Posted on: February 28, 2019

Weekly Tips From February

Weekly Tip #4

5 key points to check when Subcontractors price work

1. Main Contract Link – Subcontracts will usually have a clause linking you to everything required in the Main Contract. Signing this has massive risk most companies will not realise until after starting on site. Look out for them.

2. Programme – MC’s will usually insert a completion date in their Tender’s. This needs to be scrutinised in detail. Simply signing up to this and squashing a programme to suit will lead to issues from day 1.

3. Liquidated Damages – Does your Subcontract show LD’s at the same rate of the Main Contract and with a cap above your Subcontract value? If so this needs to be adjusted / removed.

4. Warranties – if your Subcontract has Performance Bonds, Collateral Warranty etc, then check your works aginst the whole project in terms of risk, value, duration and have something proportionate agreed or have these removed.

5. Disallowed Cost – Check the definition of Disallowed Cost in your Subcontract when working to Target Cost / Cost Reimbursable. Contracts such as the ICC are unclear on the individual aspects and this can lead to dispute.

Weekly Tip #5

Stepping Down the Main Contract into a Subcontract

In Rail, Civil’s, Nuclear, Highways etc, as a Subcontractor on larger packages of £1m plus it’s common for work to be Subcontracted from Tier 1 Contractors. It’s also common for Tier 1’s to step down what they have to do in their Main Contract and add it to your Subcontract.

This will rarely be pointed out though and if you don’t know what to look out for (or even worse don’t understand what it means and you just sign anyway), it can have massive consequences. These Clauses may have wording like this but will vary:

“The Subcontractor will observe, perform and comply will the Main Contract Requirements”. Also “The Subcontractor will indemnify the Contractor for any breach, non-observance or non-performance by the Subcontractor or his servants / agents”.

If you have a £10m Subcontract but the Main Contract is £100m then it’s safe to say there will be differences. If you take on the Main Contract requirements then you could find yourself responsible for a lot more than you’ve priced.