Contractor Performance Reviews: Building strong relationships with your vendors

Strong long-term relationships require constructive feedback

Contractor performance reviews are an important part of ensuring you’re able to meet your project goals, but they’re not exactly everyone’s favorite subject. That’s because these tasks (as important as they are) tend to put the folks up for review on edge. That’s completely understandable; anyone who’s gone through any kind of performance review knows what it’s like to have your work scrutinized. 

All the same, though, these reviews are deeply important for setting expectations and ensuring accountability on both sides of the relationship. Approaching contractor performance reviews the right way can make or break the relationships your business has with its contractors. These reviews are constructive drivers that can help a business maintain its proficiency and productivity.

In this blog, we’ll cover:

• Why contractor reviews are so important 
• Key metrics to consider covering in your contractor performance reviews
• How to run contractor reviews that benefit everyone

Let’s get started.

Why are contractor performance reviews important?

As touched on above, contractor performance reviews play an important role in helping your business meet its goals. There are three key areas of focus that contractor reviews touch on: 

• Establishing a shared culture of accountability
• Ensuring strong relationships with your contractors
• Reducing risks and maintaining work quality

Contractor performance reviews are more than a routine check—they’re a strategic tool for improving operations.

Creating a culture of shared accountability

‍Your business and the contractors you work with have agreed to certain standards. The contract you’ve both signed has formalized your expectations—and at the end of the day, contractor performance reviews are all about accountability.

But beyond the simple question of whether or not the job was done on time and to your specifications, these reviews also represent a way to foster greater accountability on both sides of these relationships. By treating reviews as a conversation with your contractors, you’re able to develop a better understanding of your project as a whole. 

Approaching reviews as an ongoing conversation can help you figure out the “why” behind budget overspend and missed deadlines. These reviews help you understand the challenges your contractors are facing, in turn giving you a chance to address them to remove potential roadblocks. 

In other words, approaching these reviews as a broader conversation makes reviews a two-way street. Your contractors can bring forward their concerns, observations, and challenges to drive better outcomes. You’re left with a culture of shared accountability that benefits everyone involved.

‍Ensuring strong relationships with contractors

‍That shared accountability goes a long way towards building (and maintaining) strong working relationships with your contractors. Remember, reviews don’t exist to point out faults, they’re there to help everyone involved come to a better understanding and recommit to shared goals. 

But they’re also a great opportunity to highlight excellent performance. 

The top performers you work with represent a tremendous strategic opportunity for your business. A strong working relationship with contractors doesn’t just mean easier communication; these partners can help you drive greater success on future projects. 

Strong contractor relationships can help you access:

• Preferred contract terms and rates
• Reliable work teams for your projects
• Strategic partnerships for larger projects

Conducting tactful, effective performance reviews can unlock greater collaboration with your contractors. Let’s use a hypothetical to illustrate this:

ABC Builders is a mid-size construction company that works with various subcontractors for different project needs. One of their key subcontractors, XYZ Electrical, has been working with ABC for over three years—but recent projects have seen a noted decline in XYZ’s performance. 

Because of the level of trust and the existing relationship, ABC is able to address these concerns through scheduled reviews, gathering feedback to determine the best way forward. This sort of relationship allows businesses to intervene and take corrective action where appropriate, reducing friction while continuing to work with a trusted contractor.

By continuing to invest in the relationship, you can strengthen it and ensure you’re always able to access the skilled workers you need. 

‍Reducing risks and maintaining work quality

‍While most of what we’ve discussed so far focuses more on intangible (but no less important) benefits of contractor performance reviews, this one digs into the data. 

Risk is high on projects everywhere. Margins are tight. There’s greater scrutiny facing nearly every element of a project, and as such, being able to report on concrete information is more important than ever. 

Contract compliance is a major factor to review with your contractors. This involves everything from LEMs, labor hours, time sheets, worker classifications, gate entry and exit data… the list goes on. Conducting a data-focused audit of the contractors and vendors you work with can help reveal trends you can act on to reduce liabilities. 

Whether it’s cost overruns or safety incidents, assessing your contractors helps you proactively identify and mitigate risks while ensuring the highest quality of work is conducted. You need access to high-quality data, though, which we’ll touch on shortly.

Key metrics for contractor performance reviews

Safety records

‍Safety considerations are top-of-mind on every job site. When conducting a performance review, make sure you take contractor safety incidents (and lack thereof) into consideration. Common safety metrics include:

• Incident rate: the number of safety incidents per hours worked (or, in some cases, projects completed).
• Near-miss reports: the frequency of near-miss reports as submitted by the contractor.
• Safety violations: any identified hazards on the site or incurred via process.
• Inspections: how frequently work sites are inspected to ensure adherence with safety policies. 

