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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  1. Why is a bank guarantee important in a long-term project contract?

    A bank guarantee promises that if the company carrying out the project defaults on any of its loans, the bank will cover ... Read Full Answer >>
  2. 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 >>
  3. 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 >>
  4. How are joint ventures regulated in the United States?

    Joint ventures are a very specific type of business arrangement. They can be organized in several different legal structures, ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
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