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Subcontractors and in-house crews can both help a construction company grow, but neither model is universally better. Subcontracting can add capacity and specialist skills when workloads fluctuate; in-house crews can preserve sequencing control, know-how and the ability to self-perform important work. The practical choice is usually a deliberate mix: compare each work type on fully loaded cost, schedule reliability, quality, coordination, safety, workforce availability and knowledge retention, then track results by project.
At a glance
| Model | Best suited to | Main advantage | Main tradeoff |
|---|---|---|---|
| Subcontractors | Variable workload, specialist scopes and capacity peaks | Access to workers and expertise without maintaining all capacity in-house | Added coordination, quality and schedule-management demands |
| In-house crews | Recurring, strategically important or coordination-sensitive work | Greater continuity, sequencing control and retained knowledge | Recruiting, carrying and supervising capacity even when demand changes |
These are tendencies, not guarantees. A subcontractor may be the more reliable choice for a recurring specialty, while a company crew may be costly or hard to keep productive on highly variable work. Judge the arrangement on comparable scopes and actual project outcomes.
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What does the evidence say about subcontractors and in-house crews?
It says subcontracting is a substantial part of construction delivery in some markets, but it does not establish that one staffing model causes better growth or performance across the industry. The best-supported conclusion is to choose by project and work type, retain the capabilities the company needs, and measure the results.
Infrastructure Australia’s 2025 Infrastructure Market Capacity Report estimates that subcontractors deliver 41% of Australian infrastructure construction, based on bespoke analysis of Australian Bureau of Statistics data. That is an Australian infrastructure estimate—not a global construction figure or an estimate for every building contractor.
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In the report’s 2025 Industry Confidence Survey, more than half of surveyed businesses named access to workers and specialist expertise among subcontracting’s top benefits. Respondents also named reduced management and administrative workload (29%) and risk transfer (30%). Those responses help explain why firms contract work out, especially when skills or capacity are not readily available internally. They do not mean subcontracting eliminates management or risk: the hiring company still needs to coordinate interfaces and monitor delivery.
The same survey identified challenges in managing subcontracting or labor-hire relationships: 45% of respondents cited cost overruns, 42% cited quality inconsistencies and 34% cited coordination difficulties. These are survey responses, not proof that subcontracting caused the problems. For infrastructure projects specifically, the report’s figure gives 40% for quality inconsistencies. The distinction matters: do not treat 42% as the infrastructure-project figure.
There is also historical evidence of considerable variation by construction segment. A 2018 U.S. Bureau of Labor Statistics article estimated subcontractor labor as a share of total labor hours in 2012 at 44.2% for single-family construction, 74.5% for multifamily, 43.2% for highways and 84.9% for industrial construction. These are U.S. estimates for 2012, not current market shares. They show why a single industry-wide assumption about the right balance is misleading, not what a contractor should target today.
Infrastructure Australia also cautions that over-reliance on subcontracting can erode in-house sequencing and resource flexibility, reduce training opportunities and increase supervisory overhead. Its report summarizes the value of retaining capability this way: “Maintaining in-house delivery capability supports better sequencing, resource flexibility, and knowledge retention – factors that underpin productivity and resilience.” That is a rationale for protecting important capabilities, not a rule that every task should be self-performed.
When can subcontractors help a construction company grow?
Subcontracting can help when it gives a company access to capacity or expertise it cannot efficiently maintain on payroll, or lets it respond to demand that rises and falls. It can also support growth when a specialist scope would otherwise limit the projects a contractor can take on.
Use subcontractors as a capacity valve. If a company has a short-term workload peak, hiring permanently for that peak may leave it carrying unused capacity afterward. A qualified subcontractor can provide another option. That flexibility only has value if the work can be scheduled, priced and coordinated reliably; availability on paper is not the same as a crew ready when the project needs it.
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Keep fixed commitments aligned with dependable demand. Subcontracting may reduce the need to carry every trade’s full capacity through slow periods. But compare the total cost of the arrangement, not simply the subcontractor’s quoted amount against an employee’s wage. Include internal estimating, procurement, coordination and supervision, plus any schedule or rework effects that can be attributed to the work.
Recognize that risk transfer has limits. Survey respondents named risk transfer as a benefit, but a contract does not make coordination disappear. The company still depends on the subcontractor’s scope, timing and quality, and must manage how that work connects to other trades and project requirements. A poorly coordinated interface can undermine the flexibility the company sought.
Subcontracting is therefore not an automatic shortcut to growth. It can expand the work a company is able to pursue, but only when the contractor can procure and manage the work without creating greater cost, delay or quality problems elsewhere.
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When should a company keep work in-house?
In-house delivery is most compelling when continuity, sequencing, accumulated know-how or frequent coordination are important enough to justify maintaining the capability. Keeping a crew can also preserve an internal base of skills and create opportunities to train workers.
