LECTURE 7 CLAIMS RELATED TO SUB-CONTRACTORS

1. LECTURE 7 CLAIMS RELATED TO SUB-CONTRACTORS • Reasons for Nominated Sub-contractors • Contractor's right to object NSC • Nominated Sub-contractor’s programs • Extension of Time for completion of Nominated Sub-contract Works • Extension of Time for NSC in HKSFSC • Delay by Nominated Sub-contractors • Architect’s consent to grant EOT to a NSC • Design and Drawings provided by the NSC • Variations to the Nominated Sub-contract Works • Delay and Disruption Claims • Loss & expenses claims by NSC

2. REASONS FOR NSC: • The design of the sub-contractor's works should be in line with the design of the principal works • Appointment of the sub-contractor before the main contractor due to long delivery periods for plant & equipment (e.g. lift) • The sub-contract work is an extension of work done previously by a particular sub-contractor & the same equipment & standards are required to be used in the new works • The sub-contract works are the main requirements of the employer and the building is secondary (e.g. in process plant) • The employer has a particular preference for a subcontractor based on previous performance & standard of work

3. CONTRACTOR'S RIGHT TO OBJECT NSC IF: • NSC refuses to enter into a sub-contract on terms, similar to that in the Main Contract, to indemnify the contractor against any claims due to default / negligence of the NSC • NSC does not agree to complete the nominated sub-contract works in accordance with the reasonable directions of the contractor so that the obligations under the main contract can be discharged • NSC does not agree to complete the nominated sub-contract works within the period specified in the proposed nominated sub-contract / suit main contractor's program • Main contractor believes, with evidence, that the NSC is unsuitable or financially unsound

4. NOMINATED SUB-CONTRACTOR’S PROGRAMS • Usually the nominated sub-contract works would not be awarded until just a few weeks before the commencement of them which may be long time after the award of the main contract. • Sometimes the nominated sub-contractors are requested that their works should suit the programs of the Main Contract which show the completion date earlier than the award of the nominated sub-contracts works! !? • In such case, the nominated sub-contractors may only be obliged to complete their works within a reasonable time which probably may not be within the contract period of the Main Contractor

5. EOT FOR COMPLETION OF NSC WORKS • EOT for 2 classes of events: • Delay for which the main contractor is entitled under the main contract • Delay or fault on the part of the main contractor or persons for whom the main contractor is responsible  

6. EOT IN HKSFSC • EOT may be granted to NSC under Clause 8 of the HKSFSC : • By reason of any of the matters specified in clause 7(1) - variations, of the sub-contract • By any act or omission of the main contractor, his sub-contractors, his or their respective servants or agents • For any reason (except delay on the part of the sub-contractor) for which the main contractor could obtain an EOT for completion under the main contract   

7. DELAY BY NSCS • Under clause 23(g) of the Main Contract, MC can obtain EOT for the delay by the NSC provided that the main contractor has taken all practical steps to avoid or reduce • Under clause8 (b)(ii) of the Sub-contract, the sub-contractor will not have EOT granted for delay on his part • Therefore, the Date for Completion of the Main Contract may be later than that of the Sub-contract • The NSC may be held wholly liable for the L.D. amount

8. WHO GRANTS NSC EOT? • It is the Main Contractor to grant EOT to the nominated sub-contractor, not the Architect • However, the Main Contractor should obtain consent from the Architect before granting any EOT to the nominated sub-contractor • If the Architect refuses to give consent to the Main Contractor to grant nominated sub-contractor EOT for qualifying events, the nominated sub-contractor may argue that the time for completion of the sub-contract works is time at large

9. DESIGN AND DRAWINGS PROVIDED BY THE NSC • In contracts where the responsibility for design rests on the employer, any design of the nominated sub-contract works by the sub-contractor is deemed to be the employer's design. • Delay in design by the NSC will be considered to be delay by the employer • Some contracts attempt to place responsibility for co-ordination of design by nominated sub-contractors upon the main contractor or on various sub-contractors. However, it is usually a disaster and will almost certainly end up to be the responsibility of the employer.

10. VARIATIONS TO THE NSC WORKS • Valuation of the variations of the NSC works is similar to that of the main contract works • However, some instructions issued are variation to the main contractor but are not variation to the sub-contractor because the sub-contracts are often awarded some time after the main contracts. • Before the award of any nominated sub-contracts, the programs of the nominated sub-contractors & that of the main contractor should be coordinated to make sure that they are consistent. • Otherwise, either the main contractor will object the nomination or the sub-contractor will claim EOT & L&E.

11. DELAY AND DISRUPTION CLAIMS • If it is the fault of the employer, then the contractor & the nominated sub-contractor should co-operate on keeping the records, giving notices and the means of formulating a claim. • If it is the fault of the contractor or other sub-contractors, there will be some resistance to settle the claims especially the delay is concurrent to the delay by the employer from which the main contractor can claim under the main contract. • In Clause 8 (c) of HKSFSC, if in the opinion of both the architect & main contractor that the sub-contractor is involved in direct loss /expense, then the architect should ascertain the amount.

12. LOSS & EXPENSES CLAIMS BY NSC • No specific clauses in the HKSFSC. • Clause 12 - NSC can have same rights or benefits (implied including loss and expense) of the main contractor under the main contract.