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Nominated Subcontract

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Sat, 2005-07-09 03:06

Vishwas Bindigana...

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Hi Planners,

Gotta problem. Will appreciate any comments on the following.

“Clause 58.2 – Use of Provisional Sums

In respect of every Provisional Sum the Engineer shall have authority to issue instructions for the execution of work or for the supply of goods, materials, Plant or services by:
a)     the Contractor, in which case the Contractor shall be entitled to an amount equal to the value thereof determined in accordance with Clause 52;
b)     a Nominated Subcontractor, as hereinafter defined, in which case the sum to be paid to the Contractor therefore shall be determined and paid in accordance with Sub-Clause 59.4 (Payments to Nominated Subcontractors).

Clause 59.3 – Design Requirements to be Expressly Stated

If in connection with any Provisional Sum the services to be provided include any matter of design or specification of any part of the Permanent Works or of any Plant to be incorporated therein, such requirement shall be expressly stated in the Contract and shall be included in any nominated Subcontract. The nominated Subcontract shall specify that the nominated Subcontractor providing such services will save harmless and indemnify the Contractor from and against the same and from all claims, proceedings, damages, costs, charges and expenses whatsoever arising out of or in connection with any failure to perform such obligations or to fulfill such liabilities.”

The said nominated subcontractor is a Post Tensioning subcontractor as appointed by the Client.

The Engineer and the Client revised design of a structural slab and held a meeting with the nominated Subcontractor regarding the redesign of the slab for post tensioning works without the knowledge of the Main Contractor.

The Main Contractor objected to the meeting of the Nominated Subcontractor, Client and the Engineer without the knowledge of the Main Contractor. The Engineer rejected the objection of the Main Contractor stating clause 58.2 (above).

Now, my question is –
a)     Has the Main Contractor any right to make any claim or objection to such meetings between the Nominated Subcontractor, Client and the Engineer without the knowledge of the Main Contractor?
b)     Can the Main Contractor penalize the Nominated Subcontractor for taking instructions directly from the Client / Engineer?
c)     Can clause 59.3 (as above) be utilized in the best interest of the Main Contractor, especially in such cases?

Looking forward for ur valuable comments.

Rgds,

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Mon, 2007-01-08 05:16

Mohammed Irfan Sh...

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Hi Richard,

Lead Consultant has put condition to limit the percentage of liquidated damages and penalties to 10 % for nominated subcontractor. Hence, we rejected the consultants conditions with those points as our reasons for the rejection, the limit of which might go above the 10% of nominated subcontract.

Moreover, in case if the consultant persist with his comments, can his instruction or comments be utilized to indemnify the main contractor for any losses or damages related to the NSC, in the event of penalty imposed on Main contractor.

Irfan

Sat, 2007-01-06 03:09

Mohammed Irfan Sh...

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Hi Friends,

Happy new year,

Well as of current, I have a letter drafted by me to a lead consultant and i want views from your side.

1. The nominated subcontractor is bound by Main Contractor’s conditions of contract, which makes them liable to bear all the damages and/or risks associated and as beared by Main Contractor for his scope of works.
2. Moreover, nomination of any P.S. contractor is based on the condition that during the process of discharging his responsibilities, they save harmless and indemnify the Main Contractor from all claims, proceedings, damage, costs, charges and expenses from or in connection with any failure to perform his obligations and his liabilities within clause 59.2.a of the conditions of contract.
3. Similarly, clause 59.2.b states that they will save harmless and indemnify the contractor from and against the negligence by themselves, their agents, workmen and servants and from any misuse by him or them of any temporary works provided by the contract.
4. Nominated Subcontractor is also liable for any damage to permanent or temporary work from his side while carrying out his obligations as may be claimed by other subcontractors and/or as determined by the Main Contractor.

Regards,:)

Irfan

Wed, 2006-08-23 01:10

Vishwas Bindigana...

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Irfan,

At the time of tender, the Client / Project manager will have issued a format for the ’Conditions of Sub-Contract’ which the Main Contractor will have accepted to be used for all Nominated Sub-contracts. This Conditions of Sub-Contract’ will be inline with the Main Contractor’s Conditions. Irrespective of the type of contract (lumpsum, remeasureable, etc.), it is imperative that the sub-contractor gives a breakdown of the items in the contract; without which the sub-contractor cannot base any claim - time or cost!!

