Subcontracting and Supply chain managment

Subcontracting and Supply chain managment

1. 1. What is supply chain managment

   • Effective supply chain managment is about creating expectations and a way of working that benefits all those involved, it is heavily reliant on the building contractors leadership qualities
     • A general principle is that the smaller, more tightly knit the supply chain, the easier it is to manage quality.
     • A general principle is efficiency and work standards increases with the level of trust developed from one project to the next. They become accustom to eachothers ways
       • A new member may be less co-opeartive until this level of trust is gained
     • A problem with the supply chain is that it is open to abuse which hampers the level of trust needed for it to operate efficiently

2. 1.2 WHERE ARE CONSULTANTS / DESIGNERS IN THE SUPPLY CHAIN?

   • Proffesional clients tend to be engaged directly by the client before contractors are involved
     • In a traditional JCT SB/C contract the contractor has no power over the designer
       • Additionally Section 16 enables the contract administrator (usually architect) to have power over the builder even though there is no contract between them
   • For the building contractor to be a good leader in the supply chain a clear understanding of contractural relationships is required
     • In design and build contracts the building contractor is given power over the consultants but there is still plenty of contractural issues to resolve
       • Defining scope of work
       • Limits of proffessional indemity
       • Collateral warranties

3. 1.4 In House Option

   • Specialist sub-contractors will tend to employ professional tradesmen directly on the basis that there is continuity in the work
   • Medium to small enterprise will tend to balance the amount of in house and specialists employed provided there is continuity of work
   • A large building contractor might employ the majority of its staff in house
     • Office based employees - Director, Estimators, Contract Manager, H&S Manager, Quantity Surveyors, Buyers, Contract managers, Accountants
     • Site based employees - Site managers, foreman, site engineers, bricklayers, carpenters, painters
     • Large companies are unlikely to carry lots of in house trade specialists due to change in demand for workers and geographical location of projects
       • Employers needed that are not in house would be procured by means of subcontract
   • Advantages
     • More quality control due to loyalty
     • Less contractural procedure (quotes, finalising deals)
     • In house training i.e apprentiships
   • Disadvantages
     • Hard to prove value for money when work can be done by specialists more cheaply
     • Individuals employed directly incur legislative requirements i.e holiday, maternity leave etc.

4. 1.5 Subcontractor and Suppliers

   • There are specialist service providers which are not in house, these would be under subcontractors or consultant agreements
     • Geotechnical investigation specialists
     • Topographical survey
     • Asbestos survey
     • Utility companies
     • Demolition contractors
     • Architectural design consultants
     • Structural engineering consultants
     • Building services consultants
     • Construction
       • Supply only materials
       • Supply only plant
       • Sub-contract labour only
       • Sub-contract plant and labour
       • Sub-contract supply and install
       • Sub-contract design, supply, install
     • An advantage to subcontract tender documents are that the pricing fits neatly into NRM2 SMM7
   • Some of the following will be organised into work packages, they will then be assigned a specialist to take care of specific supply chains, these will report to those above

5. 1.6 Procurement of materials

   • The following should be stated on a purchase order
     • Quantity - actual amount from take off from drawings required for procurement, may require adjustment for waste
     • Specification - All relevant information, drawings and dimensions
     • Price - Noramlly as a quote from the supplier, quote should be checked with compliance with pricing document
     • Delivery date - Agreed and stated on purchase order, must be stated with absolute clarity, typical mistake is for items to be delivered on time but to the head office address not site

6. 1.7 Subcontracting mechanisms

   • In a sub contract, the main contractor enters into an contractural agreement in the same way the contractor does with the employer
     • A sub-contract is no different from any other contracts and is bound by contract law
     • A signed written agreement is essential as without this (if a problem was to arise i.e subcontractor cannot gain access to work) subcontractors will incur losses and disputes will arise
     • A strong supply chain relationship here can:
       • Help in both parties planning ahead so that neither is disrupted
       • Where disruption is unavoidable, dampen levels of disagreement so that disputes are less severe.

7. 1.8 Subcontract agreement

   • JCT sub contract form mirrors the JCT standard document
     • Article 1
       • The agreement
         • Date, main contractors details (name, address etc), subcontractor details
       • The conditions
       • Subcontractor particulars
       • Annexed documents including main contract information schedule
     • Article 2
       • Subcontractors obligations
     • Article 3
       • Sub contract sum to be paid by main contractor

8. 1.9Attestation

   • This is the part of the JCT sub contract which provides for the agreement to be executed either under hand or deed
     • Under hand - both sign by hand under the eye of a witness
     • Deed - Signature and common seal from both companies
   • In absence of attestation, the lsat document on file may describe the current status of the subcontract

9. 1.10 The Conditions

   • Section 1 - Definitions and Interpretation
   • Section 2 - Carrying out the subcontract works
   • Section 3 - Control of sub-contract works
   • Section 4 - Payment
   • Section 5 - Valuation
   • Section 6 - Injury, damage and insurance
   • Section 7 - Termination
   • Section 8 - Settlement of disputes