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.

BREAKING DOWN '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.

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