Specialist sub-subcontractor

1.0 Introduction

In construction practice, not only project manager, Architect, Quantity Surveyor, contractor carrying the important role, specialist sub-subcontractor also carrying the important role in order to success the construction project.

A sub contractor is a person or a company hired by a general contractor to perform part of the work of a construction job. For example, a contractor might be building a house, but might hire a firm or a person specializing in electrical engineering to install the electrical systems needed in the house. Generally the subcontractor will either relieve the main contractor of part of the building work, or will be able to perform work at lower expense or at a greater skill level than the general contractor could. (Tricia Ellis- Christensen 2003-2009) http://www.wisegeek.com/what-is-a-subcontractor.htm

Normally sub-contractor carry out the works like electrical, heating and cooling devices (HVAC), plumbing, plastering, brickwork and roofing. There are 3 different kind of sub-contractor in construction practice and they are:

Nominated sub-contractor

Domestic sub-contractor

Named sub-contractor

Nominated sub-contractor

Is a person nominated by the Architect or Contract Administrator to the contractor in order to carry out the sub-contract work and there was a direct contractual relationship between the clients and the subcontractor. Other than that, contractor has the right to make reasonable objection on the selected sub-contractor by the Architect.

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Domestic sub-contractor

Is a person who has direct contractual relationship with the main contractor. All the sub-contract work done by the employed sub-contractor has to be responsible by the main contractor. For example, if there is any sub-contract work done badly and cause the delay of the project then the main contractor have to responsible for it.

Named sub-contractor

Is similar to the domestic sub-contractor, but named sub-contractor often use in Intermediate Building Contract (IC) and Intermediate Building Contract with contractor’s design (ICD). The idea is to provide the employer with means of ensuring that particular parcels of work are carried out by sub-contractors of the employer’s choice. (Chappell D, 2007, pg 38).

2.0 Review the method of appointing a specialist sub-contractor

A nominated sub-contractor is often appointed after the main contractor has started work, so one of the client benefits is that specialist design can continue after work has commenced on site. A prime cost sum is included within the main contractor’s tender document (a bill of quantities or specification of work). On top of this the main contractor is required to price overheads, profit and any items of attendance it has to provide, such as the use of site facilities, provision of a secure storage area etc. The value of the prime cost sum is omitted from the Bill of Quantities and replaced by the nominated subcontractor’s accepted quotation and the main contractor’s on costs are adjusted as appropriate. (Electrical & Mechanical Contractor magazine 2005)

There are some reasons for nomination of sub-contractor:

The employer will have his freedom to choose a sub-contractor that he wishes to use and is not based on price.

The employer can take control of the timing involvement and appointment of sub-contractor to meet his requirement.

The employer has the chance to make comparison which sub-contractor is better and suitable for the particular sub-contract work.

Time is saved by introducing formal links between the sub-contractor and the consulting engineer, architect, QS. Hence, there are no long chains of correspondence and quick action on price, design, programme, variations etc. is established.

In a project there will be some specialist works which only can done by the specialist team like sub-contractor.

The nominated sub-contractor can be involved early and so his design expertise and his knowledge of the contract and co-ordination of services can be utilized.

2.1 Procedure of nomination

The standard form of nominated sub-contract tender 1998 Edition (NSC/T) which comprises in 3 parts.

Part 1: Invitation to tender to a subcontractor by the Architect’s/The contract administrator

During the part 1, the invitation to tender to a subcontractor (NSC/T) of a standard form of tender will be completed by the Architect. Other than that, the relevant section of the employer/ nominated sub contractor agreement, (NSC/W), and both documents, together with the drawing/specification/bill of quantities which describe the work will be completed and sent by the Architect to those companies the employer who wishes to invite to tender.

Part 2: Tender by the Subcontractor

During this part, those subcontractors who are interesting in this tender will complete the standard form of tender and the relevant sections of the warranty, (NSC/W) and return both documents to the Architect. After the Architect had received both documents, one of the sub contractors will be selected by the Architect and will arrange to the employer to sign and confirm of the approval of the sub contractor’s tender and to execute the warranty, (NSC/W). Then, the Architect nominates the selected sub contractor to the main contractor by using the standard nomination instruction, (NSC/N). Other than that, a copy of the invitation of tender and the successful sub contractor’s tender with all the documents and details in part 1 will be sent by the Architect to the contractor under clause 35.6. Once the contractor gets receipt of those documents, within 7 days, he may either accept or he may exercise his right of reasonable objection to the selected tender. If the contractor made a reasonable objection in writing to the architect within the 7 working days, under clause 35.5 Architect may either issue further instruction to remove the objection so that the contractor can comply or accept the objection and nominate another sub contractor.

