We are the Contractor on an NEC4 ECC option C, and we have a Subcontractor on board to deliver a groundworks package. This package is worth approximately £250,000. Our Client has Instructed a large additional section of works that is worth approximately £500,000. It is in a separate area of the site and is not a groundworks package. What potential risks could we as a Contractor encounter if we were to directly Instruct the groundworks Subcontractor to do this additional element of works?
Just for clarification, the Client is happy with this approach, and the Subcontractor is willing to do these works using a separate division of their business.
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@james.bold483 I don’t really understand what your issue is? The Client instructs work i.e. changes to Scope they do not usually instruct the Contractor who they have to use for the work. If they’re a groundworks subcontractor and the additional works are not groundworks I’d be concerned about using them if they didn’t have the relevant qualifications and experience. You haven’t mentioned if this separate division has relevant qualifications and experience, if they do then there’s no more risk than if you were using any other subcontractor for the work. I suggest you put this separate division through all the same checks you would put any other subcontractor and if you have any concerns you raise them with the Project Manager. Remember subcontracting is your risk so if they don’t perform and do poor quality work or cause delays it is you that the Client will hold responsible.
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Hi Neil, I appreciate that ordinarily if the Subcontractor is suitably qualified there is no additional risk in comparison to using any other Subcontractor. My main query was to do with what potential issues might arise if we issue a compensation event on the original subcontract. There is the obvious extra expense due to the Subcontractor’s fee percentage. Is the Instruction even valid if the work is in a completely separate works area and is completely separate Scope? Are there any potential insurance issues? We are also completely missing out our normal procurement process and all the due diligence that happens through that process. Are there any other things of that nature?
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If it’s a different scope and a different division of a company then you should just issue a new subcontract
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Is the “new area” within the existing contract “Working Areas”? If not then propose an amendment to the PM to include the new area. Request a quotation from your subcontractor, apply the subcontractor fee percentage to that component, add your Defined Cost & risk allowances, then your direct fee percentage. Submit quote to client, upon implementation then implement the quote downstream with the Subcontractor. Key consideration is CL.26.1 - You are responsible for the works as if you carried out the works, i.e. if the subcontractor folds or performs poorly then you are responsible for this. Make sure you think through these risks and cover them commercially as “risk” in you CE quotation.
Also ensure cl.26.2 has been followed - when submitting your quotation to the PM, ensure you submit CV’s/experience profiles/a subcontracting proposal for the PM’s approval before you sub the work. If on Option C/D/E a failure to follow cl.26.2 would constitute a Disallowed Cost (not following an acceptance procedure set out in the contract cl.11.2(25).