Although the complexity of the nominated subcontractor form hardly encourages its use, other factors contributed to its decline. First, the past decade has seen a growth in contractual structures that deliver single-point responsibility to clients. Second, 10 years ago, the industry was still experiencing one of its worst ever recessions, and those clients that were still procuring construction were able to dictate contractual terms. This led to “ad hoc” nomination.
By ad hoc I mean the situation whereby clients wish to be involved in the selection process, but then want the appointment to be made on a domestic subcontract basis. Clients can’t have their cake and eat it. Do they want a say in the selection process or do they want to employ a main contractor to manage the process for them and consequently take responsibility for it? However, with ad hoc nomination taking hold during the recession, there was no incentive for clients to use the NSC form and share some of the risks of subcontractor performance.
Ann recognises that some clients do want a say in the selection process and accepts that some risk should be attached to this, although she argues that this should be limited to sharing the risk of insolvency. This is not a particularly generous view. Ann’s reasoning would seem to be based on the assumption that if the main contractor is aware of the selection at tender stage, it is at no greater risk than if it selected the subcontractor. To take full management responsibility and, in some cases, design liability for a subcontractor selected by someone else, is an onerous obligation. Main contractors could have subcontractors imposed on them that they never wanted to work with again.
Indeed in this post-Egan era, main contractors are looking to supply-chain management and partnering agreements as the way forward. Clients who become involved in the selection process have to accept that their interference may cut across partnering arrangements.
For all its faults, however, nomination is the only recognised contractual way for a client to select a subcontractor and then require the main contractor to enter in to a contractual relationship with that subcontractor.
When viewed this way, nomination simply recognises that he who makes the selection should take responsibility for it. Contractors do that all the time with domestic subcontractors, and if clients feel so strongly that a specific firm has to be engaged, then the client should vouch for its performance. Ann accepts this, and would only seem to be querying the allocation of risk. Time for a review of the NSC form?
Clare Edwards is director of legal affairs for the Construction Confederation. She joins the Clash points love triangle in place of Jennie Price.