WHAT ARE THE ESSENTIAL DIFFERENCES BETWEEN A SELECTED SUBCONTRACTOR AND A NOMINATED SUBCONTRACTOR?
Both Nominated and Selected Subcontractors are described in the JBCC Series 2000 Principal Building Agreement as Subcontractors who execute work which is provided for by a provisional amount in the Bills of Quantities. However, there are major differences in the manner in which these subcontractors are appointed.
A Nominated Subcontractor is chosen unilaterally by the Principal Agent who then instructs the Contractor to appoint the Subcontractor as a Nominated Subcontractor, subject to limited grounds for objection by the Contractor.
A selected Subcontractor however is very different. Clause 21.0 requires firstly, that the tender documents for such work shall be prepared in consultation with and to the approval of the Contractor; secondly, that the tender documents shall only be issued to a list of tenderers agreed upon between the Contractor and the Principal Agent; thirdly, that the Selected Subcontractor shall be chosen by the Principal Agent together with the Contractor; and fourthly, that the Contractor shall satisfy himself that the Selected Subcontractor can meet the requirements of the agreement which he will be required to enter into.
Why is it then necessary that the Contractor must be heavily involved in the selection and appointment of a Selected Subcontractor whereas he is not in the case of a Nominated Subcontractor?
The answer is that the Contractor carries a much greater risk in the case of a Selected Subcontractor and therefore he must be actively involved in the selection and appointment process.
The Contractor is protected in the case of a delay or default by a Nominated Subcontractor where he is not in the case of a Selected Subcontractor.
Clause 20.9 provides that if the Nominated Subcontractor's contract is cancelled because of his default, then all costs of employing others to complete the work shall be for the Employer.
Clause 21.10 on the other hand provides that in the case of a Selected Subcontractor those costs will be for the Contractor.
Clause 29.0 allows the Contractor to obtain an extension of the construction period if delay is caused by a Nominated Subcontractor but not if delay is caused by a Selected Subcontractor.
Because they carry these added risks, Contractors must be fully aware of their rights to participate in the selection and appointment of Selected Subcontractors and should resist any attempts by the Employer or his agents to unilaterally seek tenders from subcontractors and then appoint them as Selected Subcontractors.
Contractors should take care to accept subcontractors on a selected basis only when:
(a) They have been properly consulted with regard to the selection of subcontractor firms to be invited to tender, prior to the tender enquiries being distributed.
(b) They have satisfied themselves by scrutiny of the subcontract documents that the proposed terms and conditions are acceptable and not in conflict with the provisions of the Principal Agreement.
(c) They have knowledge of the "track record" of the chosen subcontractor and are not in doubt that he is capable of carrying out the work satisfactorily, and
(d) That they are confident that the subcontractor has adequate resources to enable him to complete the Subcontract work.
If these conditions cannot be fulfilled and the Contractor has not been involved in the selection process then the Principal Agent should appoint the subcontractor on a nominated basis.
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