EIABC

DEPARTMENT OF CONSTRUCTION TECHNOLOGY

AND MANAGEMENT

CONSTRUCTION LAW

CHAPTER FIVE: Subcontracting and Consultancy

Services
Subcontracting
The Sub-contracting System
 is a contract to do work for another company as

part of a larger project.

Types of Sub-contracts
 Sub-contracts, in relation to construction
contract, may be classified on the basis of the
following criterion: These are:
• Based on Appointment; and
• Based on the Type of Contract Price
Subcontracting
Based on Appointment:
  

• Domestic Sub-contractor is a subcontractor appointed by the

main contractor at his judgment.
  
• Nominated Sub-contractor is a subcontractor nominated by the
employer which the contractor is obliged to appoint as a
subcontractor.
  
• Selected Sub-contractor is a subcontractor selected by the
contractor in consultation with the employer in terms of the
requirements of the contract.
Subcontracting
Based on Contract Price
  Just as the Main Contract, the Sub-contract

could be classified in to:-

• Lump Sum Sub-contract. It is competitive.

• Unit Price Sub-contract. It is competitive.

 Negotiated Sub-contract. It may be used in special

circumstances. It is not necessarily competitive.

Subcontracting
General Needs for Subcontracting
 The following may serve as the ground or reasons for

subcontracting.
  These are:-

• The need to acquire specialist capabilities (of the

subcontractor) to perform certain aspects of the works.

This is true in case of nominated subcontract.
•The need to subcontract portions of the works to increase
the contracting capacity of the Main Contractor. This is
true in case of domestic subcontract. It has the effect of
reducing the work load of the Main Contractor.
Subcontracting

•The need to satisfy the Employers requirements or expectations

relating to the engagement of small & micro enterprises or local
enterprises in a contract. This issue is related to the issue of the
broader concept of local capacity building.
 Contractual Procedure for Domestic Sub-contracting under the
Main Contract

• The Main Contractor is not allowed to sub-contract the whole of

the works (see Sub-clause 4.2 of FIDIC Red Book).
• The partial subcontracting of the works by the Main Contractor
shall be based on the prior consent or approval of the Engineer.
Subcontracting
• The procedure for appointment of the domestic sub-
contractor is notifying the Engineer by the Main
Contractor & of same by the Engineer.
• the Main Contractor fail to observe this procedure for the
appointment of the domestic sub-contractor or
contravenes the provisions of the said Sub-clause (Sub-
clause 4.1&4.4 of FIDIC), in whole or in part,
 the Main Contract shall be terminated by the
Employer by giving 14 days of notice to the Main
Contractor (cl.15.2 termination by employer)
Subcontracting
Exemption from Notification Requirement

 The Main Contractor may not be required to notify to the Engineer & to
secure the approval or consent of same for the sub-contracting of the
following, as per Sub-clause 4.4 of FIDIC.

  Namely, for:-  
• The provision of labor;
• The purchase of materials which are in accordance with the
standards specified in the Contract; or
• The subcontracting of any part of the Works for which the
Subcontractor is named in the Contract;
Consultancy Services
Architectural & Consulting Engineering (Consultancy) Services
Contract
Definition of the Services
 
• Engineering & architectural services are important technical &
professional services in construction projects.

 Defn:- According to the World Bank, consulting services means

services of an intellectual & advisory nature provided by
consultants using their professional skills to study, design, and
organize specific projects, advise clients, conduct training and
transfer knowledge.
Consultancy Services
Nature of the Services
 The following features characterize the nature
of the consulting services.
 These are;
• Intellectual/professional nature;
• Independent nature;
• Personal nature;
• Incorporeal nature; and
• Technical nature;
Consultancy Services
Intellectual Nature
 The intellectual nature of the services has been provided under

the law. Article 2636(1) of the Civil Code provides that hiring of
intellectual work is a contract relating to the performance of
services of an intellectual character.

Independence Nature
 The independence nature of the consulting services is also

provided under the law. The Civil Code it has been provided
that the contractor (in our case the Engineer or the Architect)
shall carry out his task as he wishes and shall comply with the
rules of his profession.
Consultancy Services
Personal Nature
 The personal nature of the obligation of the consultant is

also provided by law. As per Article 2633(1) of the Civil

Code, it has been provided: Whosoever hires out his
intellectual works shall carry out his obligations
personally.

 It means that the professional qualification or

competence of the consultant is the basis for its selection.
  
Consultancy Services
Incorporeal Nature

 The services of the consultant are not tangible or have

materiality in its nature.
 This nature of the service distinguishes the consultancy service
from construction of works or from the supply of goods.

Technical Nature
 The technical nature of the consultancy services distinguishes

the services of the consultant from other non-technical

consultancy services.
Consultancy Services
Types of Consulting Services

 The World Bank generally classifies types of consulting services in to the

following.
 These are;-

• Preparation Services;
• Implementation Services;
• Advisory Services;
Preparation Services
 Under preparation services, the following services are identified,

• Sector studies;

• Master Plans;

• Feasibility studies;

• Design studies;
Consultancy Services
Advisory Services
 Under advisory services, the following sub-services

are identified
 Policy and strategy;

 Reorganization/Privatization;

 Institution building;

 Training/knowledge transfer;

 Management services;

 Technical/operating advice;
Consultancy Services
Implementation Services
 Under implementation services, the following sub-

services are identified

• Tender document (preparation);

• Procurement assistance;

• Construction supervision;

• Project management;

• Quality management;

• Commissioning;
Consultancy Services
The Selection Process : The International Context
A. The World Bank Approach
 
 The selection process may depend on the chosen method of selection.

 The World Bank generally recommends the following selection process to select consultants.

 The process is presented, in summary, as follows.

• Preparation of the TOR of the assignment;

• Preparation of the cost estimate to determine the budget of the assignment;
• Advertising to invite expression of interest from consultants;
• Shortlisting to identify consultants qualified for the assignment;
• Preparation & issuance of Request for Proposal(RFP);
• Preparation & submission of proposals by the consultants;
• Evaluation of technical proposals-quality evaluation;
• Evaluation of financial proposal-cost evaluation;
• Final combined quality & cost evaluation to select the wining proposal(QCBS);
• Negotiations & signing of the contract between the Borrower & the consultants;
Consultancy Services
B. The FIDIC Approach
 The FIDIC recommends the following selection

procedure-process.
 The process is presented, in summary, as follows.

• Preparation of terms of reference;

• Pre-qualifying consultants;
• Shortlisting consultants;
• Requesting for proposals;
• Assessment of proposals;
• Making an agreement;
Consultancy Services
The Ethiopian Context
 According to the Guide prepared by the PPA, the
following selection process is adopted for the
selection of consultants.
 The process is presented, in summary, as follows.
• Selection of Bidders;
• Preparation & Issue of RFP Documents;
• Bidding Period & Receipt of Proposals;
• Proposal Evaluation;
• Proposal Acceptance, Contract Award & Placement;