The answer to your other questions -
1. Ask your nominated sub-contractor to raise claim to YOU - The Main Contractor. Evaluate it, add your %s and forward it to the Client / Project Manager.
2. You can claim damages for reduction in scope if the reduction is beyond some % (check with your contracts or estimating departments).
3. Make your claims SEPERATELY.
4. Yes, you are responsible to the performance of the sub-contractor (nominated or otherwise). But, you are not obliged to accept the nomination if you feel that the nominated sub-contractor is not performing to the expectations of the contract. You can formally have the nomination terminated if you wish to, but, you will have to substantiate heavily for this. This can screw-up a lot of things, especially business relationships!! I’d suggest you handle this more diplomatically instead.

Cheers

Vishwas

Tue, 2006-08-15 09:46

Mohammed Irfan Sh...

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Hi Friends,

For a PS item, one subcontractor is nominated for 3 items altogether in lumpsum rate without any breakups. After nomination, the same subcontractor refuses to forward any break up stating that this being our lumpsum rate, we have not considered any breakup. After delay in item no. 1 for 4 months, client/consultant nominate other subcontractor for item no. 2, without clarifying if the contract value to be deducted from the first one or not. It is only specified that it is removed from the scope of first one and transferred to the scope of other. Now how can the claim be forwarded. I believe there more than a couple of ways,
1. EOT + time claim directly to client / consultant for delay in nomination.
2. Damages to the first subcontractor, as after nomination he is a domestic subcontractor.
3. Or is it that the claim no. 1 to the client/consultant is inclusive of the one of claim no. 2.
4. Is there any liability on the main contractor as being responsible for the performance of his subcontractor.( even when a notice is forwarded by the main contractor to the client/consultant for the inefficiency of the 1st nominated subcontractot)

Awaiting good response for this query.

:) Irfan

Mon, 2006-08-07 07:02

Mohammed Irfan Sh...

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Hi Friends,

Lead consultant or Engineer is appointed by the Employer, to provide the Lead design or intents for all the phase of works including the specialized items and his scope of works included review of all the designs, supervision of works and certification of the drawings and activities completed. Review of the design is scope of his work for which he is already being paid by the Employer. Hence such situation cannot be arrived in which a lead consultant is charging the main contractor alias the subcontractor for design checks and reviews. If it is such then for what is he being paid by the Employer?

:] Irfan

Mon, 2006-08-07 04:13

Andrew Flowerdew

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Vishwas,

Richards got it spot on.

As for payment, you need to sort out exactly who was responsible for what - by which I mean:

Provision of slab - was this in your scope of works (I guess it was as you have to build the building!)

Design of slab - is there anything else other than that stated on the drawing in your documents, it would surprise me if there wasn’t. If the LDC is responsible for the design then why did the sub contractor design it? Someone must have agreed with the sub contractor for him to take on the design (even if it is usual practice) - was this the LDC, in which case the sub contractor may actually have created a seperate contract with the LDC for the design which is nothing to do with you.

Or was it the case that everyone assumed that the sub contractor would do the design, as usual, the LDC would check it, as usual, without thinking about who was actualy responsible and who should be instructing who to do what. Not an uncommon situation!

Another thought, is the fee for checking chargable by you to the subcontractor, ie, the LDC is using the contractual chain to get a bill paid, ie they charge you and you charge the subcontractor.

There’s a few permutations that could be at work here and it all hangs on who was responsible for the design in the first place.

Sat, 2006-08-05 12:32

Andrew Flowerdew

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Vishwas,

Not knowing what’s in your contract who submitted what to who? By this I mean did the contractor go straight to the consultant for the checks or submit through you?

If submission was straight to the consultant and there’s nothing in your contract about getting approval then could it be said the agreement for checking was directly between consultant/contractor and hence so should payment be.

Sat, 2006-08-05 07:47

Vishwas Bindigana...

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Yo Planners,

Looks like I churned an Hornet’s nest!! Here is another one -

The tender drawings mention that the slabs have to be designed as the Post-Tensioned by the Lead Design Consultant. Now, once the Post-tensioned contractor has been appointed; he designs the slabs as required and, submits it for checking to the Lead Design Consultant as is the general practice. Now, the LDC (Lead Design Consultant) has raised an invoice to the Main Contractor for CHECKING the designs of the slabs as submitted by the post-tensioned sub-contractor (through the main contractor).

Now, my argument is -
1. as the Main Contractor (i.e. ME), I did not tell the LDC to come and design PT slabs in my back-yard - its the LDC who originally designed it for the project. Why should I pay him anything for chekcing a design for something which he insisted??
2. In case I don’t pay the LDC the design review charges, can I go ahead with the casting of the slabs (I do have the Performance Security from the post-tensioning sub-contractor. And, also, he has given me a 10 year warranty)?
3. What are the risks associated with this kind of situation? (What do I do if I do not get any approval on the shop drgs?)

