Clash points

Not altogether. Rudi extrapolates from a very particular example to a general statement about how clients should look after subcontractors and then back to some very specific provisions of subcontracts without pausing for breath. Along the way, he ignores some rather pertinent issues.

First, not all clients are as sophisticated as O&Y. O&Y had used construction management in New York; it preferred to deal directly with subcontractors and it was not averse to risk. Second, on phase one, O&Y used management contracting and took most of the risk of default by subcontractors. So, too, do other clients using management contracting. By assuming the risk of default, clients quite properly also insist on the power to intervene in the terms and conditions of subcontracts. This is not the case under design and build or traditional forms of main contract, where the main contractor has all of the risk of subcontractor default and should, therefore, have the power to dictate the forms of subcontract.

Third, repeat clients of the industry do appreciate the waste inherent in construction – hence the Latham report, Lord Levene’s report and the Egan report – and one-off customers are constantly appalled by it. But for clients that want the industry to deliver a product but do not want, for whatever reason, to be deeply involved in the process, shouldn’t the industry sort itself out? Why should the one-off customer be expected to intervene? The subcontracting industry needs to fight for its own concerns against bad practice and not demand that clients do it for them - particularly when most clients are ill-equipped to do so. The industry needs to distinguish the good contractor from the bad when pricing tenders. If subcontractors submit uncompetitive prices to main contractors that routinely indulge in bad practices, those contractors will soon find themselves losing work as a result. In an extreme case, perhaps subcontractors could decline to tender. The remedy lies in the hands of subcontractors.

It also seems to me to be invidious that the subcontracting industry, when it does decide to take action against certain practices, does it uniformly. As a result of abuses by main contractors on unrelated projects, good clients that release retention promptly are now denied the ability to deduct retention by certain sectors of the market acting under registered agreements. How can this be defended?