Subcontracting

AAA

DEFINITION of 'Subcontracting'

The practice of assigning part of the obligations and tasks under a contract to another party known as a subcontractor. Subcontracting is especially prevalent in areas where complex projects are the norm, such as construction and information technology. Subcontractors are hired by the project's general contractor, who continues to have overall responsibility for project completion and execution within its stipulated parameters and deadlines.

INVESTOPEDIA EXPLAINS 'Subcontracting'

Subcontracting is very useful in situations where the range of required capabilities for a project is too diverse to be possessed by a single general contractor. In such cases, subcontracting parts of the project that do not form the general contractor's core competencies may assist in keeping costs under control and mitigate overall project risk.

RELATED TERMS
  1. Lien Waiver

    A document from a contractor, subcontractor, supplier or other ...
  2. Deliverables

    A project management term for the quantifiable goods or services ...
  3. Scope

    A project management term for the combined objectives and requirements ...
  4. Outsourcing

    A practice used by different companies to reduce costs by transferring ...
  5. Project Finance

    Defined by the International Project Finance Association (IPFA) ...
  6. Independent Contractor

    A self-employed taxpayer that controls his or her own employment ...
RELATED FAQS
  1. Are waivers of subrogation clauses ever ineffective in preventing a third-party lawsuit?

    Sometimes waiver of subrogation clauses are ineffective at preventing a third-party lawsuits. In determining who is responsible ... Read Full Answer >>
  2. What's the difference between outsourcing and subcontracting?

    Business leaders often blur the lines between outsourcing and subcontracting, but both practices are distinct, and each is ... Read Full Answer >>
Related Articles
  1. Home & Auto

    Do-It-Yourself Projects To Boost Home Value

    These simple projects can add value to your property without taking too much out of your wallet.
  2. Fundamental Analysis

    Internal Rate Of Return: An Inside Look

    Use this method to choose which project or investment is right for you.
  3. Retirement

    5 Secrets You Didn't Know About 401(k)s

    If your employer offers a 401(k), that should be your first stop for retirement savings – especially if your contributions are matched.
  4. Retirement

    5 Secrets You Didn't Know About Traditional IRAs

    A traditional IRA gives you a current-year tax benefit and future years of tax savings – minus the income restrictions that limit who can have a Roth IRA.
  5. Retirement

    How (And Why) To Open an IRA Now

    Take these simple steps to set up an Individual Retirement Account that will save you tax money and set you up for the future.
  6. Entrepreneurship

    5 Small Business Ideas With Big Potential

    Here are five businesses almost anyone can start their own and grow as they gain experience.
  7. Stock Analysis

    What Makes LinnCo Different From MLPs?

    MLPs are some of the favorite investments of dividend investors, as the surge in the energy industry increased the amount of income that MLPs paid out to.
  8. Investing

    What's a Transfer Price?

    A transfer price is what one unit of a business charges another unit of the same business for a good or service. The transfer price is usually close to the prevailing market rate when different ...
  9. Entrepreneurship

    Best Checking Accounts For Small Businesses

    What you need to know to choose the best checking account for your small business – and where to look.
  10. Investing

    Who are Stakeholders?

    “Stakeholder” is used in commerce to describe any party who has an interest in a business or enterprise. Traditionally, stakeholders in a corporation are shareholders, employees, customers and ...

You May Also Like

Hot Definitions
  1. Asset Class

    A group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same ...
  2. Fiat Money

    Currency that a government has declared to be legal tender, but is not backed by a physical commodity. The value of fiat ...
  3. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  4. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  5. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  6. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
Trading Center