Use of nominated sub-contractors

Some of the problems associated with the contractor’s use of sub-contractors have been described in Sections 7.7 and 7.8. This section deals with additional problems that can arise with the use of nominated sub-contractors.
When a sub-contractor is nominated in a contract it is important that the specification sets out what services the contractor must supply to the nominated sub-contractor. These may include – providing access, off-loading materials, providing electrical power, scaffolding, cranes, etc. and permitting use by the sub-contractor’s men of the contractor’s canteen and welfare facilities. It will also be necessary to define how much notice the sub-contractor must be given before he is able to deliver equipment or start work, when he can undertake his work and how long it will take.
However, the actual terms of the sub-contract have to be decided between the contractor and sub-contractor, and there can be instances where they cannot agree. The sub-contractor may refuse to indemnify the contractor ‘against all claims’ and costs, etc. as required by Clause 3 of the Form of Sub-contract (described in Section 7.8) and the contractor may then refuse to place the  sub-contract. It is true that, under Clause 59(1) the contractor has to have a ‘reasonable objection’ for refusing to employ a nominated sub-contractor, but this constraint is of little value in practice. There can also be refusal of either party to accept the other’s terms for payment – although Clause 59(7) of the ICE Conditions endeavours to protect a nominated sub-contractor by providing for direct payment to him if the main contractor fails to pay him.

If the contractor or nominated sub-contractor will not enter a contract between them for any reason, the nomination fails. The engineer then has to nominate another sub-contractor, or ask the contractor to do the work himself or find his own sub-contractor. This mixing of responsibilities between the employer and main contractor for the performance of a nominated subcontractor leads to frequent disputes. If the nominated sub-contractor fails to do the work or goes into liquidation, the employer must take action without delay, since the main contractor has no duty to carry out the work himself and will claim for any delay in getting it done. Further, if the sub-contractor’s work proves unsuitable or not fit for its purpose, the main contractor will deny responsibility (unless he was expressly charged in the terms of the sub-contract to take such responsibility – which is unlikely) since he had no choice in the selection of the sub-contractor or the product.
The extensive disputes which have arisen over the years on these matters, more particularly in building work with its wider use of nominated subcontractors, has led many engineers to take the view that use of nominated sub-contractors in civil engineering should be avoided wherever possible.
The problems most often arise from late completion or defective performance by a nominated sub-contractor which affects the contractor or his other sub-contractors. A possible way to avoid this is to specify the work in detail, providing for its payment by measure under appropriate bill items. Or, if specially skilled or experienced workers are required to do the work, there is no reason why this cannot be specified by calling for particular craft skills and requiring evidence of same. Alternatively, if only one firm can provide the special techniques required, the letting of a separate contract for such work can be considered. Although the organization of separate contracts has to be efficiently managed (as described in Section 5.6), the advantage is that the engineer retains direct control over the specialist’s work and can act to avoid or solve problems arising from late delivery or defective work. Where a nominated sub-contractor is to supply only certain items, the employer may be persuaded to order the materials direct and store them in advance of being needed; or the contractor may be instructed to order them early and can be paid for offloading and storing them on site under items provided in the bill of quantities.