the end of the day, that's what matters.