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Most users ever online was 32 on Fri Mar 08, 2013 10:22 pm

Sub-Contracting: At a time of Contract Execution

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Re: Sub-Contracting: At a time of Contract Execution

Post  RJM on Sun Jun 14, 2015 7:56 pm

Eng Sabai,

Welcome on board and good luck on your dream to become Construction Claims Expert/Attorney!

I strongly believe that the ITT Clause 3.10 you have referred intends to cater for Specialized Works. In the event that the contractor is envisage to subcontract any element(s) of the contract amounting to more than ten percent of the tender price, then, the contractor should indicate the details of subcontracting in the Form of Tender. For more detail and new development on this clause, I will urge to read the World Bank Standard Bidding Documents for Works - April 2015.

The basis of your question is GCC 8 which you have referred.

1. First and foremost, there is a significant difference between "subcontracting" and "assignment". In this particular situation we are dealing with the subcontracting.

2. I have revisited the ITT Clause 3.10, GCC 8 and R11(d)/446/2013 and I could not see the limit of subcontracting. However, going by logic, if the contractor is intending to subcontract more than 50%, one can question his capacity and capability to execute the contract. GCC 4.4 (FIDIC - RED BOOK) states that  The Contractor shall not subcontract the whole of the Works. May be the limit would be not the whole works!

3. Going by GCC 8, the contractor is allowed to subcontract subject to approval of the Project Manager regardless is mentioned either in the Data Sheet or Form of Tender. It is the discretion of the Project Manager during the execution of works. As matter of procedures; - contractor will notify the Project Manager the intention; submit the formal proposal; Project Manager will determine whether acceptable or not; and then grant approval or reject the proposal. I believe during determination issues such as % to be subcontracted, circumstances; nature and complexity of the works and capacity and capability of the subcontractor will feature.

4.

Main reason behind being that the Cashflow is highly unstable for the Contract, which is towards the end without payment by Client, nor approval/certifying raised payment claims except for the advance payment (IPC No. 1). Making the Contractor not liquid enough to complete the works as more than 40% value of works to date have not been paid for.

The above quote is of concern to me in the sense that if the employer is not paying the contractor on time - how will the employer be able to pay even if the works are going to be subcontracted? Subcontracting will not relief the contractor from the contractual obligations - subcontractor will be paid by the contractor because of "Pay - When - Paid Clause" in the contract between the contractor and the subcontractor. One big question from the prospective subcontractors is - why are you subcontracting?? Under this situation, do you think the contractor will get the suitor?

For now!

RJM

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Sub-Contracting: At a time of Contract Execution

Post  Eng. Sabai, D.M on Mon Jun 08, 2015 8:33 pm

Reference: Contract Documents uses Standard Tendering Document (STD) for Procurement of Medium and Large Works: National and International Competitive Tendering.

ITT Clause 3.10 states that “Tenderers shall, if so indicated in the Tender Data Sheet, submit proposals relating to the nature, conditions and modalities of sub-contracting whenever the sub-contracting of any elements of the contract amounting to more than ten percent of the tender price is envisaged.

GCC Clause 8 states “The Contractor may subcontract with the approval of the Project Manager, but may not assign the Contract without the approval of the Employer in writing. Subcontracting shall not alter the Contractor's obligations”

The Tender Data Sheet does not indicate anything related to submission of proposals for sub-contracting, meanwhile, in the form of Qualification information Section IX: forms of tender, refers to ITT Clause 3.10 and GCC Clause 8 and there is a form to fill for proposed sub contractor details.

Situation: 
The Contractor did not propose any sub-contractor for the works at the time of tendering, and is intending to propose a sub contractor and assign subcontract for more than 10% of the works.
Main reason behind being that the Cashflow is highly unstable for the Contract, which is towards the end without payment by Client, nor approval/certifying raised payment claims except for the advance payment (IPC No. 1). Making the Contractor not liquid enough to complete the works as more than 40% value of works to date have not been paid for.
The contractor, for a good intention of finishing the works within Contract time has opted to propose sub contractor to team up for the remaining works.

Question(s):
What is the possible procedure for Sub contracting in above situation since the works intended to be sub contracted is more than the allowable limit and the Contractor did not propose as per ITT Clause 10


PLS ADVICE
I submit

        Sabai


Last edited by Eng. Sabai, D.M on Mon Jun 08, 2015 8:34 pm; edited 1 time in total (Reason for editing : Signature insertion)

Eng. Sabai, D.M

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