Protect work that strongly affects project flow. A crew under the company’s direct operational control may make it easier to adjust priorities or coordinate closely with adjacent work. That is particularly relevant where the task is recurring or tightly connected to the contractor’s broader delivery process. It is not a guarantee of better sequencing: internal crews still need planning, supervision and adequate capacity.
Retain knowledge the company would otherwise repeatedly buy back. If a contractor relies entirely on outside firms for an important recurring scope, it may lose practical knowledge about how that work is estimated, sequenced and delivered. In-house capability can preserve that knowledge and strengthen the company’s ability to plan future work. Conversely, an internal crew that lacks sufficient workload or training is not automatically a knowledge asset; the company needs to keep its skills current.
Consider supervision as a real cost. Self-performance does not remove management effort. It shifts some of the work into recruiting, scheduling, training and supervising employees. Infrastructure Australia warns that over-reliance on subcontractors can raise supervisory overhead, but the implication is not that in-house teams are supervision-free. Compare the actual indirect labor needed for each model.
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Keep strategic options open. A company does not have to choose between total self-performance and total outsourcing. It can retain a core level of in-house capability for recurring or coordination-sensitive work, then use subcontractors for variable demand and specialist scopes. This is a practical framework inferred from the evidence, not a universally tested formula.
How should you compare the true cost?
Compare the total cost per completed unit of work—not payroll cost on one side and a subcontractor quote on the other. The relevant question is what the company spends to deliver an equivalent scope at the required quality and timing.
- Define a like-for-like scope. Specify what is included, the expected quantity and quality, timing, and which party handles coordination or related tasks. A low bid for a narrower scope is not a lower cost for the same work.
- Build the in-house cost. Include wages and benefits, recruitment and training, equipment or other labor-related costs where applicable, supervision, and the cost of carrying capacity through periods with less work. Account for productive and idle time rather than assuming every paid hour becomes completed work.
- Build the subcontracted cost. Start with the bid, then include the company’s own estimating, procurement, contract administration and supervision. Consider the cost of coordinating interfaces, managing changes and addressing rework or schedule effects when they are attributable to the scope.
- Include time and quality effects. A cheaper arrangement can be more expensive overall if it contributes to delay, callbacks or rework. Use project records rather than a general assumption that either employees or subcontractors are inherently more productive or reliable.
- Review cash-flow exposure. Payment timing and working capital can affect a subcontractor’s financial capacity and the terms it can offer. Do not assume a subcontractor’s quoted price is unaffected by financing costs.
Infrastructure Australia recommends better project-level measurement, including budget against actual cost, planned against actual time, indirect labor costs and rework. The report says consistent project-level data comparing subcontracting and self-performance is lacking. That is an important limit: the industry statistics above can frame a decision, but cannot replace a contractor’s own comparable project data.
Billd’s 2024 National Subcontractor Market Report offers relevant context about subcontractor cash flow, but it is a vendor-published survey rather than a direct comparison of staffing models. Among 696 construction professionals surveyed in December 2023, the report gives an average wait of 57 days for payment after submitting a pay application. It also reports 14.1% profit margins for surveyed subcontractors who accounted for working-capital cost in bids, versus 12.7% for those who did not. Treat these as findings from that survey, not universal benchmarks or a prediction of any particular subcontractor’s finances.
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Track results by project and trade before reallocating work. A company-wide average can hide the fact that one scope benefits from an internal crew while another is more reliably delivered by a specialist subcontractor.
- Cost: budget versus actual cost and total cost per completed unit, including indirect labor and supervision.
- Schedule: planned versus actual completion and whether the crew or subcontractor was available when the work was ready.
- Quality: inspections, callbacks, defects and rework associated with the scope.
- Coordination: time spent resolving handoffs, scope gaps, sequencing conflicts and communication issues.
- Safety and compliance integration: whether the work is planned and managed within the project’s safety and regulatory requirements. Infrastructure Australia’s survey respondents included regulatory or compliance issues among reported challenges, though the report does not establish causation.
- Capability: skills retained, training opportunities, reliance on scarce external expertise and continuity between projects.
- Financial exposure: payment timing, change management and the cash-flow requirements associated with the arrangement.
Use the same definitions across comparable projects. Record the work type, project context and who supplied supervision or coordination; otherwise a cost or schedule comparison may reflect differences in scope or management rather than the staffing model itself. Review both favorable and unfavorable outcomes instead of using one successful job as proof that the model always works.
How do you decide which construction work to self-perform?
Start with the work, not a company-wide preference. Classify each recurring scope by demand, strategic importance, skill availability and coordination needs, then compare its measured outcomes under both delivery models.
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- List the work types the company delivers repeatedly. Separate recurring core work from occasional specialist scopes and temporary demand peaks.
