Partnerships Vs. Subcontractors

When you have a project that involves many separate tasks, you may need specialists. For example, if you are manufacturing, shipping and marketing a new product, you may not have the expertise you need to handle those functions. You can either contract those tasks out to someone who has experience with them, or you can form a partnership with another company, either as a joint venture or a permanent partnership, to handle the additional tasks.

If you form a partnership to complete part of the tasks you need for a large project, you will have a great deal of control. Because you put your money and resources into the venture, you have a say in how things are done and how quality is measured. In addition, you can schedule tasks so that they fit the needs of the project as a whole, rather than depending on a separate company to deliver on deadline.

Your partnership for secondary tasks can take your attention away from the big picture. You can focus so much on problems in the partnership that you overlook the needs of the project. Also, you have an obligation to a partner to make the venture possible, and this can conflict with what you need for a project. For example, if you need units manufactured for a marketing and selling venture, the partner in the manufacturing enterprise may see an advantage in avoiding paying overtime by extending the delivery date. You might insist on manufacturing units at a reduced profit or even a loss so that you can keep the rest of your project on schedule.

When you subcontract for a task, you have leverage. You can insist on specific performance of agreed-upon services. Failure to meet your deadlines or standards can result in you terminating the contract. This provides a great deal of incentive for subcontractors to deliver what they've promised. In addition, you can seek a subcontractor who has experience with the task you want performed. All insurance and overhead remain the responsibility of the subcontractor, and you can focus on getting the work you want from the subcontracting firm, rather than running it.

Subcontractors may miss deadlines, deliver substandard work, or get too busy with other projects to give yours the attention you want for it. Even with a contract, you may find it too expensive to start over with another subcontractor. This can put you at the mercy of a company that may not care as much about your project as you do. You must spend a lot of time nourishing the relationship with a subcontractor, and you have to inspect the work the subcontracting company does.