Compatible contractual mechanisms for administrating subcontractors’ claims and disputes.

Abstract

The increasing uncertainty and complexity of construction projects have led main contractors to adopt the multi-tier subcontracting practice which allow them to sublet all or parts of the works and responsibilities to specialized subcontractors. Despite its advantages, subcontracting has its disadvantages that cause claims and disputes, between the main contractor and subcontractors, to be inevitable. Construction projects, on which main contractors adopt the subcontracting practice, are characterized by multi-level contractual relationships established among its parties. Thus, the success of those construction projects is directly related to the clear and balanced contractual agreements on all levels. It is evident that claims and disputes generating at the subcontractor’s level cannot propagate directly to the employer due to the absence of privity of contract between the two, and the subcontractor can raise the claim/dispute only against the main contractor who in turn decides its contractual remedy. The subcontractor’s claims and disputes, being under the control of the main contractor, are prone to receiving an unfair treatment possibly arising from the degree of incompatibility between the concerned conditions of the subcontract and main contract, signed at the lower and upper levels, respectively. The literature mainly discusses the cases when the main contractor signs with the subcontractor an in-house prepared subcontract tailored to the main contractor’s benefit, while not addressing the fact that the subcontract standard conditions, such as those by the International Federation of Consulting Engineers (FIDIC), can also present a certain degree of incompatibility and unfairness to the parties when used in conjunction with the FIDIC’s main contract conditions, those specifically pertaining to the claim and dispute mechanisms. This research has studied this incompatibility through the diligent examination of the aperiodic evolvement of the FIDIC’s subcontract conditions (those of 1994 and 2011), related to the claim and dispute administration mechanisms, in conjunction with the FIDIC’s contract conditions released in 1987 (with 1992 reprint), 1999, and 2017. The significance of this research lies, firstly, in bridging the gap in the literature, by studying the FIDIC subcontract claim/dispute timelines’ compatibility and/or incompatibility when used in conjunction with the FIDIC’s main contract claims/disputes timelines. Secondly, it proposes the necessary amendments that need to be implemented to the subcontract’s general conditions to attain compatibility between the related timelines. Finally, it recommends the most suitable FIDIC’s subcontract conditions to be signed in conjunction with the FIDIC’s main contract conditions to ensure a balanced and compatible mechanism for treating the subcontractor’s claims and disputes.