- Identify the capability at stake. Ask whether doing the work internally preserves important sequencing knowledge, continuity or training, and whether the company can actually maintain the necessary skills.
- Check the labor market and workload pattern. If skilled workers are difficult to recruit or demand is irregular, subcontracting may offer access and flexibility. If work is dependable and central to delivery, an internal crew may be more viable.
- Compare complete costs and delivery records. Include supervision, indirect labor, rework, schedule reliability and the cost of maintaining capacity—not just hourly wages or the bid price.
- Test the coordination burden. Consider how many interfaces the scope has with other work and whether the company has the systems and supervisors to manage them effectively.
- Choose a trial allocation and review it. For future comparable work, document the rationale and track budget, time, indirect costs, quality and rework. Adjust the mix based on accumulated results.
For many firms, the resulting answer will be a portfolio: keep enough internal capability to protect recurring, important or coordination-sensitive work, and use qualified subcontractors where variable demand or specialist expertise makes that the stronger fit. Treat this as a decision framework, not a prescribed staffing ratio.
What can go wrong with either model?
Each approach can fail when the company assumes the delivery model will solve a problem that is actually about planning, management or workload. The warning signs differ, so diagnose the cause before switching models.
Subcontracting risks: underestimated coordination, inconsistent quality, cost overruns, schedule slippage or compliance problems. These issues appear among the challenges reported in Infrastructure Australia’s survey, but survey responses do not establish that subcontracting caused them. A company should examine scope clarity, handoffs, supervision and actual project records before concluding that the model itself is responsible.
In-house risks: a mismatch between the crew’s capacity and available workload, difficulty recruiting or retaining needed skills, and the cost of supervision, training and idle time. Retaining a crew only makes sense if the company can keep the capability useful and productive enough to justify its full cost.
Mixed-model risks: unclear boundaries between employee and subcontractor responsibilities, inconsistent expectations, duplicated supervision or gaps at trade interfaces. A hybrid approach is not automatically simpler; it requires deliberate assignment of scope and coordination duties. Where the work crosses organizational boundaries, plan the handoff as carefully as the work itself.
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Does subcontractor software use change the decision?
Software adoption is useful context, but the available survey does not show that a particular tool—or technology adoption generally—makes subcontracting a better choice. Billd’s December 2023 survey reports that 71% of respondents used estimating or takeoff software and 68% used project-management software. Those figures describe reported category adoption among survey respondents, not the suitability of any product or proof of better project outcomes.
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For a contractor deciding between the models, the useful question is whether its estimating, project-management, accounting and bid processes capture comparable scope and delivery data. Infrastructure Australia’s recommendation to track project-level actuals remains central: better records can make the comparison more informed, but software does not remove the need to define scopes, coordinate work and evaluate results.
How should a growing contractor put the decision into practice?
Make staffing decisions at the work-type level, document the tradeoffs and revisit them as the company’s workload and capabilities change. Growth is not just taking on more projects; it also means delivering them without losing control of cost, schedule, quality or the skills needed for future work.
A practical operating policy can define which scopes the company prefers to self-perform, which are commonly subcontracted, and what conditions trigger an exception. For example, a specialty scope may ordinarily be subcontracted, but an unusually tight sequence or unavailable specialist could change the choice. A recurring core scope may ordinarily be retained in-house, but a temporary demand spike may still justify outside capacity.
Use comparable completed work to refine those rules. When the company awards a subcontract, record the full internal effort needed to manage it. When it self-performs, record the loaded labor and supervision costs, including periods when the crew lacks productive work. Then compare outcomes by scope and project conditions. This is more useful than adopting an industry-wide subcontracting percentage, especially when the published figures refer to different segments, countries and years.
Finally, treat the model as adjustable. A firm may build in-house capability as demand becomes more predictable, or rely more on subcontractors when projects become more specialized or uneven. The aim is not to reach a permanent balance for its own sake; it is to preserve the capabilities the company needs while using outside capacity where it genuinely improves delivery.
Frequently Asked Questions
What does it mean to self-perform construction work?
Self-performing generally means the contractor delivers a scope with its own workforce rather than engaging another company to perform it. The precise division of responsibility depends on the contract and the work arrangement, so define scope and accountability clearly for each project.
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Why might a subcontractor include financing costs in a bid?
A subcontractor may need working capital while waiting for payment, and that financing burden can influence pricing. Billd’s 2024 report says surveyed professionals waited an average of 57 days after submitting a pay application for payment; that is a survey finding, not a standard payment term for every project.
Do construction companies use subcontractors more for some kinds of projects?
Historical U.S. BLS estimates show that subcontractor labor’s share varied by segment in 2012, from 43.2% of labor hours in highways to 84.9% in industrial construction. Those figures are too old to describe current shares, but illustrate why segment and date matter when interpreting industry-wide claims.
