Sub Contract Agreement

Transcription

1 Sub Contract Agreement In a building project there is always a contractor. There need not be any sub-contractors However there will invariably be sub-contractors. There are two types of sub-contractors Domestic and Nominated The main contractor will have a contracts with both types of sub-contractors. The conditions of main contract will only require a formal sub-contract agreement with Nominated sub-contractors

2 Sub Contract Agreement (cont.) The nominated sub-contractors agreement is expected to be on the standard form produced by FIDIC when the FIDIC (Red Book) Is used as the form of contract. The sub-contractors are recognised in the Red Book For domestic contractors,the form of contract is not specified and as they are not recognised under the main contract.

3 Sub Contract Agreement (cont.) This agreement too consists of the 20 main clauses as in the other FIDIC documents. The clauses cover similar aspects as in the FIDIC red book. They differ as far as the difference in their application to the Sub-contractor as against the Main contractor.

4 The 20 Clauses of the Contracts Main Contract Agreement 1 General Provisions 2 The Employer 3 The Engineer 4 The Contractor 5 Nominated Sub-Contractor 6 Staff and Labour 7 Plant, Materials & Workmanship 8 Commencement Delays and Suspension 9 Tests on Completion 10 Employers taking over Sub-contract Agreement 1. Definitions and Interpretations 2. The Main Contract 3. The Contractor 4. The Sub-Contractor 5. Assignment of Subcontract 6. Co-operation Staff and Labour 7. Equipment, Temporary works, Other facilities Plant & Materials 8. Commencement & Completion 9. Tests on Completion 10. Completion & Take over of the Sub-contract works

5 The 20 Clauses of the Contract 11 Defects Liability 12 Measurement and Evaluation 13 Variations and Adjustments 14 Contract price and Payment 15 Termination by employer 16 Suspension & Termination by Contractor 17 Risk and Responsibility 18 Insurance 19 Force Majeur 20 Claims Disputes and Arbitration 11 Defects Liability 12 Measurement and Evaluation 13 Subcontract Variations and Adjustments 14 Subcontract price and Payments 15 Termination of the main contractor & Termination of the Subcontractor by the contractor 16 Suspension and Termination by Subcontractor 17 Risk and Indemnities 18 Subcontractor Insurance 19 Subcontract Force Majeure 20 Notices Subcontractor s claims and disputes.

6 Scenario 1 A domestic sub contractor is engaged on a project by the main contractor. He has problems in getting access to his area of work as another crew are busy there. He approaches the engineer to the contract for assistance. But the engineer refers him back to the main contractor without giving him a solution.

7 FIDIC MAIN CONTRACT 1. General Provisions Total privity of contract with Employer (see cont. agreement) FIDIC SUBCONTRACT 1 Definitions & Interpretations No privity of contract with Employer (Cl.1.10) Covers general topics such as definitions, interpretations, documents communications Covers general topics such as definitions, interpretations, documents communications

8 FIDIC MAIN CONTRACT 2 The Employer Obligations of the employer. FIDIC SUBCONTRACT 2 The Main Contract The employer here is substituted by the Main Contract Knowledge of Main Contract, Compliance with it, Instructions, Determinations, Rights, Entitlements & remedies derived under Main Contract.

9 FIDIC MAIN CONTRAC 3. The Engineer Appointment,Duties, and rights) of engineer. All Determinations, instructions by Engineer, on authority derived from employer FIDIC SUBCONTRACT 3. The Contractor No direct connection to engineer, other than via Main contractor, under the control of Main Contractor.

10 Scenario 2 A Sub contractor is engaged by the main contractor. The engineer notices the work being done is not precisely according to the design. He instructs the subcontractor to alter it accordingly. Subcontractor ignores and carries on as he has already informed the reason for deviation to main contractor. Engineer sends a strongly worded reprimand to subcontractor Subcontractor protests to the Main contractor. Where did it go wrong? Communication breakdown?

11 FIDIC MAIN CONTRACT 4. The Contractor Extensive clause (24 sub clauses) dealing with rights, obligations etc. of contractor under the contract. Subcontracts to have provisions for assignment of subcontracts or benefits thereof to owner in the event of Contractor s termination or if his obligations extend beyond DNP.(Cl.4.4, 4.5) FIDIC SUBCONTRACT 5. The Sub-Contractor Clause dealing with rights, obligations etc. of Subcontractor under the sub contract agreement. Need to provide Sub contract

12 FIDIC MAIN CONTRACT 4. The Contractor No provision to provide separate sub-contractor performance security by main contractor under the contract. Need to provide Performance Security to Owner FIDIC SUBCONTRACT 5. The Sub-Contractor Need to provide Sub contract Performance Security to Contractor Sub-contractor to permit both employers and contractors personell access at all reasonable times to inspect, examine, measure, test and see progress.

13 5. Nominated Sub-Contractor Defined as S.C. stated in Contract or (under Cl.13)instructed by Engineer to employ. Main contractor to include payments to SC in his interim claims, require evidence of payment of same. Provision to pay the SC directly by owner 5.Assignment of Subcontract and Subcontracting. Nominated as subcontractor by Main Contractor Circumstances of assignment of part or whole of subcontract and provisions for assignment of benefits to Main contractor.

