How do you deal with subcontractor insolvency, breach, or termination?

That's why payment shall be based on progress billing to avoid extra losses on your project. I suggest being safe a piecework contract shall be made for the entire project. You have the program of works and phases of deliverables from the roadmap you prepared, I suggest you let your sub-contracts do the job under contract on the piece-by-piece you prepared to ensure effective supervision and monitor their job according to standards, plans, and specifications. Failure on their part as early, you can take over to avoid hefty damage to the entire project. This will also avoid misunderstandings between you and the sub-contractors.

Yes, you can terminate the sub-contractor because of a breach of work, provided specific clauses on the job contract agreements, as the primary contractor, you have the right to terminate the job base on the ground specified on the job contracts agreement, and the contract agreement must always be favorable at your end as the primary contractor.

Everything is stipulated in the job contract agreement, to make sure let your legal advisor prepare the documents for review, once it was finalized you have a pro-forma document as the basis of any future job contracts to execute, of course, it will vary on the type of jobs and duration of project completion as stated part of the agreements.

I think it would rarely happen in a legal suit regarding the job contract. Before the signing of contracts, the documents were duly prepared, examine, or reviewed by your legal advisor and even you as the signatory of the job contract agreements. As I've said, the agreements must always be favorable at your end based on various clauses stipulated thereat, such as the breach of poor quality of work, delays, and lack of work standards and specifications, that will be favorable on your stand as the primary contractor.

Procedure for any possible subcontractor insolvency, breach, dispute, or termination should be explicitly defined in the subcontract, reserving the rights of the contractor. PBG, APG, LD, remedies, dispute resolution, governing laws, etc. should be secured under the subcontract and any overpayment to the subcontractor should be avoided. As soon as potential failure of the subcontractor is become aware, the subcontractor should be closely monitored and communicated on how to prevent the failure and a Plan-B demonstrating possible impacts of replacing the subcontractor should be prepared not to jeopardize the cost, time, and quality objectives as much as possible.

That's why to avoid that circumstance, if possible, do the job contracts phase by phase based on your timelines and roadmap, and if necessary hire as many as needed 3 or four sub-cons, if needed, to mitigate cost or budget reduction and control your cash out release payment on progress billing based on accomplishments.

At the procurement stage, financial health and technical capability of each subcontractor should be assessed through due diligence and pre-qualification forms. This will expose signs of whether a subcontractor can successfully deliver a project. In such assessments, bidders' financial statements, ongoing litigations, non-performance records, similar experience, resources / assets, etc. should be deeply evaluated, and any bidders likely to become insolvent or technically incompetent should not be qualified or shortlisted.

Financial position and performance of the subcontractors should be periodically monitored (ideally twice a year) through subcontractor evaluation forms, and a subcontractor giving signs of potential insolvency, failure to deliver, or termination should be strictly monitored. A plan to determine risks and mitigate impacts for two possible scenarios should be framed before it is too late: proceeding with the existing subcontractor vs replacing it with a new subcontractor. The best route should be selected by taking necessary actions to meet the CTQ requirements of the project.