Part 3: Particular Conditions (To be agree by the contractor and the subcontractor nominated under clause 35.5)

Under the ‘Particular Condition’ set out in this part of (NSC/T), these include sub-contract period, insurance details, and the identity of the adjudicator and trustee stake-holder. Once reached the arrangement on Particular Condition, the contractor and sub contractor sign (NSC/T) part 3 and execute the sub-contract articles of agreement, (NSC/A), which together with reference the sub-contract conditions (NSC/C). After both of them had signed (NSC/T) part 3, a copy of signed (NSC/T) part 3 together with the executed sub-contract articles of agreement, (NSC/A) will be sent to the Architect for his records.

3.0 Review the method of appointing a specialist sub-contractor Post JCT 2005

JCT 2005 is a new improved version to replace the JCT 1998 because there are many of the problems that arose on- site and in practice still failed to resolve despite of its length and complexity of JCT 1998. (James Davison 2005 pg13). In sub contract, there are also many problems arise between main and sub-contractor because a project is not ready for a sub-contractor to commence work on the date anticipated and then sub-contractor may say that he wants more money because of the commencement of sub-contract was delayed. (Chappell D, 2007, pg 37) Hence, in the new version of JCT 2005 there is no more nomination of sub-contractor, only kind of sub-contractor which is domestic sub-contractor. Since nomination has been removed, some new clauses regarding to the sub-contracting in JCT 2005 is shown as below:

Clause 3.7 in JCT 2005 consent to sub-contracting

The Contractor shall not without the consent of the Architect/ Contract Administrator sub contract the whole part of work or any part of the work to the sub-contractor and such consent shall not be unreasonable delayed or withheld the project. During contractor design proportion, contractor shall not without the consent of the employer sub-contract the design to the sub-contractor and is similar to the previous, such consent shall not be unreasonable delayed or withheld the project.

Clause 3.8 in JCT 2005 List in Contract bills

The Contract Bills provide that certain work measured or otherwise described in those Bills and priced by the Contractor is to be carried out by persons named in a list in or annexed to the Contract Bills and selected from that list by and at the sole discretion of the Contractor. Not less than 3 person the list shall comprise, additional persons to the list can be add by the contractor at any time prior to the execution of a binding sub-contract and with the consent of the employer or (Architect/ Contract Administrator act on his behalf ) which shall not be unreasonably delayed or withheld the project. If at any time prior to the execution of binding sub-contract the list stills less than three person, then the employer and contractor shall agreement add the names of the others person to make it not less than three person in the list. Other than that, the work shall be carried out by the contractor and the person selected from the list by the contractor will be the sub-contractor and carry out the sub-contract work.

If at any time before the contractor has entered into a building sub-contract the number of firms able and willing to carry out the work falls below:

The employer and the contractor must agree on the addition of more firms so that the list comprises at least three.

Contractor can carry out the work itself; however, contractor also can sub-let the work to any sub-contractor of its choice provided the architect gives consent. . (Chappell D, 2007, pg 37)

4.0 Review the method of appointing a specialist subcontractor NEC 3 ECC 2005

Normally NEC 3 was used in the government project. Under this standard form of contract, Project Manager plays a very important role in sub-contracting. He is the one who accept and reject the sub-contract with reasonable reason stated in this contract, not like other form of contract like JCT 05. In this standard form of contracts, the rules for the contractor to appoint sub-contractor to carry out sub-contract work were strict and details.

Clause 26.1 Contractor have to responsible for all his work and if he sub-contract work then he have to responsible for all the sub contract work also.

Clause 26.2 The contractor submits the name of each proposed sub-contractor to the Project Manager for acceptance. The contractor only can appoint sub-contractor to carry out sub-contract work for him when the Project Manager had accepted the proposed sub-contractor.

Clause 26.3 The contractor submits the proposed conditions of contract for each sub-contract to the project manager for acceptance unless

An NEC contract is proposed

The Project Manager has agreed that no submission is required

Clause 26.4 In this clause, there are two reasons stated that the Project Manager can use to reject the sub-contract condition;

Sub-contract condition which not allow the contractor to provide the works

Sub-contract condition does not include a statement that the parties to the subcontract should act in a spirit of mutual trust and co-operation.

Project manager only can reject the sub-contract condition with these two reasons, if project manager was rejected the contractor not within these two reasons and in the end the contractor can’t finish the work or delayed the project then contractor was entitled for compensation.

5.0 Reasons behind why nomination has been stopped

Nomination of sub-contractor has been stopped after JCT 1998 because of many reasons, there are:

Problems between main and sub-contractors arise because a project is not ready for a sub-contractor to commence work on the date anticipated. If the commencement of the sub-contract delayed, the sub contractor may say that it wants more money, or even that it cannot, at a later date, fit the work into its programme. (Chappell D, 2007, pg 37). Due to the late commencement of the sub-contract, sub-contractor may want more money because of his labours who are waiting for him to start the work in the project, so there will be an argument.

Lack of management of the progress of the sub-contractor work on site because of the main contractor is not responsible for delay by nominated sub-contractors.

