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Construction Law/AP Charges to Nominated Subcontractors


We are Main Contractor in one project in Dubai. Client nominated Suppliers/Subconrtactors for PS and PC Items and agreed a payment terms with Nominated Subcontractor/Supplier "NSC" . Client issued Letter of Nomination to us to enter into an Agreement with the Nominated Subcontractors. As per LON,NSC are entitled for an Advance Payment "AP" against Advance Payment Guarantee in favor of the Main Contractor.
Client refused to issue AP directly to the NSC instead instructed us to submit APG against the Advances to be paid to NSC.
Do we have right to claim costs and expenses in procurring the APG's.

Dear Catherine,

Thanks for your question.

Yes, the arrangement followed in the nomination and procurement of the scope of the nominated subcontractor's works is in order and that is the common practice. Let me also let you know that, once you entered into agreement with the NSC, it means the nominated NSC becomes your agency on the execution of the subcontract scope and you are entirely responsible for the diligent delivery of their scope and in similar vein, all payments due to the NSC would be made to you being the MAIN CONTRACTOR who is entirely responsible for the works and you would then pass on the portion of the payment of the NSC. Though i do not know the form of Contract you are using to administer the contract but most form of contract have a guideline on payments of NSC through the MC and also circumstances that could warrant the employer to make direct payments to the NSC.

In your specific case here, i believe your cost of administering the NSC scope (for instance, for attendance, special attendance and profit) would have been stated in the MC and if not, you need to check your contract and follow the procedure to include such costs. I am happy to let you know therefore that the cost and expenses in procuring the APG for NSC scope is part of the cost reimbursable which should be compiled with the cost of attendance, special attendance and profits. You also need to check (if available) under your contract, the definition and scope of what is covered under "attendance, special attendance and profit" of the MC for the NSC scope and see if the cost and expenses of procuring  APG is there or not, if not, you can claim the reimbursement by tendering the receipt for such cost and expenses.

Don't forget that, your APG would be issued to the employer making the AP recoverable by the employer in case of defaults while you are to request the NSC to submit APG to you (the MC) stating your name as party that would recover the AP in case of NSC default.

Hope this is clear for you?


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Femi Alofe


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