Cheers,

Vishwas

Sat, 2006-08-05 06:14

Andrew Flowerdew

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Philip,

Client or Contractor - the Contractor has agreed to the nominated sub contractors work being included within the scope of the main contract, be it included by Prime Cost item in BoQ only, PC sum and some other words, etc, etc.

By virue of being included in the main contract, the starting position is the main contractor is fully responsible for this total scope of work, hence by default takes on responsibility for the nominated sub contractor unless the contract says otherwise.

If the Employer wanted to take all the responsibility then he just places an order directly with the sub contractor - then he would be totally responsible.

Sat, 2006-08-05 03:58

#10

Mohammed Irfan Sh...

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Hi Guys,

By the way whos the cook?

:>
Irfan

Fri, 2006-08-04 14:04

#11

Philip Jonker

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Hi guys,

Exactly, remember I am putting myself in the clients position, asking for a nominated sub-contractor, so if I reverse my role to the contractor, I am right.

Fri, 2006-08-04 07:43

#12

Damian Smith

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Philip, hate to say it but you are incorrect.

The contractor for example would have priced this oven into his costs, and put a margin on it. He puts this margin on for risk Y profit. He has the contract with the supplier, you dont. The supplier would have given him a procument duration and if that duration extends over the build period, it is up to the contractor & supplier to sort out.

If you had bought the oven yourself, it would have been your problem.

Thu, 2006-08-03 17:25

#13

Andrew Flowerdew

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Philip,

Nice try but you’re still 101% wrong.

Thu, 2006-08-03 15:17

#14

Philip Jonker

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Hi Andrew,

Still trying to figure out why I was 101% wrong when your next posting was unclear, and obviously you withdrew your previous statement but tried to get away with your nonsense by being unclear. You must be working for a client.

Regards

Philp

Thu, 2006-08-03 07:13

#15

Andrew Flowerdew

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Irfan,

Richard is correct as I have assumed, maybe incorrectly, that the instruction with the main contractor had been given and accepted.

The contract with the nominated s/c must be in place otherwise there would be nothing to terminate! Interestly, this contract could be dependant on the main contractor accepting the instruction (and nominated s/c) and therefore depending on the timing, there may be no contract with the nominated s/c even though people possibly think there is! Nothing is simple, is it.

Thu, 2006-08-03 06:30

#16

Andrew Flowerdew

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Irfan,

Domestic sub contractors - main contractor 100% responsible for everything, full stop.

Nominated subcontractors - main contractor 100% responsible for everything, unless otherwise stated in the contract. I think you mean right of rejection by main contractor, not employer when talking about nominated s/c.

Generally, the delay due to the Employer having to re-nominate is claimable by the main contractor but any delay caused by the nominated subcontractor in carrying out it’s work is not - unless of course the contract says it is, as some do. The two delays are seperate and need splitting apart.

But, as always, it does depend on the wording in the contract and when talking about termination, the reasons why and the way the termination is carried out can be critically important.

Thu, 2006-08-03 06:06

#17

Raja Izat Raja Ib...

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Hi,
Is it by reject the contractor and gave to another can solve the problem? why dont just break the portion, its much competitive, to show which contractor is the one more productive.

Thu, 2006-08-03 05:53

#18

Mohammed Irfan Sh...

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Hi, Further on the valuable inputs, now if the situation arises that the nominated subcontractor’s contract is terminated on the grounds that he is incapable to complete the job and wishes to appoint a new subcontractor, who is responsible for the delay due to this and who will appoint te subcontractor? I beleive the Employer/Engineer have the right to reject the proposed subcontractor, So to whom does the delay be imposed on till the appointment of new subcontractor, Employer/Client for appointing incapable subcontractor or for Main contractor as he is responsible for the nominated( working as domestic) subcontrator, or the nominated subcontractor, to whom any penalties or liquidated damages could be imposed being bound by Main contractors conditions of contract? :> Irfan

Wed, 2006-08-02 20:18

#19

Andrew Flowerdew

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Philip (I’ll get it right this time)

If you have ordered the cooker and have taken responsibility for that part of the work then you are responsible.

If the Contractor has agreed to take on the responsibility for that part of the work then he’s responsible,

simple as that, the agreement stands.

A Client might do the nominating and the negotiation of terms and price, but the agreement made between the client and contractor is that the contractor takes the full responsibility. (unless otherwise expressly stated) Not too hard a concept is it?

Wed, 2006-08-02 20:09

#20

Andrew Flowerdew

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Phillip,

You are 101% wrong.

