Nominated sub-contractor

[edit] Introduction

Sub-contractors are appointed by main contractors to carry out part of the works on their behalf. As construction has become more complicated and more specialist construction techniques have been developed, it has become increasingly common for contractors to sub-contract others rather than employing a large workforce themselves.

The use of sub-contractors enables the main contractor to undertake more complex projects whilst not unacceptably increasing their risk, however, concerns have been expressed about the prevalence of sub-contractors because of a perception that the main contractor has less control over the skills and training of sub-contractor employees and so there may be a negative impact on quality and health and safety on site.

Sub-contractors can be classified as:

• Domestic sub-contractors.
• Named sub-contractors.
• Nominated sub-contractors...

In addition, on management contracts, the works will be carried out by 'works contractors' and on construction management contracts the works will be carried out by 'trade contractors', although technically trade contractors are not sub-contractors as they are contracted by the client, and only managed by the construction manager.

[edit] Nominated sub-contractors

A nominated sub-contractor is one that is selected by the client to carry out an element of the works. Nominated sub-contractors are imposed on the main contractor after the main contractor has been appointed.

The mechanism for nominating is an instruction in relation to a prime cost sum to which the main contractor is entitled to add a mark-up and attendance costs. It allows the client to have direct separate negotiations with major suppliers of goods or services and feed their appointment and design input into the contract after works by the main contractor have commenced.

There are mutual benefits to the client and sub-contractor using the nomination route. The client can select the specialist contractor it wants, obtain design and value engineering input and have direct access during the progress of works. The sub-contractor benefits by having so much greater certainty of payment.

Examples of situations where sub-contractors might be nominated could include:

• Long delivery items where ordering is necessary before the appointment of the main contractor. For example, lifts, switchgear, or refrigeration plant.
• Where specialist design input is required in the early stages of design development. For example, for a cladding system.
• Where the client directly orders a preferred item on which design is to be based. For example complex or specialist industrial plant or equipment.

[edit] Contractual arrangements

The contractual arrangements allowing nomination are very complicated, attempting to cover all possible eventualities both between the client and the main contractor and also between the main contractor and the nominated sub-contractor. This may include; objections by the main contractor to the nomination, insolvency of the nominated sub-contractor, the need for re-nomination, and so on.

The contractor may or may not be held responsible for the failure of the nominated sub-contractor to perform, depending on the exact wording of the specific contract used. However, as the subcontractor is being imposed on them, the contractor will generally be allowed the right to object to the subcontractor under certain conditions. If the client still wishes to use the subcontractor, some contracts allow them to indemnify the main contractor against the possible consequences of this.

In addition, as the contract for the nominated sub-contractor is with the main contractor, not with the client, the client may wish to ensure that they have a direct warranty with the nominated sub-contractor to guarantee performance and to indemnify them against any possible losses.

Nomination is still common on international projects, but some forms of contract (such as Joint Contracts Tribunal (JCT) contracts) no longer include provision for nomination because of the complexities involved. The use of named sub-contractors or named specialists are generally considered to be a simpler alternative.

[edit] Payment

The cost consultant values the work of the nominated sub-contractor separately and the amount due is shown on interim certificates and is notified to the nominated sub-contractor. The contract may allow the client to pay the nominated sub-contractor directly if the main contractor fails to do so.

[edit] Allocation of preliminaries

The allocation of preliminaries between the main contractor and sub-contractor depends on whether the nominated sub-contractor is appointed before or after the main contractor.

Normally the main contractor is appointed first. In this case, it is wise to get the main contractor to specify the general preliminaries available to the sub-contractor, such as welfare buildings, craneage, site security, hoists, water, power and lighting, and general scaffolding, etc., but also to set out specific items of preliminaries to be provided by the sub-contractor, such as site offices and stores, special scaffolding or cranes and waste disposal to a certain point.

Before any order is placed the main contractor should be consulted as to whether the subcontractor's proposals are acceptable including matters relating to preliminaries.

If the sub-contractor is appointed before the main contractor, it is wise to send them the proposed preliminaries requirements to be imposed on the main contractor and request that the sub-contractor clearly states in their tender what preliminaries are included in their bid and what preliminaries they anticipate will be provided by the main contractor.

[edit] Public projects

NB: On public sector projects, a sub-contract for which the client intends to nominate a sub-contractor may be subject to the requirements of the OJEU procurement rules.

[edit] Related articles on Designing Buildings

• Collaborative practices.
• Construction supply chain payment charter.
• Contract sum.
• Contractor.
• Domestic sub-contractor.
• Named specialist work.
• Named sub-contractor.
• Nominated subcontractor v named subcontractor.
• Nominated supplier.
• OJEU.
• Payments to nominated sub-contractors.
• Preliminaries.
• Prime cost sum.
• Procurement route.
• Selected subcontractor.
• Subcontractor.

[edit] External references

• Building article: http://www.building.co.uk/what-sort-of-subbie-are-you?/3046823.article What sort of subbie are you?
• PACE http://webarchive.nationalarchives.gov.uk/20100503135839/http://www.ogc.gov.uk/documents/PACE_-_GACC.pdf Guidance for the Appointment of Consultants and Contractors.