State your case Rudi Klein’s assertion that specialists are losing out because main contractors are telling them what products to use doesn’t stand up to scrutiny.
In his article “An Offer You Can’t Accept” (1 December) Rudi Klein lamented the increasingly common practice of main contractors specifying which products are to be supplied by specialist subcontractors. His gripe is that this breaks up supply chains, inhibits R&D and leaves the specialist as little more than a supplier of trained labour. Worse still, although the specialist’s power to make decisions about products is removed, its liability for them is not.
Rudi may be right about the supply chain, but his proposition on the liability tells only part of the story. The condition in the 1982 Supply of Goods and Services Act – that in all contracts, goods supplied must be of satisfactory quality – is not just respectable, it’s correct.
He neglects to mention that this applies whether the products are specified by the contractor or selected by the specialist. This means that the specialist is in no worse position merely because the contractor has specified the products.
He also does not mention that the satisfactory quality condition is accompanied, in appropriate circumstances, by a requirement that a product be fit for the purpose for which it was supplied. This may not be appropriate if the goods are specified by the contractor, rather than the specialist, so, in liability terms the specialist is probably better off if the contractor selects the products.
Rudi is really advocating that specialists should accept more responsibility than if they did not select the products
Worse still, Rudi neglects to mention that if the subcontractor selects the products, the wider fitness for purpose condition may apply. This says the products must be fit for the purpose for which they were acquired if that purpose is made known to the supplier.
So, by advocating that selection be left to the specialists, Rudi is really advocating that they should accept more responsibility than if they did not select the products.
He is on slightly firmer ground when he asserts that the specialist is forced to accept terms imposed by the manufacturer, who will usually seek to limit liability. But, are manufacturers queuing up to relax their conditions of sale merely because specialists have the right of selection? The evidence available to me suggests that they are not.
Admittedly, the ability to source elsewhere is a bargaining chip that can be deployed by the specialist, but in truth, how often does it result in a relaxation of terms of sale? Where used, this is likely to get a better price, but rarely better terms of sale.
Specialists are complaining because their ability to obtain price advantages is restricted once their right of selection is removed. That’s what they don’t like
This brings us to the nub of the matter. Specialists are complaining because their ability to obtain price advantages is restricted once their right of selection is removed. That’s what they don’t like. Moreover, specialists’ assertion that they are becoming no more than suppliers of trained labour does them no credit – surely installation is a specialist skill and, even if specified by somebody else, integrating products into the whole is also a specialist skill. If not, then contractors ought to bypass the middle man altogether and go straight to the manufacturer.
The fundamental flaw is the presumption that the purchaser doesn’t have the right to decide what to buy. I may listen to a shop assistant’s advice when purchasing perfume for my wife, but ultimately the decision is mine. And if I want Issey Miyake – because that’s what she likes – then the shop assistant’s opinion that Chanel is better (and pays better commission) cuts no ice. When I pay the piper, I call the tune. Why should contractors be criticised for doing the same thing? Why shouldn’t a design-and-build contractor specify the products to be included in the building that it is designing and that it is ultimately responsible for?
The truth is that market practices may be shifting adversely to the interests of the specialist but that’s the nature of the market. Specialists will have to adapt and find some other way of generating pricing advantages (or should I say “adding value”?), or demonstrate that the old way was better. Complaining about one narrow aspect of the new regime is just a diversion.
Kevin Barrett is a partner in the construction and energy team at Wragge & Co