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BUSINESS AND TRAINING
Standard-form Subcontracts ( Part 1 )
Uwe Putlitz is a registered professional Architect and Construction Project Manager , a Fellow of the Royal Institute of Chartered Surveyors ( RICS ) and is a visiting lecturer at the School of Construction Economics and Management at the University of the Witwatersrand . Having recently retired as the Chief Executive Officer of the Joint Building Contracts Committee ( JBCC ) he specialises in the avoidance of construction disputes by way of lectures , technical articles dealing with aspects of contract administration for various industry publications arising from the use of Standardform Contracts including the Federation Internationale des Ingenieurs-Conseils ( FIDIC ), the General Conditions of Contract ( GCC ), the JBCC or the New Engineering Contract ( NEC ) to find an acceptable settlement without resorting to legal processes , where possible . More info : info @ buildstrat . co . za
“ Subcontractors are
chosen by following a procurement process appropriate to the project .”
By
Uwe Putlitz
Uwe Putlitz takes us through the ins and outs of standardform subcontracts to broaden our understanding of the topic . We kick off this month with part one .
In order to get to grips with subcontracts , it ’ s important to understand what a subcontractor is .
A subcontractor , like a contractor , undertakes to provide labour and materials to execute described works within a defined period for an agreed payment . Such a written ( or spoken ) agreement is enforceable by law . The principal contractor ( PCr ) is appointed by the employer . A subcontractor is appointed by the PCr using a ‘ back-to-back ’ ancillary agreement binding the subcontractor to the same performance conditions applicable in the principal contract ( PC ).
Subcontractors are chosen by following a procurement process appropriate to the project . A ‘ domestic subcontractor ’ ( DS ) is appointed by the PCr generally for ‘ wet ’ trades such as bricklayers and plasterers , without instruction from the principal agent / contract administrator ( PA / CA ). No provision exists for a direct payment from the employer on default of the PCr , nor is the PCr entitled to a revision of the date for practical completion where a DS is at fault .
It may be appropriate to invite potential specialist ( sub ) contractors early during the design phases as part of the procurement process – to be appointed as a ‘ nominated ’ subcontractor ( often before the PCr is appointed ) or as a ‘ selected ’ subcontractor ( term only used in JBCC agreements – where the PCr is involved ). A ‘ provisional sum ’ for the supply and installation of such work as part of the contract sum is included in the tender document / bills of quantities .
A ‘ selected subcontractor ’ ( SS ) is appointed by the PCr in consultation with and on instruction from the PA / CA for ‘ specialised ’ work that may include the ‘ design ’ of utility services or finishes , etc , typically based on longstanding successful business relationships – the PCr is at risk for the correct and timely execution of the work by a ‘ selected ’ subcontractor . A ‘ nominated subcontractor ’ ( NS ) is appointed by the
PCr on instruction from the PA / CA for specific work described in the tender documents . The PCr is not involved in the selection process – but may object to such an appointment on ‘ reasonable ’ grounds where such NS may “ lack the competence and / or the capacity to execute the subcontract works within the specified period and / or budget .” As the PCr is exposed to greater risk due to the poor or nonperformance by a NS , the PCr may be entitled to an extension of time and / or additional costs in the event of default .
Note : Some employers seek to ‘ nominate ’ a subcontractor and force the contractor to appoint him / her as a ‘ selected ’ subcontractor to pass the non-performance risk to the contractor . This practice is unethical . Note : If the employer and / or agents choose to call for tenders for subcontract works before the contractor is appointed such appointment must be as ‘ nominated ’ subcontractors . Note : The employer is not a party to any ‘ subcontract agreement ’ and there is no privity of contract between the employer and a ‘ nominated / selected subcontractor ’. Note : Why tender ? The advantages of tendering are to provide competition within the industry and therefore reduce costs . Iacobucci 1 stated that “ a prudent owner would also consider the capability and experience of the contractor and how realistic the tender price was …” Note : The employer cannot negotiate a price with some tenderers after tenders have been received .
1 Domestic Construction Dispute Resolution – a Guide for the Layperson – LC Lawyers - accessed on 2023-01-23
The employer may appoint a direct contractor ( DC ) ( a term only used in JBCC agreements ) for unique aspects of the project , with the consent of the PCr . The PCr is not responsible for the correct or timely execution of the works or payments – but
www . plumbingafrica . co . za @ plumbingonline @ plumbingonline @ PlumbingAfricaOnline August 2024 Volume 30 I Number 6