Is it a good idea to nominate a subcontractor, asks Kim Franklin? The scheme whereby an employer may name a subcontractor, who is then foisted on an unsuspecting main contractor, was concocted to enable employers to have the best of both worlds. On the one hand, they can choose specialist contractors and negotiate all the relevant terms of their engagement, including price, and obtain detailed specialist design which would not ordinarily be provided by their architect. On the other hand, the employer is saved the hassle of contracting various different subcontractors.
Instead, the nominated subcontractors are slotted neatly under the umbrella of the main contract.
The upshot is that if the nominated subcontractor fails to perform, the main contractor may be responsible for its failings, even though they had little say in how the work was done in the first place.
Understandably, perhaps, where contracting bodies have had a say in the drafting of the contract, they have sought to limit the main contractor's exposure. Nevertheless, some courts have found this to be a step too far and refused to hold the contractor liable, even though the employer is left without a remedy. Employers responded to this risk by requiring direct warranties from the subcontractors.
The efficacy of the warranties would depend upon their wording and whether the subcontractor is still solvent when the balloon goes up.
Already you can see that the employers' original attempts to keep things simple have provided ample scope for complication; and the JCT suite of contracts for use by nominated subcontractors is nothing if not complicated.
Standard forms of tender, tender acceptance, warranty and conditions of contract are required to be distributed, returned, signed and accepted.
In the highly likely event that one of the relevant forms is overlooked in the general enthusiasm for the project, it is necessary to look at the main contract, the subcontract and all surrounding circumstances, in particular those relating to the nomination, to work out who is liable to whom and for what.
So why do they do it?
The advantages to the employer of nomination are said to be threefold:
? choice of specialist subcontractor;
? best price for specialist works; and - design work which cannot be obtained elsewhere.
The editors of Keating, one of the leading texts on construction law, debunk all three. An employer can issue a list of approved subcontractors providing specialist services.
The works can be described in terms of a performance specification, that is, specifying the desired result, not the means by which it is obtained.
If allowed sufficient time, the main contractor can shop around for the best price.
Specialists can be required to provide design as part of their bid on either a speculative or a paid basis. Instead, they suggest that the best protection against the complications of nomination is to avoid it. They go so far as to suggest that the penny may have dropped and that subcontractor nomination, particularly on large projects, is in decline.
Is nomination a good idea?
It seems not.