Subcontracting guidance note now published

The final part of the UK Black Book provides comprehensive guidance on the process of subcontracting

Author:

Steven Thompson

22 April 2021

Procurement and contracts

Project management

Quantity surveying and construction

RICS standards and guidance

Wooden blocks with white icons linked with white lines on a grey background

The final guidance note in the UK Black Book series, Subcontracting, has now been published. Structured in three parts in line with the APC levels – knowing, doing and advising – the publication addresses the relationship between a main contractor and their subcontractors.

Knowing

The first section of the guidance note looks at what subcontracting is, providing a brief history of the concept; the initial reason for subcontracting was the introduction of an employment tax in the 1960s, which meant that there was an incentive for main contractors to remove employees from the direct payroll, thus saving on tax expenditure.

This is followed by an overview of its current status in the UK, and an examination of the advantages and disadvantages of subcontracting on any particular project.

There is comprehensive commentary on the different kinds of subcontractor in the UK, which are a result of the wealth of different procurement models used and the variety of standard forms of contract. The commentary covers different types of subcontractor such as trade or works contractors, and explains how these differ from traditional subcontractors.

Doing

The second section covers procurement and tendering strategies, with comprehensive guidance on the process that should be followed.

The note examines the basis and principles of a generic subcontract document and provides an overview of the forms available, including those from JCT, CIP, NEC, CECA, ACE, ACA and FIDIC. Amendments to these forms are also covered.

The specific clauses in the JCT 2016 suite and the NEC4 subcontract form are discussed in further depth, including:

insurance
guidance on performance security measures that might be put in place
related payment provisions including retention, materials on and off site, and the status and rectification of defects.

Information is provided about the preparation of bespoke forms and the place of early subcontractor involvement, both in the contract and in practice, while there is also guidance on delays and the remedies available in the event of subcontractor delay.

Advising

The third section builds on the previous two and includes information on the various dispute resolution routes available, with a particular focus on adjudication, arbitration and subcontractor insolvency.

There are also sections on:

e-tendering
methods of legal execution of the subcontract
what to look out for if the subcontractor is based overseas
signs of subcontractor failure to perform.

A series of appendices follows, including:

checklists on procurement strategy
a tender recommendation report checklist
information about and checklists for performance security and insolvency, with material on the warning signs for potential subcontractor failure.

The guidance note observes that much of the current UK construction industry model is based on domestic subcontracting, with responsibility for managing the supply chain being the concern of the main contractor’s commercial manager.

Nevertheless the guidance note is still relevant to quantity surveyors and project managers in a variety of roles. Subcontractors are vitally important to the success of construction projects, and as such RICS professionals should ensure they fully understand subcontracting provisions.

Steven Thompson FRICS is senior specialist, construction standards at RICS

sthompson@rics.org

Related competencies include: Commercial management, Contract practice

Download the RICS Subcontracting guidance note, 1st edition