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Construction Law/Nomination of Subcontractor

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QUESTION: FIDIC 2005 Harmonized bank edition
Dear Sir,
We are the supervision consultant for the project in Uzbekistan. The contractor without informing the Employer and the Engineer has subcontracted over 70% of the works to the subcontractor, however the subcontractor has not been nominated by the contractor under the contract yet. The contractor has named the Subcontractor as a supplier of solely materials, howver 70% of the works is being caried out by the still non nominated subcontractor.
1. Is it ok to subcontract works under the contract without giving a notice?
2. Can the Employer force the Contractor under the contract to nominate the subcontractor officially considering 70% subcontracted works.
3. what amount of works can be subcontracted to subcontractors.

Your valuable response is appreciated.

ANSWER: Dear Mansur,

Thank you for this question.

I do not have a copy of the Harmonised MDB form to hand, so I will refer to the Red Book for the present time.

By sub-clause 4.4 if a supplier or sub-contractor has been named in the Contract no approval is necessary. However if I read your question correctly the Contractor is using a named supplier as a sub-contractor without seeking approval for this. That action is not contemplated by the standard terms of the contract and much will depend upon the manner in which the supplier was described in the Contract.

If the Contract is clear that the named organisation was intended as a supplier only the Contractor should have requested permission before engaging that organisation as a sub-contractor. If there is any ambiguity the interpretation might not be so easy.

I suggest that a pragmatic approach is taken. Can the organisation be accepted as a sub-contractor, or is there a reason for rejection other than the Contractor's failure to observe the correct protocol? If not, any action might be considered as mischievous or malicious.

Regarding the extent to which a Contractor can sub-contract, the standard terns state that the Contractor shall not sub-contract the whole of the Works. That is very ambiguous wording; arguably sub-contracting 99% does not contravene the standard term.

If the Contract has not been drafted to restrict the Contractor I suggest again that a pragmatic approach is taken. If the Contractor has sub-contracted so much as to relinquish control of the project, I suggest that is unacceptable. If the Contractor is merely managing the project and not providing any other resources that is less certain a position and the capabilities of those actually performing the work should also be considered.


I hope that this assists you.

Kind regards,
John Dowse

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---------- FOLLOW-UP ----------

QUESTION: Dear Sir
I thank you for your quick and resourceful answer.
We, the Employer and Consultant do not mind to accept the current unnamed subcontractor as nominated subcontractor, however the Contractor is refusing to nominate him, but keeping to name him as a material supplier, in reality as I said this material supplier is at the same time supplying material as well as engaed in subcontract works. As I understand from your answer there is nothing we can do with the Contractor unless he himself seeks an approval for nomination of the subcontractor, is that right? Can we accuse the Contractor under cl.15.6 Corrupt or fraudulent practices since the Contractor has not nominated the Contractor? Actuall it did once submitted letter nominating the material supplier as the subcontractor officially, but the next day this letter was withdrawn, naming the subcontractor only the material supplier.
Thank you

Thank you.

Answer
Dear Mansur,

Thank you for this question.

As I indicated previously the FIDIC contract does not state a remedy for the Contractor's failure to nominate a sub-contractor. Although the failure is a technical breach of contract I question whether you have the evidence to claim that it constitutes sufficiently serious practice to allow a valid termination under sub-clause 15.6. Allegations of corruption and/or fraud carry a high burden of proof.

I will be happy to consider anything further that you can provide.


I hope that this assists you.

Kind regards,
John Dowse

Follow me on Twitter: @CernoOrg

For my regular industry newsletter e-mail to info@cerno.org, stating SUBSCRIBE in the subject line

Training and consulting services are available, bespoke to companies and individuals.

John Dowse can be contacted by e-mail to info@cerno.org (When e-mailing, please include “AllExperts” in the subject line.)

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John Dowse

Expertise

Legal; contract interpretation; quantum; delay analysis. Practitioner in arbitration, adjudication and mediation.

Experience

Thirty-three (33) years experience in building and construction, at all levels both within contracting and consulting organisations. Practising arbitrator, adjudicator, and mediator. Faculty approved trainer for the Chartered Institute of Arbitrators. Lecturer on construction contract forms and dispute resolution practices.

Organizations
Chartered Institution of Civil Engineering Surveyors Chartered Institute of Arbitrators Institute of Directors Society of Construction Arbitrators

Publications
Various UK and International construction and legal publications.

Education/Credentials
LLB (Hons), Pg Dip (Legal Practice), MCInstCES MCIArb MIOD Barrister

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