Nomination is used because there are benefits to the employer in using the system. The main benefit to the employer is the control of selection and performance required by NSC. Above all, the employer reserves the right to choose the subcontractor. The cost consultant evaluates the work of the designated subcontractor separately and the amount due is indicated on the provisional certificates and communicated to the designated subcontractor. The contract may allow the customer to pay the designated subcontractor directly if the prime contractor does not. This case was decided by the Scottish Court of Session in early October 2003 and takes a completely different view from the previous case of St Modwen Developments Limited v. Bowmer & Kirkland Limited. It appears that the Scottish Court will support an employer who wants to play an active role in the selection of subcontractors but does not want to accept the risks involved. In terms of appointment, the risk imposed on the client is quite significant, as he is responsible for the execution of the designated subcontractor. This is outlined in the standard construction contract of YCW 98, section 25.4.7, which provides for an extension of time if the designated subcontractor causes delays. However, the legal situation of designated subcontractors is less simple. The fact and circumstances of the appointment of a subcontractor and the terms used in the main contract may sometimes result in the prime contractor not being liable for the failures of the designated subcontractor.
Much depends on what the prime contractor has agreed with the client in the main contract. The terms of the main contract should be the starting point for any analysis. This cannot be overemphasized. Any provision describing the prime contractor`s liability for failures of a designated subcontractor is, of course, relevant. It will also be relevant to the analysis whether the prime contractor has assumed responsibility for the overall design of the work. One method used by employers to enable them to select subcontractors without the risks associated with the appointment is to classify all subcontractors as domestic subcontractors. This point was illustrated in St Modwen Developments Limited v. Bowmer & Kirkland Limited [1996], which dealt with valuation issues, but in which the Court decided to look behind the label of „domestic subcontractor“ and deal with the reality of the procurement procedure.
It is likely that, for these reasons, JCT has since 2005 removed the possibility for designated subcontractors to be included by default in the use of their terms. In fact, in the 2005 series of YCW contracts, the use of appointed subcontractors replaces appointment, although named subcontractors have been used in one form or another in YCW contracts since 1984. When it comes to named subcontractors, the customer is still able to influence the supply chain list, but it`s not absolutely like an appointment. The procuring entity may include subcontractors designated in a tender, but the contractor has the right to reject some of the names, although any dispute must be made before the contract is awarded. (2) If the Contractor has the right to object to a nomination instruction, either:. (b) Because, in the case of subcontractors or designated suppliers or designated subcontractors or suppliers whose work is the subject of article P.C, the subcontracting conditions offered by the subcontractor or selected supplier are not satisfactory in this regard:. (ix) it is not necessary to provide the Contractor with a guarantee or performance guarantee for the proper performance of all its obligations under the subcontractor by the subcontractor or the designated supplier or the subcontractor or supplier designated (as the case may be) in a form acceptable to the Contractor, issued by a bank or insurance company satisfactory to the Contractor; this security shall be [ ] % of the price of the subcontract and shall be released under the subcontract on the date of issue of the final certificate. „As a developer employing up to 20 subcontractors per project, it is important for our company to create high-quality subcontracting requests. We.
If a domestic subcontractor causes a delay in the project, the contractor will bear the cost of that delay because it is deemed that the contractor has assumed responsibility for that subcontractor. If the subcontractor is designated, the contractor is entitled to an extension of the time (e.B in accordance with Article 25.4.7 of the JCT Model Form for the Construction Contract). Indeed, the contractor has less control over the selection of the subcontractor and therefore over performance. The level of control that the contractor exercises in the selection and hiring of the subcontractor will also be an important factor in deciding whether or not to appoint a subcontractor. If the employer was directly involved in the negotiation of the subcontract, the argument that such a subcontractor is appointed has much more power. It is therefore important to consider not only what the construction contract says, but also how this construction contract came into being. By using a designated subcontractor, the developer will establish ongoing relationships with each supplier rather than approaching the supply chain on a project basis. .