Wed, 2006-08-02 15:52

#21

Philip Jonker

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Hi guys,

The question is simple, I want a new kitchen. I dictate I want a XYZC stove, the contractor delivers everything on time except my XYZC stove. Do I try and attack the kitchen contractor for not controlling the XYZC company for late deliveries? This is the basis of common law, which overides most of the bull which is floating around in the general atmosphere.
If I cannot cook a supper for four weeks as a reult of my choice of XYZC, it is not my contractors problem but my own problem.

Regards

Wed, 2006-08-02 10:52

#22

Dimitrios Athanas...

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Dear Irfan,

I agree with Andrew in that unless otherwise stated in the main contract, the main contractor is fully liable for the actions or inactions of the nominated sub-contractor. I would also like to emphasise that the system of selection of sub-contractors should not be confused with the question of whose responsibility it is.

In an English context, it seems that since the Old JCT Standard Nominated Agreement (NSC/W) has been abolished, it does not make much difference whether a sub-contractor is nominated or not.

Best,

Dimitrios

Wed, 2006-08-02 09:43

#23

Andrew Flowerdew

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Sorry,

Misread No 4 - No !!!!!!!!!!

Wed, 2006-08-02 09:42

#24

Andrew Flowerdew

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Irfan,

Generally:

1. Yes
2. No
3. Yes - depending on the wording of agreement made though
4. Yes

The intention is to clearly state that the nominated sub contractor is to be treated as a domestic sub contractor in all respects - the wording is probably not needed as this is the case anyway.

The main contractor is fully responsible for a nominated sub contractor (as any other sub contractor what ever name you choose to give them) unless the contract wording expressly relieves the main contractor of his obligations - eg "the main contractor may claim an Eot for the delay of a nominated subcontractor". If the contract doesn’t say it, the main contractor can’t claim for it is the general rule with nominated sub contractors.

Wed, 2006-08-02 09:25

#25

Mohammed Irfan Sh...

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Hi Everybody,

Further to the query by Jorge Pham, Please elaborate on the following:
Any Subcontractor, once nominated by the Employer/Engineer and agreement executed with the Main contractor, becomes a Domestic Subcontractor, so does it means,
1. Main Contractor is fully responsible for the delay of that subcontractor?
2. Or it that the Main contractor can brush up the delay part and be responsible only for the coordination part?
3. Main contractor has the right to terminate the subcontract work for the nominated subcontractor as he is the domestic subcontractor after signing the agreement?
4. the delay of nomination of the Subcontractor can be claimed but can the delay of the nominated subcontractor be claimed as he is domestic soncontractor?

I believe, maximum a main contractor can do is keep the records of delay by the nominated subcontractor and put a notice to the Employer/Engineer for the inability of the subcontractor and replacement desired.

: ) Irfan

Sat, 2006-07-08 18:04

#26

Dimitrios Athanas...

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I think the position in law now is pretty much settled: the main contractor will be held liable (by the employer) for the sub-contractor’s actions, whether domestic or nominated (in the old language of the JCT Forms). Still, in the JCT Forms Employer-NSCtor would sign the NSC/W Agreement. As this agreement does not exist anymore, and since the law now says that no legal link (privity) exists between Employer-NSC, I would be interested to see whether NSC will cause any further controversy to practitioners from the perspective of whom the NSCtor could turn to?

Sat, 2006-06-24 16:37

#27

Shahzad Munawar

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I totally agree with Andrew ’s statement that actullay the main Contractor is responsible for whole of the Works subject to provisions of Contract in this respect.

Sat, 2006-05-20 12:05

#28

Andrew Flowerdew

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jorge,

It is as I said, main contractor fully responsible for all aspects of a nominated sub contractor unless relieved by the provisions of the contract.

Often time delays and fitness for purpose are relieved, sometimes quality but not so often.

There may be more scope for arguement if the main contractor has no power to object to a nomination but it is often the case that he does - again you’ve got to look at the contract to find out.

Sat, 2006-05-20 04:56

#29

jorge pham

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SORRY REPEATED QUESTION ....

Sat, 2006-05-20 04:55

#30

jorge pham

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Mean that , is fully under Main Contractor responsibility taking care of the QUALITY of NSC work...

Philip Jonker any comments on this ?????? (quoted by you)
"If a nominated sub-contractor is appointed in terms of the contract, then the managing contractor, holds minimal responsibility in terms of the contract, ie safety management and the like. The client who has nominated the sub-contractor should be held responsible for issues like performance and "QUALITY", as these are obviously the reasons why the sub-contractor was nominated. Nomination does not relieve the client of responsibility, except site related issues such as safety."

Fri, 2006-05-19 21:10

#31

jorge pham

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Thanks Andrew

HI Philip Jonker ...

