Nominated Sub Contractor & Supplier PDF

NOMINATED SUB-CONTRACTOR &
NOMINATED SUPPLIER
PROVISION IN THE CONTRACT
Relevant contractual provisions regarding
Nominated sub-contractors/suppliers in P.W.D.
203A (Rev. 1/2010) Standard form of contract:
a) Clause 47 – Sub-contract or assignment
b) Clause 60 – Nominated Sub-Contractors
(NSC) or Nominated Suppliers (NS)
c) Clause 60 – Payment to NSC and NS
d) Clause 34 – Prime Cost/Provisional Sum
Clause 47 – Sub-contract or Assignment
Sub-Contract Assignment
• Transfer the right and responsibilities to
• The contractor passes over part only of
another party - where the contractor
the works and rewards for so doing to
wishes to dispose his obligations under
another person
the contract to a new contractor
• The contractor remains involved in the
• Written consent of the employer is
management of the contract.
required
• Contractual liability over performance
• In construction contract, contractor
remains with the contractor. Sub let does
cannot assign his obligation to complete
not release the contractor for all his
the works to another. He may assign the
contractual obligation
right of receiving payments due under
• Written consent of the C.A. (Contract
the contract in order to obtain credit
Administrator) is required
from supplier or funding institution
TYPES OF SUB CONTRACTOR
a) Domestic Sub-Contractor
• Appointed by the contractor himself to execute the
works or services which form part of the main
contract.
• Contractor must not sublet any part of the work to his
sub-contractor without prior consent of the S.O.
• S.O.’s consent must not unreasonably withheld to the
prejudice of the contractor.
TYPES OF SUB CONTRACTOR
b) Nominated Sub-Contractor
• Person who nominated by the employer/S.O. to execute
the work or services which form part of the main contract.
• The affected work are covered under P.C. sums in the BQ.
May also cover under Provisional Sum if so instructed by
the S.O.
• The S.O. cannot instruct measured works priced by the
contractor to be done by N.S.C.
• N.S.C. is similar like N.S. but N.S. merely supply material or
goods for the contractor to fix.
NOMINATION OF NOMINATED SUB
CONTRACTOR & NOMINATED SUPPLIER
Clause 60.1
• N.S.C. is normally procured through a quotation or
tendering process.
• S.O. must not delay the nomination of N.S.C., since it may
affect the overall progress of the work and cause financial
loss to main contractor.
• The delay in nomination by the S.O. is a ground for the
main contractor to claim for:
a) Extension of time
b) Loss and expense
OBJECTION TO NOMINATION
Clause 60.2
• The objection by the main contractor to the proposed N.S.C. must be
made in writing within 21 days from the receipt of S.O.’s instruction
but the objection is nonetheless still subject to the S.O.’s concurrence
• If the objection is not accepted by the S.O. – main contractor has to
enter into sub-contract with N.S.C. or he can bring the matter to
arbitration (clause 65.1)
Tender for sun- Objection by main
contractor/supplier Nomination by S.O. contractor
<21 days
OBJECTION TO NOMINATION
Clause 60.2
Possible ground for main contractor’s reasonable
objection:
• N.S.C.’s financial instability
• Technical incompetence of the N.S.C.
• Introduction of special conditions by N.S.C.
• N.S.C. declines to provide main contractor appropriate indemnity
• N.S.C. fails to undertake certain specified obligation
• N.S.C.’s work programme is incompatible with main contractor’s
programme
PROCESS OF N.S.C. / N.S. NOMINATION
Clause 60.3 Tender for sub-
contractor/supplier
This cycle is repeated until
contractor accepts
nomination by S.O.
Nomination by S.O.
Vary the work to overcome
problems
Yes
Omit the work and give it Contractor’s
to others objection
Ask main contractor to No

execute the work
Sub-contract/supplier enters into
contract with contractor
PAYMENT TO N.S.C
Clause 61.1
• As a general rule, all payment due to the N.S.C. must be made to
the contractor.
• Payment certificates to the contractor will show amounts included
for each N.S.C. and N.S.
• The employer is obliged to pay directly to the N.S.C. or N.S. the
amount due to them which has been separately stated in the
certificate.
• The amount paid directly by the employer to the N.S.C. and N.S. is
deemed to be payment made by the employer to the contractor
under the contract.
PRIME COST SUM / P.C. SUM
Clause 34.1
• The term prime cost sum (P.C. sum) shall mean a sum for works or
services to be executed by a N.S.C or for material or goods to be
obtained from a N.S.
• The amount allowed for P.C. sum item is the estimated amount of
the goods to be supplied and executed. The amount will be
expanded as required.
• The profit and attendance item is to be paid to contractor and
priced by contractor .
• Profit – normally given as a percentage.
• Attendance – given as a lump sump.
Example of Prime Cost Sum
Item Description Qty Unit Rate Amount
A Provide the Prime Cost Sum of Malaysian Item - 20,000.00

