Nominated Subcontractors

It is a tough one.

Daniel, There is a famous Canadian Court Case named as ’Ron Engineering’look into it as it may be of some help.


Regards
Rashid Iqbal

Daniel,

I faced a similar problem in one of our projects. The MEP works were nominated and, therefore, the client/consultant nominated a sub-contractor as per clause 58 (Provisional Sums) and Clause 59 (Nominated Sub-contractors).

In order to minimise the difference in LD imposed by the client/consultant on the Main Contractor and the Main Contractor and Nominated Sub-contractor, the percentage of LD was increased to 35% instead of the normal 10%.

That means, the client/consultant can charge the main contractor a maximum of 10% of his contract price as LD. But, the main contractor can charge a maximum of 35% of the nominated sub-contractors’ contract prices.

As a main contractor, you have the right to impose any percentage of LD while entering into a contract with your sub-contractor as long as the main contract does not have any specific rule or condition for the sub-contractor.

This is one of the ways the main contractor can save his back.

Dear Vishwas,

I thank you for your reply. However, I have comments on your suggestions as follows:
1- If you raise the LD to 35% instead of 10% of maximum amount, no S/C will dare to work with the Main Contractor as the maximum amount of LD is usually equal to the retaining amount of work which means that a S/C will be willing to lose his uplift & benefit (in worse case) but not willing to enter a S/C agreement where LD can reach 35%?!
2- As S/C is nominated, that means that he negotiated terms, money, schedule and other conditions with the Engineer. Therefore, the Main Contractor cannot easily overpass these conditions and standardize his own S/C agreement rules?!
3- If we took the example of E/M packages in Building, it will form a max. of 40% of Main Contractor’s BOQ amount (noted S). Hence, the application of 10% of LD from Client will be S x 10/100 = 0.1 x S and if Main Contractor wants to be compensated then the application of 25% of the 40% of S will be sufficient as 25/100 x (40/100 x S)= 0.1 x S

In all cases, Main Contractor had to take also the risk of entering into S/C agreements with these nominated S/Cs or else he should from the beginning decline and object on doing so.

Regards,
J. Daniel

Good Morning all

If a owner nominate a subcontractor the main contractor normally ad a "mark up". This mark up should allow in my book for the following as a minumum.

1) A Management Fee.
2) The Risk
3) Profit

I Think to many see this fee as profit only but you must rememeber about the other.

Cheers