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The subcontracting is a contract by which a company known as “client” requires of another company known as " under-traitante" to carry out part of its production or components necessary to its production. The sub-contracting companies are companies to which certain parts of work are deputy.

The subcontractor is different from the simple supplier because it manufactures a product designed by the client or, often, in common with him. The product is manufactured by the subcontractor for the exclusive account of the client and its name does not carry. The subcontractor engages exclusively on conformity of his execution compared to the directives of the client.

There exist 3 types of subcontracting:

of speciality: the company, not having know-how necessary to manufacture the product or to carry it out, gives the order to a company to do it.
of capacity: the company is in the incapacity to answer, at a given moment, to produce additional orders.
of market: a company entrusts to another company a market concluded with a building owner. That thus connects the building owner, the company client, and the subcontractor.

Legal considerations

Economic considerations

Subcontracting in industry

Advantages and disadvantages of subcontracting

For the client the advantages are numerous:

- The task sharing makes it possible to the client to concentrate his means on the activities which he considers strategic;

- The company client supports only variable loads. She thus avoids raising her break-even point. She has neither personnel to engage, nor material to be bought. She can make play competition and lower the prices;

- Flexibility is improved. Subcontracting makes it possible to face the peaks of activity;

- Organisational complexity is reduced;

- The subcontracting of speciality gives access to technologies or processes which it would be difficult with the company to get (it would be necessary to engage specialists, to assume loads of formation, etc). To build cars and to manufacture headlights raise of knowledge-faires different, the manufacturer of cars will thus be addressed to a subcontractor who will manufacture the headlights of which it needs according to the specifications his research department. It becomes possible to find synergies, complementarities;

- In the field of the services the externalisation makes it possible to make carry out tasks which do not form part of the “trade” of company (reception, restoration, cleaning, etc) by specialized companies;

- In certain cases subcontracting was used to circumvent rigidities of the Law the labor, and to put the pressure on the people receiving benefits, was put in situations more precarious than if they were paid company client.

Certain sophisticated forms of subcontracting (Impartition, Undertaken in network) further go than the assumption of responsibility from certain activities, but aim at making cooperate several independent entities with the design and the completion of projects which the initiating company does not have interest with, or does not have the possibility, to realize entirely by itself.

Certain sectors are particularly users of subcontracting, for example the Auto industry, transport. In this field, it is even of rule which the subcontractors externalisent in their turn and certain companies have the aim of being suppliers of second or third rank.

In the data-processing field, the firms of subcontracting are selected software firm (services company in data processing).

The subcontractor has a production capacity available and/or a knowledge to make particular. subcontracting brings the following advantages to him:

- To have a assured level of orders. There is a clear evolution in this field: the relations between the clients and the subcontractors evolve to reports/ratios of partnership based on mutual confidence. the subcontractor obtains longer-term guarantees and contracts;

- To have limited services mercatic: no the mark to be promoted, few expenses of publicity, not need of a packed business service, etc;

- the services of design can often be limited because the products are designed by the client or in collaboration with him. Often it profits from technical supports on behalf of its client and sometimes even of financial supports (near the bankers);

- On the whole the services of the subcontractor being less diversified his overheads are less low;

- Lastly, its growth is leant with that of dynamic large companies what gets opportunities to him to seize.

. There exist nevertheless disadvantages and limits for the clients:

- The clients choose their subcontractors for considerations of price, quality and deadlines. If it is rather easy to obtain the respect of the prices it is not always the same with regard to quality and the deadlines. To avoid the risks the clients often force inspections to the subcontractor or certifications (of the type ISO 9000);

- The cost is sometimes higher than the internal production;

- A form of dependence is created. The client is obliged to deliver certain data (" secrecies of fabrication" , etc) with the subcontractor who will be able to then use them with other partners or with his own profit. Thus certain products whose manufacture had been delocalized, in particular in Asia, are competed with today by those of the former subcontractors who sometimes became the leaders of the market.

Limiting for the subcontractors:

- The subcontractor is often in a situation of technical and commercial dependence compared to his client;

- It is in position of weakness because it undergoes the competition of its fellow-members and that of the client himself which can always take again the production under treated;

- In the event of recession the subcontractors are often the first victims because the client prefers to take again manufacture sub-contracted to avoid the conflicts with his personnel;

- the sub-contracting company must adapt permanently because the clients change techniques, are integrated or disappeared. With the universalization of the economy subcontracting becomes international.

Critical relating to uses considered to be excessive

Some regard subcontracting as being able in many cases to weaken (socially, psychologically, in their health, and sometimes economically) of the workers.
On estimates sometimes that they in certain companies are exposed systematically to the risks. Being sometimes less informed of these risks, they would be then even more vulnerable there.
Lor Santé is followed by the Occupational medicine, and as hard-working are very mobile, they escape bénéfiecient even less than the others of a possible long-term medical monitoring or epidemiologic.
As example, in France, CGT Mine-Energy (FNME - CGT] still shows in 2007 EDF of " ingénier to circumvent the legislation " , via purchase of service, parallel with regular suppressions of stations, and via its policy with respect to the subcontractors… for " not to maintain in their employment " part of the 22.000 paid subcontractors who, according to CGT, undergo more than 70% of the irradiant amounts in the nuclear plants, being less protected than the 20.000 agents from EDF, in 19 nuclear plants where they intervene, in particular for material repairs and talks.

Subcontracting in the building

See too

Internal bonds

Crowdsourcing
Outsourcing or Impartition
Flextronics

External bonds

Subcontracting offshore oil rig News
Place on the market of people receiving benefits

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