Subcontracting contracts are always of great interest to many contractors as the subcontracting method is widely applied in construction projects nowadays. So, what are the issues to consider when executing a subcontracting contract? Let's follow the article below by DauThau.info to find out!
Subcontracting Agreement and Key Notes for Contractors
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What is a subcontracting contract?
In simple terms, a subcontracting contract is a document signed between the main contractor (or general contractor) and the subcontractor to agree on the tasks that the subcontractor will perform after the bidding process.
The subcontracting contract is the basis for clearly defining the scope of work and the percentage (%) of work that the subcontractor is allowed to perform when implementing the contract. At the same time, it also serves as the basis for determining the rights and obligations of the contractor (or general contractor) and the subcontractor in the contract execution.
Notes on subcontracting contracts to enhance bidding capabilities
Below are 5 notes on subcontracting contracts that DauThau.info has compiled through the customer support process, as follows:
Key points on subcontract agreement to enhance bidding capacity
1. Adhere strictly to the scope of work specified in the subcontracting agreement
One important note for subcontractors is to ensure compliance and proper execution of their assigned tasks as outlined in the contract. If there are any additional tasks outside the contract, there should be a separate document signed to avoid situations where the subcontractor signs the contract but fails to perform the work as stated in the contract, following the instructions of the main contractor or the client. This can result in disputes and disadvantages due to a lack of evidence to prove compliance.
2. Differentiate between the primary contract and the subcontract
Subcontractors need to understand that the main contract and the subcontracting contract are two independent contracts.
The main contract is a contract that is not dependent on the subcontracting contract. It is a document signed between the main contractor (or general contractor) and the client to establish the responsibilities, obligations, and rights of all parties involved in executing the entire scope of work under the contract.
The subcontracting contract, on the other hand, is a regular construction contract between the main contractor and the subcontractor.
3. Understand the value of the contract
As a subcontractor, the value of the contract is realized through the main contractor and is not directly related to the client. The contract is signed with the main contractor, so any issues regarding the value of the subcontracting contract should be addressed with the main contractor for discussion.
4. Discuss in detail the tasks that the subcontractor will be involved in
Subcontractors should engage in detailed discussions regarding the tasks they will be involved in to avoid unnecessary losses. They need to calculate their ability to complete the tasks according to the contract schedule. In urgent cases where additional materials need to be urgently purchased or additional labor needs to be hired in large numbers, the subcontractor should request additional time extensions or price adjustments to utilize external resources.
The volume of work and the percentage of work allocated are crucial factors, so subcontractors need to carefully check to avoid being overwhelmed with tasks assigned by the main contractor.
5. Clearly define the payment terms for the subcontractor
In the subcontracting contract, the parties involved should agree on and specify clear payment terms such as payment schedule (in installments or a lump sum), advance payment percentage, etc., to limit potential risks. This allows for timely payment upon completion of each phase of work or upon completion of the contract as a whole.
DauThau.info has shared valuable information about subcontracting contracts. If there are any further inquiries regarding other bidding content or if legal advice is needed for specific cases, contractors can contact DauThau.info through:
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