Successful subcontracting – Part 2
In Part 1 of this two part subcontracting series, we detailed some tips and traps with respect to subcontracting, and considered the criticality of successful subcontractor performance to the timely and on budget delivery of projects. In Part 2 below, we examine the risks of pro-forma subcontracts and back-to-back drafting and briefly touch on the benefits of bespoke drafted subcontracts.
Now, we appreciate that a lawyer’s innate desire to dot every ‘i’ and cross every ‘t’ does not always resonate with commercial teams keen to deliver a project, and we are mindful that there are times when it is appropriate to put the weighty law books aside and just get on with it. Subcontract drafting is [...]
Successful subcontracting – Part 1
Since Adam Smith first set his mind to the efficiency of the pin factory in 1776, specialisation and division of labour has underpinned industrial development. The construction industry has embraced specialisation and division of labour to such a degree that almost every construction project, no matter how large or small, is delivered in practice by a large number of separate parties, each with a narrow field of expertise and each with a commercial and practical imperative to maximise the efficiency within their field of expertise.
We are, of course, speaking of subcontractors. Whether through management contracting or more traditional procurement, subcontractors continue to play a major rol [...]
Freedom of contract meets its match: Pay If Paid Clauses
Cash-flow from lender to owner to construction manager to subcontractors is the lifeblood of any construction project. And maintaining a sufficient flow of funds is essential to every construction manager’s ability to manage the job. Contract provisions requiring a contractor or subcontractor to continue to work, even if the right to payment is disputed, mean little to the fate of the project if subcontractors cannot meet payroll.
As a consequence, who will bear the risk of non-payment has becomes a frequent negotiation point, particularly so during periods of economic uncertainty. Imagine that two sophisticated corporations spend thousands of dollars and hundreds of hours of th [...]