"If a nominated sub-contractor is appointed in terms of the contract, then the managing contractor, holds minimal responsibility in terms of the contract, ie safety management and the like. The client who has nominated the sub-contractor should be held responsible for issues like performance and quality, as these are obviously the reasons why the sub-contractor was nominated. Nomination does not relieve the client of responsibility, except site related issues such as safety. If I pass you a turd, do you have to accept it?"

above quoted by 1 of our PP active member ...

Any comment on this Andrew ???

Currently undertaking a reputable hotel project, and the ID contractor being nominated and the quality of work does not show to the stadard we require...

Fri, 2006-05-19 11:25

#32

Andrew Flowerdew

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Jorge

Starting point is main contractor is responsible for everything unless contract says otherwise.

Normally always will be the case for quality.

May or may not allow recover of delay by nominated sub contractor.

Fri, 2006-05-19 11:02

#33

jorge pham

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Normally who will be responsible for Nominated Sub Contractor for the following :-

i) Performance of work ?

ii)Quality of work ?

Thu, 2005-07-14 07:04

#34

Andrew Flowerdew

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Philip,

As long as all things go well then that is the case. There was a thread on here recently that I can’t find at the moment, regarding LD’s and nominated sub contractors. If things went wrong, the main contractor would end up paying a very large amount, only 10% of which was recoverable from the nominated sub contractor.

I’m sure in this case the main contractor wouldn’t be pleased if he had no control over the nomination and then had to pay a large bill due to the actions of someone he just had to accept.

Nomination can be a minefield when it comes to who’s responsible for who and what. Always check the small print!

Wed, 2005-07-13 13:21

#35

Philip Jonker

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Hi Andrew,

The point is that when a nomited sub-contractor is put in place, the client obviously wants him, why argue, just take your percentage.

At the end of the day it is money for jam.

Mon, 2005-07-11 00:23

#36

Shahzad Munawar

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Andrew is rightly saying that if your Subcontractor is nominated in the Main Contract then he may deal with the Client directly for his disputed issues but in case of Agreement between you and Subcontractor, then Subcontractor has no right that he may directly deal or get instructions from the Client or Engineer. You may penalize the Subcontractor because he is not authorized to get any instructions from Client.

Sun, 2005-07-10 19:40

#37

Andrew Flowerdew

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Philip,

Most main contractors contracts will have a clause that allows the main contractor to object to the nominated sub contrator and a procedure for appointing another, but not all. The main contract will then usually spell out what resposibilities the main contractor is taking on with regard the nominated sub contractor. If the main contractor doesn’t like them then he should do something about it before signing the contract.

If you’ve accepted the nominated sub contractor when there was oppertunity to object, then to use Philip’s words, "you may have excepted a turd", are stuck with it and whatever responsibilities you have taken on regarding it.

Whether this is right or wrong is certainly up for debate.

Sun, 2005-07-10 14:42

#38

Philip Jonker

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If a nominated sub-contractor is appointed in terms of the contract, then the managing contractor, holds minimal responsibility in terms of the contract, ie safety management and the like. The client who has nominated the sub-contractor should be held responsible for issues like performance and quality, as these are obviously the reasons why the sub-contractor was nominated. Nomination does not relieve the client of responsibility, except site related issues such as safety. If I pass you a turd, do you have to accept it?

Sat, 2005-07-09 18:50

#39

Andrew Flowerdew

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Vishwas,

Agree generally with J.S. Only question I would ask is has the nominated subcontractor got a collateral contract of any kind with the client as well as that with the main contractor. If so, do you know what the conditions are?

Unless the meeting has resulted in some form of loss to the main contractor I don’t see how the main contractor can claim anything, however it is unprofessional and not going to give rise to harmonious relationships. As J S pointed out, depending on the wording of the main / nominated sub contractors contract it may constitute a breach of contract. If so a reminder to all parties may prevent a future occurence.

Sat, 2005-07-09 04:11

#40

Jihad Daniel

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Dear Vishwas,
This subject of Nominated S/C has been discussed in previous threads. Anyway, my answers are as follows:
a) Contractually, If Main Contractor has signed already a S/C agreement with the selected P.T. Company, at that time, this Co. became a S/C and is forbidden to make meetings with Client/Engineer without the prior approval of the Main Contractor.
b) The Main Contractor cannot penalize (in terms of money)his S/C for such an act unless it is written and specified in the Contract’s Clause. However,Main Contractor can send his S/C a warning letter.
c) This clause 59.3 is for design requirement clause and responsibility of the S/C to provide a well designed product complying to Specs. I could not see how this could be used for Main Contractor best interest in such cases.

Regards,
J.S. Daniel

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