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Procurement Perspectives: Using subcontractors for municipal contracts

Stephen Bauld
Procurement Perspectives: Using subcontractors for municipal contracts

For major contracts, especially construction contracts, the intent of the supplier will often be to subcontract at least a portion of the work to be done.

Subcontracting is not in itself objectionable for construction projects. It is generally essential since few construction firms have a sufficiently diverse staff to be able to execute all required work themselves.

Nevertheless, a municipality should not allow a contractor to use subcontracting as a method of avoiding its own responsibilities under the contract.

It should be made clear to the contractor that despite any subcontracting, the contractor will be held accountable for the manner in which all aspects of the work are carried out.

Many municipalities make it a practice of including an express right in their contracts to approve or reject any proposed subcontractor.

Others go so far as to state any intention to use a subcontractor should be stated in the proposal with the name of the proposed subcontractor being expressly disclosed.

The following is a sample provision of this type:

Where required in the form of tender, description of project, works or supply or special provisions, the bidder shall include the names and addresses of all nominated subcontractors that it proposes to use,

on the project, work or supply or

in connection with the provision of any supply of goods or an intended fixture.

The city reserves the right to reject any subcontractor so nominated.

No change shall be made to the list of nominated subcontractors after the closing of the tender without the prior written approval of the city’s project manager (if there is one) or the purchasing manager in all other cases.

There are two reasons for contracting for these rights.

First, it allows the municipality to avoid reliance on a supplier who has proven unreliable in the past. Second, a particular subcontractor may have current or past corporate or other interests that give to a conflict of interest in connection with the project and for that reason may be objectionable.

Municipal contracts should be drafted to make clear to contractors that merely by agreeing to allow the use of subcontractors, or even when approving the use of particular subcontractors, the municipality should not be taken as having qualified its right to require the contractor to perform the contract in full.

The responsibility of the party to a contract is to perform his or her obligations under it in full. The use of a subcontractor does not affect that obligation.

The responsibility for performance should always remain with the contractor.

Subcontracting is for the contractor’s convenience.

While some review of a proposed subcontract arrangement may be necessary to protect municipal interests, provisions of a contract providing for such review should be understood as being intended solely for the protection of the municipality.

They are not intended to affect, and should not be construed as affecting, the liability of the contractor under the contract.

Depending on the size of the contract and the nature of the work to be done under it, the contractor may engage a number of subcontractors to perform a portion of the work involved in making the improvement.

The day-to-day management of the project is administered by the contractor. It is responsible for ensuring the work that is constructed conforms to the agreed specifications.

However, the project is often placed under the general supervision of an architect or engineer who will act as the municipality’s onsite agent and will inspect the work to make sure that it conforms to the agreement.

In many cases, the contractor will also perform the related function of acting as payment certifier, determining whether specific portions of the work have been completed and relating the amount of work performed to the payment formula of the contract.

Stephen Bauld is a government procurement expert and can be reached at Some of his columns may contain excerpts from The Municipal Procurement Handbook published by Butterworths.

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