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What is the definition of a Subcontractor under NEC3

+2 votes
I'm trying to come to an agreement with my client on what is a Subcontractor and what is considered People. The reason been is that we have a Subcontract fee and a Direct fee. It clearly states in the Contract that People not employed by the Contractor directly but who are working within the working area as Labour only are considered People but I'm finding it hard to find an explanation to what falls under the Subcontract fee.

Can someone advise as to what constitutes a Subcontractor and also if we have a Subcontractor on site as part of a CE, do we need to provide more than the invoice as proof of payment. Example, can the Client ask to see our Subcontractors defined cost?
asked Feb 6, 2013 in Main options by Tom Scott (290 points)  

1 Answer

+1 vote
Best answer
Assuming its the ECC conditions you are using, Subcontractor is defined under Cl.11.2.17 as a person or organisation who has a contract with the (main) Contractor.... (this next bit is summarized) and providing parts of the works or services necessary to provide the works.


The boundary however is somewhat muddied when you have labour only subcontractors or a mixture of payment provisions for a singel subcontractor.  If a Subcontractor is paid on an output basis i.e unit rates m2/m3, then it falls clearly within the definition of a Subcontractor  Cl. 11.2.17.  However Subcontractors who are paid for by the Contractor based upon the number of hours they work when they are within the Working Areas are treated as people costs under the schedule of cost components.


Where the costs fall within the definition of people set out in item 14 of the schedule of cost components, their costs should attract the addition of the Working Areas overhead percentage and the direct fee percentage. Where the costs sit outside schedule of costs components but within the definition of Subcontractor they attract the subcontracted fee percentage.


The burden of proof required for payment is a somewhat emotive topic, but the requirements to demonstrate costs varies with the main options (A, B , C & D, etc). Option C for example required the Contractor to meet certains test under Cl.s11.2(23), 11.2(25), 52.2 and 52.3. Generally where the costs are treated as Subcontarctor costs an invoice should suffice. The Project manager may ask to see a coppy of the Subcontarctor conditions under Cl. 26.2.
answered Feb 6, 2013 by Chris Corr (9,380 points)  
Thanks for your prompt response Chris, under the Clause 11.2.17, do all 3 bullet points need to apply because couldn't the second bullet point "Provide a service necessary to provide the Subcontract Works" be considered as a labour only. What then takes precedence?

If I need a MEWP and driver for the Project, is this considered under people because the driver is labour and the plant would have a direct fee also or would it be a subcontractor as they are supplying both items?

It seems a bit of a grey area for me.

Regarding the Option for evidence of cost, this is an option B.
Tom I ageed the use of labour only subcontractor is somewhat grey. The bullets under Cl. 11.2.17 are "either/or" statements so don't all need to apply, but i don't think that this answers the underlying problem. I'd suggest you consider commercially which is your prefered intrepration and in doing so take into account hwo the subcontract contract was orginally set up. i would take into account whether the contract is set up labour only, or as unit rates ie a more traditional contractor/subcontractor relationship. I would put your prefered intrepraion to the PM and if youneed him to make a deciosn you could always notify it as a ambinguity undr Cl. 17.1