Subcontracts

Unarguably, the appointment and management of Subcontractors is the area with the most potential for improvement. The fact that Employers, or their Agents do not pay sufficient attention to this part of the Construction Works, cause major quality, cost, time and health and safety problems. Albeit the fact that a large portion of the Construction Works is procured and constructed by Subcontracts, especially in the Building sector, it is the perception of Principal Agents that it is the Principal Contractor’s concern and accordingly they do not interfere with this Contractual Relationship where their client, the Employer, does not have any privity of contract.

However, if perusing the JBCC 2000 suite of Contracts, it is evident that the Principal Agent has a prominent role to fulfil in terms of the Nominated and Selected Subcontracts and a lesser role pursuant the Domestic (MBSA Agreement) Subcontracts. The Principal Agent’s lack of involvement may cause his / her client to pay more for the Subcontract Works they should. Notwithstanding the requirement that the appointed Principal Contractor is obliged to appoint the Subcontractors as agreed between the Employer and the Contractor, on the basis of a standard JBCC Subcontract Agreement, most Subcontractors breach this obligation by incorporating their own onerous “Special Conditions” transferring considerably more risk to the Subcontractors than provided for in the agreed standard agreement.

Accordingly, the Subcontractors need to Tender higher to allow for the increased risk introduced by the “Special Conditions” which include inter alia longer payment periods, pay as paid, longer liability for the care of the works and related damages, contra charges unilaterally enforced and delay damages levied.

Most Employers are ignorant on the fact that the above scenario cost them in the final analysis considerable amounts of money and that it even may constitute uncompetitive tendering in a government procurement process. Although the aforesaid is less problematic pertaining the Engineering Construction where the Contractors take full responsibility for their Subcontractor’s risk and payment, the lack of adequate Subcontracts still cause many problems including delays, disputes, compromise on quality and possible insolvencies.

We propose that all Subcontract “Special Conditions” and in some respects, Suppliers Conditions, be scrutinised and approved by the Employer to ensure the maximum benefit for the project as a whole, including the Subcontractors interests.