In any construction job, there will inevitably be the use of subcontractors. The subcontractor is usually appointed by the Contractor to perform a part of the construction works. However, there are times where one finds that their agreement makes reference to a nominated Subcontractor and a Selected Subcontractor. It is important to understand the difference between the two as they may have implications for the Employer.
In Minister of Public Works and Land Affairs v Group Five Building Ltd , the Court laid out the essential elements of a Nominated Subcontractor:
- Its first essential quality is that the Employer reserves the right to nominate as Subcontractors particular persons to perform specified parts of the overall works.
- A second essential feature is that the Contractor is obliged to accept the nomination, subject to a limited, but nonetheless important, right of challenge.
- A third is that the Contractor must enter into a subcontract with the person nominated, usually one containing the same terms, particularly as to performance, as those contained in the main contract.
- A fourth is that there is no privity of contract between the Employer and the Subcontractor.
- From this flows a fifth, that the Employer compels performance of the subcontract not directly, but through his remedies against the Contractor under the main contract.
- A sixth is that in the bills of quantities contract a figure is inserted in the bills for the Nominated Subcontract works which is called a provisional sum, provisional because when a payment certificate is prepared this sum is struck out and replaced by the contract price derived by multiplying the actual measured quantities by the appropriate unit rates in the bills.
A common further feature is that the terms of the subcontract are settled only after the main contract has been concluded. This description is a broad one, and, of course, its accuracy in a particular case depends upon the terms of the particular contract. This is designed to avoid privity between the Employer and the nominated subcontractor, whilst retaining substantial control over the subcontract works in the Employer’s hands.