Subcontracting strategies: the relationships between contractors and sub-contractors in Brazil

Abstract

Construction projects in Brazil are more and more undertaken by subcontractors under the direction of a major contractor, according to what is happening in different parts of the world. This paper documents the results of an exploratory study about the level of integration found in a sample of 60 building companies of Florianópolis, a city of some 300,000 inhabitants in the south of Brazil. An analysis was conducted on the contractual relationships between general contractors and subcontractors of 20 companies. The paper initially investigates the issues general contractors have to face when they decide to integrate their business with those of the subcontractors. In order to do so corporate and operational strategies concepts are brought into light. It then investigates the process of organisation and management of subcontractors in these companies focusing on the contractor's and subcontractor's perceptions. An analytical framework describes the contractor and subcontractor relationships including the selection criterion, partnering development, conflict resolution, process control and legal contracts. The data was collected through structured questionnaires. The results confirm the low level of vertical integration in the building industry. The primary characteristic of the subcontracting process is the total submission of the majority subcontractors to the building companies, since the contractual relationships are influenced and dominated by the major party. The subcontractors, general are small companies, which informal process and their origins are in building laborers.