Ringgit Twenty Thousand Only
(RM20,000.00) for Sanitary fittings to be
supply and fixed by a firm to be nominated by
the Architect/S.O to be expended as directed
by the Architect/S.O. or deducted wholly or in
part if not required
B Allow for profit % 2 400.00
C Allow for attendance Item - 500.00

Profit
• The contractor is given the opportunity to price for profit item
for the work done by N.S.C. because:
a) Contractor is responsible for the sub-contracted work since
sub-contracting does not relieve him from any liability or
obligation under the contract. He deserves to be paid for
the risk taken.
b) Sub-contract work is originally part of the main contract.
Taking out the work from the main contract and giving it to
N.S.C. means reducing the profit of contractor.
Attendance
• The contractor is to provide general attendance for the works executed
by N.S.C.
• Attendance for N.S.C. can be classified into 2 categories:
1) General attendance
 The facilities to be provided to N.S.C. in this case are basically
what the contractor happens to have on site at the time for his
own use.
 This attendance is given for every P.C sum item. The contractor
should price this item in a lump sum basis.
 Example – use of temporary roads, paving and path, scaffolding,
lighting and water supplies, etc.
Attendance
2) Special attendance
 Required solely by the N.S.C.
 Special attendance should be included in priced by
N.S.C. He is going to erect their special attendance.
 Example – special scaffolding or additional scaffolding,
covered storage, maintenance of specific equipment,
testing and commissioning, or any other attendance
not included under general attendance.
PROVISIONAL SUM
Clause 34.2
• The term Provisional Sum shall mean a sum for works or for the
supply of goods or materials which cannot be entirely foreseen,
defined or detailed at the time the tender documents are issued.
• Works covered under provisional sum may be carried out by the
contractor himself or by other person, i.e. N.S.C. as decided by the
S.O.
• If the work carried out by the contractor, the work has to be
measured by the S.O. and valued appropriately as variation.
• Any Provisional sum item in the BQ, which required special skills for
their execution may be converted to P.C. Sums by the S.O. (clause
34.3)
Example of Provisional Sum
Item Description Qty Unit Rate Amount
A Provide the Provisional Sum of Item - 80,000.00

Malaysian Ringgit Eighty Thousand
only (RM80,000.00) for Landscaping
works to be expended as directed by
the Architect / S.O. or to be deducted
in whole or in part if not required
PAM CONTRACT –
Relevant contractual provisions regarding Nominated
sub-contractors/suppliers in PAM Standard form of
contract:
a) Clause 17 – Assignment or sub-letting
b) Clause 27 – Nominated sub-contractors
c) Clause 28 – Nominated suppliers
d) Clause 11.4 – AI on PC Sum and Provisional Sum
The provisions are generally similar as P.W.D. 203A (Rev.
1/2010). The differences are discussed:
PAYMENT TO N.S.C.
Clause 27.5
• As a general rule, all payments due to the N.S.C. must be made to the
Contractor.
• The contractor should be paid by the employer at any time during the
Period of honoring certificate.
• When the Architect issued the payment certificates, he shall at the same
time, notify the N.S.C. of the amount of his payment.
• The contractor is responsible to pay his sub-contractors within 7 days
after the expiry of the Period of honoring certificate even if he does not
receive payment from the employer.
PAYMENT TO N.S.C.
Clause 27.6
• The Employer can make direct payment to the sub-
contractors in case of default by the contractor in paying the
sub-contractors.
• The S.O. has to make sure that the contractor has paid all the
sub-contractors before issuing new interim certificate.
• He may require proof of previous payments made to sub-
contractors from the contractor.
• The necessary proof must be furnished to the Architect
within 14 days after the request made by him.

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NOMINATED SUB-CONTRACTOR &

Ask main contractor to No

A Provide the Prime Cost Sum of Malaysian Item - 20,000.00

B Allow for profit % 2 400.00

C Allow for attendance Item - 500.00

A Provide the Provisional Sum of Item - 80,000.00

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