Standard form subcontracts
BUSINESS AND TRAINING 9 by
Uwe Putlitz
Uwe Putlitz goes into detail about standard form subcontracts in the first part of this two-part series .
Understanding subcontracts begins with understanding who and / or what a subcontractor is as well as the rights and obligations of all parties concerned . Let ’ s begin at the beginning .
What / who is a subcontractor a . 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 ( PCt ). b . Subcontractors are chosen by following a procurement process appropriate to the project . c . A domestic subcontractor ( DS ) is appointed by the PCr generally for wet trades including bricklayers , plasterers , etc 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 . d . 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 ’ ( SS - a 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 . e . A 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 long-standing successful business relationships . The PCr is at risk for the correct and timely execution of the work by a ‘ selected ’ subcontractor . f . 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 non-performance 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 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 . g .
h .
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 is responsible for compliance with statutory health and safety regulations by a DC . The tender document / bills of quantities may include a ‘ prime cost ’ amount in the contract sum for the delivered cost of materials and goods from a specified supplier . No industryspecific standard supplier agreement is in common use .
Standard-form sub-contracts ( SfS ) a . In South Africa , the Construction Industry Development board ( CIDB ) recognises four Standard-form Contracts ( SfC ) published by the International Federation of Consulting Engineers
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
" It may be appropriate to
invite potential specialist ( sub ) contractors early during the design phases as part of the procurement process "
March 2025 Volume 31 I Number 01 www . plumbingafrica . co . za