The construction industry can be complex. A client decides something needs to be built, then develops a timeframe and budget for the project. A consultant will oversee the project which includes designing the build and choosing appropriate construction contractors.
Contractors will ‘bid’ for the opportunity to carry out the construction work. It’s their job to make sure the project is built correctly, taking instruction from the consultant.
Job roles within contractors include site managers, construction workers, plumbers, electricians, engineers and much more. It can be a tough job for several reasons:
- Long working hours
- Night shifts or irregular shift patterns
- Working in difficult conditions, such as in bad weather
- High levels of responsibility, with considerable risk
Selecting the right contractor
Ultimately, contractors are responsible for delivering the build. So it’s important to choose the right contractor for your project.
Ask the right questions for the outset – you should know about the contractor’s past experience, capacity to complete the project and information about their finances. As a rough estimate, the value of the contract should be less than 20% of the contractor’s annual turnover.
You will then need to understand how the contractor will approach your project. Will they complete the build on time, and to specification? Asking shortlisted contractors to submit a tender is the most effective way to decide on the right candidate. Don’t always choose the contractor who submits the lowest quote – you should choose a reputable contractor who will perform reliably and to a high standard.
Contractors must also have adequate insurance, with many clients requiring up to £10 million Professional Indemnity Insurance cover. As this is sometimes difficult to secure, contractors must have a sound risk management strategy in place. This will demonstrate good internal practices and highlights the company’s dedication to mitigating risks. Good risk management means contractors are less likely to need to make a claim – thus potentially leading to an affordable and achievable insurance premium which can be sometimes difficult to secure.
Contractors are likely to put together an insurance proposal that presents risks in the best way, so they should be well-versed in providing key information about their business. If you’re looking for a responsible, reliable contractor, ask them to submit a similar proposal. It should include:
- Proof the contractor has had their risk professionally assessed
- Demonstration of ‘above and beyond’ risk mitigation
- A sound Business Continuity Plan to demonstrate the contractor is prepared if the worst does happen
- Professional Health & Safety policies
- Representation of claims history to demonstrate the contractor is a safe bet
- Demonstration of good ethical practices such as CSR activity, charity partnerships and staff wellbeing to show the business is committed to operating well
- Good business history, including information on the people who own and run the business
- Industry awards, accreditations and qualifications
The Professional Indemnity Crisis
Clients require contractors to have Professional Indemnity Insurance cover, Public Liability Insurance, Plant and Equipment Insurance and Employers’ Liability Insurance if the contractor employs staff (both permanent, temporary or casual).
The insurance market is currently hard – with many insurers reducing their capacity to insure contractor or sub-contractor risks. This means it’s increasingly difficult for contractors to get competitive quotes or an alternative option if their premiums rise.
If contractors are not able to get adequate insurance cover, or the cost becomes too prohibitive, they may not be able to commence work on projects.
This has a knock-on effect on the industry, as if a contractor is unable to secure insurance they will be unable to commence work on a project. This leads to a time delay and, in extreme cases, monetary loss.
Never employ a contractor that doesn’t have adequate insurance
Similarly, it’s sometimes counter-productive to expect contractors and subcontractors to have an unusually high Professional Indemnity Insurance limit. This could be particularly difficult for them to secure. Ultimately, a contractor should have sound risk management and be able to demonstrate its health and safety procedures and policies. Mitigating risk is incredibly important, and the priority should be working with a reputable, qualified and safe contractor with good working practices.
Struggling to get construction insurance?
Our insurance brokers are experts in the industry and can help you get the cover you need for the best price. This is because we can present your risk in the best way to insurers, and can approach the whole insurance market to find the most appropriate cover for your business. Contractors might need multiple insurers to insure a single risk, but working with a broker will ensure the best options are combined to create the right cover tailored to you.