14 6. Staff and Labour Policies to be adopted in recruiting, facilities to be provided, adherence to labour laws, working hour restrictions OH&S requirements, Comparison of 20 Clauses 6. Co-operation, Staff and Labour Co-operate with Owners and other contractors personell by providing access to carry out their work. For both the main Contractor and The subcontractor to refrain from recruiting staff from each other. Requirement to appoint a representative for both main and sub-contractor

15 7. Plant, Materials & Workmanship Need to carry out all aspects of construction as specified in contract and to recognised good practice. Facilitate inspection and testing. Right to reject and require rectification. All materials and plant becomes the property of Owner when brought on site or when contractor is entitled to payment subject to laws of land.and may not remove. from site 7. Equipment, Temporary works, Other facilities Plant & Materials Contractor to make available employers equipment, contractors equipment temporary works and other facilities required for performance of subcontractors work. Who will be responsible for same. Same applies to free issues. All subcontract plant and materials forming permanent work become the property of Contractor.and may not remove from site

16 8. Commencement Delays and Suspension Requirement to commence progress and complete on time as per program. Engineer to monitor program and require contractor to revise program in the event of non compliance with program. Comparison of 20 Clauses 8. Commencement & Completion Requirement to commence progress and complete on time as per subcontractor program complying with main contractor program and reporting to be consistent with same. Contractor to monitor and require revision in the event of delay. Eligible for EOT under specific circumstances beyond his control. Contactor s right to issue instructions and impose delay damages.(cl.8.7)

17 9. Tests on Completion Testing, rectifications, retesting and procedure adopted in delayed testing specified. 9. Tests on Completion Tests specified for subcontract work shall be done with due notice If Main contractors tests, are dependant the subcontractor shall complete his in good time to facilitate.

18 10. Employers taking over Engineer to take over and issue takeover certificate. Partial taking over can only be done at the sole discretion of the owner. 10. Completion & Take over of the Sub-contract works Main Contractor to take over subcontractors work on completion and issue take over certificate.

19 11.Defects Liability 11. Defects Liability All works referred to in Main Contract (Cl.11.1(b) shall be executed by and to cost of Subcontractor. For plant and work executed by him. Cost implecations to Main contractor consequent such can be deducted by Main contractor. SC DNP is as stated in SC contract. Performance is such isued by Engineer under Main contract.

20 Scenario 3 A subcontractor engaged on a project completes his assigned work. He approaches the engineer to the contact and requests that work be taken over. He refuses to do so and refers him to his main contractor. The main contractor informs him that he has not completed the main part of the work that the subcontractors work is part of. Was he correct?

21 12. Measurement and Evaluation Engineer to measure works attended by Contractor When measured by records the contractor may attend. Net actual quantities used 12. Measurement and Evaluation Engineer to measure works attended by Contractor to which he shall permit the SC to attend.sc shall supply any particulars requested by Contractor or Engineer. Measurement from records similar to that of Main contractor. Any quantities shown in SC s BOQ is to be considered only as an estimate. Measured quantity prevails and rate remains unchanged. Other than by instruction.

22 13. Variations and Adjustments Where the contract so states variations and adjustments are possible for: Value Engineering, Currency fluctuations, PC variations, Adjustments for changes in legislation and changes in Costs Variations to be authorised by Engineer. 13. Subcontract Variations and Adjustments Subcontractor variations by Contractors Instruction only Engineers instructions must be conveyed by main contractor as a contractors instruction. Subjects for variation shall be as for main contractor. The sub contractor can be requested to provide a proposal for variation.

23 14. Contract price & Payment 14. Contract price & Payment Subcontractors payments are chanelled through main contractors. His claims are included with the main contractors periodic payment claims. Employer has the right to require proof of payments to SC by the Main Contractors. Provision in Main contract to make direct payments to SC.

24 15. Termination by employer 15. Termination of the main contractor & Termination of the Subcontractor by the contractor Termination can be consequent to termination of main contractor. Contractor is entitled to terminate the subcontractor under certain circumstances.

25 16. Suspension & Termination by Contractor 16. Suspension & Termination by Subcontractor Subcontractors right to suspend work for non payment. Entitled to claim any consequential loss. Subcontractors right to terminate if payments not received after suspension or contractor becoming insolvent or bankrupt or fails to perform his obligations under subcontract.

26 17. Risk and Responsibility 17. Risk and Indemnities Subcontractor to have full responsibility for care of subcontract works and goods from commencement to take-over. Subcontractor to make good any damage or loss. Contractor to hold subcontractor harmless in the event of loss or damage attributable to contractor

27 18. Insurance 18. Subcontractor Insurance Subcontractor to maintain insurances against risks as specified and maintain these from commencement of subcontract to taking over by main contractor. The main contractor and or the employer also may take insurance cover for subcontractors work. Subcontractor to satisfy himself as to adequacy.

28 Scenario 5 On a project the Main contractor obtains insurances to cover the entire project. The subcontractor is of the opinion that the cover is not adequate. He requests the engineer to the contract and offers to take the balance cover. What should be the correct procedure to follow.

29 19. Force Majeure 19. Subcontractor Force Majeure The provisions of Main contract Cl.19 applies to the Subcontract

30 20. Claims Disputes and Arbitration 20. Notices Subcontractor s claims and disputes. Whenever contractor is required to give notice or other information in support of a claim under main contract of which SC work is part of he is obliged to keep such records when requested by main contractor to do so. Failure may result in SC s claim being denied due to lack of info.