Last edited 05 Jan 2018

Nominated supplier

In the construction industry, ‘supplier’ is a very general term which refers to organisations contracted as part of the delivery of a built asset.

Typically, a contractor is able to purchase from their own choice of supplier, as long as they comply with the requirements set out in the specification. However, under certain circumstances, the client may wish to impose (or nominate) a particular supplier on the main contractor after the main contractor has been appointed.

The client may wish to use a particular supplier because:

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

A potential drawback of nominating a supplier is that the contractor is then not able to ‘shop around’ to obtain the best price or supplier. It is important therefore that suppliers are nominated with due consideration to their ability to supply in line with the project specification, programme and budget.

In addition, as the contractor has no choice in the selection of the nominated sub-contractor, they cannot be held responsible for their failure to perform. However, as the supply contract is with the main contractor, not with the client, the client should ensure that they have a direct warranty with the nominated supplier to guarantee performance and indemnify the client if any default allows a claim for loss and expense or extension of time by the main contractor.

The complexity of this situation means that some forms of contract no longer include provision for the nomination, preferring to 'name' suppliers instead.

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