A prime contractor is the company that has the primary responsibility for the overall completion of a construction or renovation project. This company may also be known as the general contractor, and is hired by a project owner to oversee the entire building process. A prime contractor may hire multiple subcontractors to perform work on the project, but these companies will not be directly engaged in a contract with the project owner.
Most construction contracts are issued after a bidding phase, in which the lowest qualified bidder is awarded the project. The owner will issue a single contract to a construction company, who will then become the prime contractor on the job. Once the contract has been signed, the company is responsible for all the tasks required to complete the project. The owner is only responsible for tasks that were excluded from the contract. He may self-perform this work, or hire additional contractors to complete these items.
The prime contractor can use several different methods for completing the project. He may use his own employees to perform the required work. He may also hire specialized contracting companies to perform specific tasks. These companies are known as subcontractors, because they are contracted by the primer contractor, not the owner. In essence, they work for the general contractor, not directly for the owner.
In some cases, the prime contractor may not perform any work himself. Instead, he will hire subcontractors to complete the project while he oversees the job. This type of completion method is often known as construction management.
Some project owners may include requirements for subcontractors in the prime contract. This means that the prime contractor can only hire firms that have been approved by the owner. The prime contractor may also have to include specific language in the subcontracts based on the owner's requirements. Even in these types of situations, the subcontractors are not considered contractually bound to the owner.
The prime contractor must complete the job according to his agreement with the owner. If he hires subcontractors, he is legally responsible for their failures, as the ultimate responsibility for the job rests with him. He must maintain the project schedule, keep within budget, and deliver the job to the owner as promised. He must carefully balance the interests of the owner with the needs of his own company when it comes to budgeting, profit, and getting the job done per the contractual agreement.