Tracking these metrics not only helps identify higher-risk contractors but also highlights those who consistently prioritize safety, reinforcing a culture of accountability on your job sites.

Compliance

‍As anyone working in the supply chain space can attest, compliance is a broad and challenging topic to tackle. In the context of working with contractors and evaluating their performance, policy compliance is the name of the game. 

These metrics will typically include things like badging, entry/exit data, worker classifications, hours worked, and of course overall contract compliance. 

Compliance issues can add up over time, in turn creating serious bottlenecks for your projects. Regularly reviewing your contractors to ensure they are fully compliant with your policies and procedures can help you reduce these bottlenecks for greater productivity. 

‍Budget adherence

‍Budget concerns affect everyone. The end goal with these metrics is, as always, cost efficiency and driving greater value from your contractor relationships. It’s worth noting that cost overruns can occur for any number of valid reasons, but if it keeps on happening, it’s time to take a closer look at root causes. Common budget metrics include:

• Budget adherence: how closely do actual costs compare to estimated costs? 
• Change orders: measure the number and value of change orders initiated by the contractor.
• Value delivered: an assessment of whether the delivered work aligns with the value provided. 

Tracking these metrics over time helps identify patterns, allowing you to differentiate between unavoidable cost adjustments and recurring inefficiencies that need to be addressed.

Quality of work

‍Speaking of value and quality, you have to evaluate whether the services provided by your vendors helps you meet your goals without impeding productivity or cost. Not sure how to measure quality? It’s not as subjective as you’d think. 

Common quality metrics include: 

• Defect rate: a measurement of the work that must be redone because of defects or because it doesn’t meet required standards.
• Compliance with specifications: a measurement of how the completed work aligns with project specifications and expectations.
• Inspection results: the pass/fail rates recorded following routine inspections.

Reviewing past performance evaluations can give insights into previous work quality and reliability, in turn giving you a means of benchmarking performance. 

‍How to run effective contractor performance reviews

‍So now that you understand just how important contractor performance reviews are and what they should cover, let’s look at what goes into an effective review process. 

There are four key areas to focus on for running a good review: 

• Preparation
• Preparing the agenda
• Starting a conversation
• Gathering feedback

A structured approach ensures performance reviews are productive rather than adversarial, creating a framework for continuous improvement and stronger contractor relationships.

Preparation

‍Well before you sit down to speak with your contractors, you should start with open communication about your review process. By setting these expectations early and establishing a cadence, you’re able to ensure your contractors don’t feel caught off guard or stuck under the microscope. At the risk of sounding like a broken record, the goal isn’t to spot flaws, but to foster an ongoing conversation that ensure mutual success.

Naturally, projects have a lot of stakeholders who may want to be involved in the review process. Instead of inviting everyone on your team to grill your contractors, take the time in advance to consult with your stakeholders to see what matters to them so you can include those details in your process.

Tell your contractors what they should come prepared to talk about. For example, if you’ve spotted budget overruns, let them know you’re going to talk about how many times they met their budget, how many times they went over, and their reasons for why these things occurred. The idea is to define what “good” looks like for your contractors. 

‍Preparing the agenda

‍Based on how you define quality work and the metrics you track, prepare the agenda for what you’ll discuss during your review. For example, if you identified safety issues as a sticking point, but budgets were consistently respected, you should weigh things more towards a safety discussion. 

And this is critical: share the agenda with your contractors ahead of time. 

Remember, this isn’t a “gotcha” moment! Your contractors are equally invested in your success because it affects their future livelihood. Give them a copy of the agenda and let them know what you’ll be talking about early to help them prepare. 

‍Start a conversation

‍A performance review is always a conversation, but to take that dialog from good to great, you need to make sure that your contractors feel like they have a seat at the table. 

Opening up that dialog should be one of the first things you do when onboarding new contractors. Regardless, make sure your contractors have a chance to offer feedback on the agenda. After all, there may be topics they want to discuss to help ensure they can keep meeting your expectations. 

Collaborators that feel heard and valued are in a better position to align their goals with your own. 

‍Gather feedback

‍Getting feedback from your review process is critical to ongoing success. Your goal here is to understand why performance is what it is, which means asking questions and opening the floor to your contractors to figure out the reasons behind the data. 

Invite your contractors to share their own feedback and thoughts as part of your agenda. This doesn’t need to be a formal line item or anything, but making sure you gather feedback on your end can help you build more effective processes. 

Putting it all together

‍Vendor and contractor management is a two-way street. As much as you rely on these partners to help you complete your projects and reach your goals, they want to maintain a good working relationship with you for repeat business. 

Effective contractor reviews are a critical component of this relationship. Building strong communication, accountability, and mutual respect can help both parties achieve even greater success.

For insights into how you can unlock the power contractor data check out our ebook, The Ultimate Contractor Scorecarding Guide. Get your copy here.