Confuses lines of communication and management because the sub-contractor will be answerable to the architect, main contractors and others on same issue.

Contractor may have no right to choose who carries out that part of the works. Unless there are very clear grounds, otherwise most main contractors are reluctant to try to exercise their right of reasonable objection.

Contractor being forced to employ the sub-contractor on the basis of a standard form of contract, in this situation, contractor is unable to impose his own terms and conditions which may be more useful for them during the work on site.

Nominated sub-contractor can be difficult to manage and control because of their direct links with the professional team and the division of contractual responsibility for their performance, which is owed to the employer in respect of design and progress and to the main contractor in respect of quantity of work and materials.

Employer need to take full responsible on sub-contractor, if any work cant finish by the sub-contractor and cause delay to the project, the contractor entitle to claim for extension of time.

Employer has no right against the main contractor in the event of defective design by the sub-contractor. (Jennie Price 1994 pg40-41)

6.0 conclusions

As a conclusion, after review JCT 1998, JCT2005 and NEC 3 ECC 2005 standard form of contracts I think that the standard form of contract need to be amended, merged and improved time by time to reduce conflicts and problems which may arise in the construction practice. From this assignment, we can know that in JCT 1998 sub-contractor was used and when come to JCT 2005 and NEC 3 EEC 2005 nominated sub-contractor had omitted due to many problems and conflicts which happen in between the contractor, sub-contractor and also client, so they are more focus on domestic sub-contractor in the latest version of JCT.

In my opinion, I think that nominated sub-contractor and domestic sub-contractor both of them also had their own advantages and disadvantages. Because of the nominated sub-contractor had direct contractual relationship with the employer so employer have to responsible on sub-contract work and contractor gain benefit when the sub-contractor can’t finish the work and cause delayed, he can claim for extension of time and the employer will suffer loss in this kind of situation. For the contractor, he is being force to employ the sub contractor and he is unable to impose his own terms and conditions which may be more useful for them during the work on site and many other reasons. Therefore, when come to the JCT 2005, nominated sub-contractor had omitted and domestic sub-contractor was use in this standard form of contract. By using the domestic sub-contractor, I think that the conflict had reduced because the sub-contractor was direct deal with contractor, so the management level was increase, the contractor fully responsible of sub-contract work and he is able to impose his own terms and conditions which are helpful and improve the quality of construction.

Other than that, the procedure in appointing domestic sub-contractor under JCT 2005 was showing clear, simple and easy to understand because the contractor fully responsible in all the employment of sub-contractor compare to the JCT 1998 the procedure in appointing nominated sub-contractor is more complex.

7.0 References

Barnes, P., 2008. JCT 05′ & 06′ Contracts. [pdf] 25 January. Available at: http://www.arbitrate.org.uk/speakers_papers/Peter%20Barnes%20JCT%202005%20%20CIArb%2023-01-08.pdf [Last accessed on 26 July 2009]

Brian, E. Rawling & Associates, 2003. Nominated or Names? [pdf] 27 September. Available at: http://www.brianerawling.com/PDF/Jun%2001%20~%20Nominated%20or%20Named.pdf [Last accessed on 26 July 2009]

CC&L Department, 2005. What Sort of Subbie Are You? [pdf] March. Available at: http://www.eca.co.uk/IndustryGuidance/CCandL/Download/WhatSortOfSubbieRU.pdf [Last accessed on 23 July 2009]

Chappell, D. (2007). Understanding JCT Standard Building Contracts. 8th Edi. Taylor & Francis. London & New York.

Davison, J. (2005). JCT 2005 What’s New? RICS Books.

Karnick, M., 2009. Nominating the best project subcontractors. [Online] 12 July. Available at: http://cmguide.org/archives/1357 [Last accessed on 23 July 2009]

Brand, D., 2009. Contract nominations. [Online] 5 January. Available at: http://cmguide.org/archives/315 [Last accessed on 23 July 2009]

Murdoch, J. & Hughes, W. (2009). Construction Contracts: Law and Management. Taylor & Francis. London & New York.

OFFICE OF GOVERNMENT COMMERCE (2005). NEC3 Engineering and Construction Contract: Option B: Priced Contract with Bill of Quantities. 3rd ed., Great Britain, Bell & Bain Limited.

Price, J. (1994). Sub-Contracting under the JCT Standard Form of Building Contract. Macmillan.

RICS, 2005. A comprehensive guide to help you move from JCT 98 to JCT 05. [pdf] 3 May. Available at: http://www.ricsbooks.com/downloads/CONTRACT%20FINDER.pdf [Last accessed on 26 July 2009]

Ryland, J., 2004. Nominated Sub-contractors- What’s in name? [pdf] 2 January. Available at: http://pprn.crippslaw.com/index2.php?option=com_content&do_pdf=1&id=63 [Last accessed on 23 July 2009]