Is subcontracting permitted?

Construction

Belgium Small Flag Belgium

Yes. Parties (e.g. client or (main) contractor) can contractually limit subcontracting. Very often contracts stipulate that subcontracting the whole of the works is not allowed. Also, in certain circumstances, the client may require the contractor to enter into subcontracting agreements with specific subcontractors (so-called nominated subcontractors).

Oman Small Flag Oman

In Oman, a main contractor may subcontract the works (or a portion thereof) subject to the terms and conditions of the main contract.

Denmark Small Flag Denmark

Under AB 92/ABT 93, sub-contracting is permitted to the extent that it is common or natural to delegate the work. This will very often be the case.

Most sub-contractor agreements are based on AB 92 and are often drafted to ensure back-to-back terms (that are the same as the terms of the main/turnkey contract).

Spain Small Flag Spain

Yes, it is permitted and regulated in Law for the regulation of Construction and in the Technical Code of Construction.

Indonesia Small Flag Indonesia

Yes, subcontracting is permitted under the Construction Law (Note: please see Question No. 2 above).

For construction contracts funded by APBN, the Ministry of PWPH standard form contract (which may be used as a reference), contains a clause regulating the cooperation between the service provider and the subcontractor.

The Construction Law distinguishes between the types of construction services, those that are deemed general and those deemed specialist. According to Art. 53 of Indonesian Construction Services Law, only work deemed to fall into the specialist category can be subcontracted. According to the Construction Law, the specialist work consists of “The Construction Services Consultant” and “Construction Work Services” business type.

Type of Services

 

General

(Not Permitted to Subcontracting)

Specialist

(Permitted to Subcontracting, subject to the approval of project owner)

Construction Work

Services

 

Classification

 

·  Tower Building

·  Civil Building

·  Installations

·  Special Construction

·  Pre-fabrication Construction

·  Building Completion

·  Equipment Lease

 

Scope of Work

 

 

·  Construction

·  Maintenance

·  Demolition

·  Re-building

 

Particular Part of the Construction Building or Other Physical Form

Construction Services Consultant

Classification

·  Architecture

·  Engineering

·  Integrated Engineering

·  Landscape Architecture and Site Planning

 

·  Scientific and Technical Consultation

·  Technical Review and Analysis

Scope of Work

·  Review

·  Planning

·  Design

·  Supervision

·  Construction Operational Management

·  Survey

·  Technical Examination

·  Analysis

Mexico Small Flag Mexico

In the case of government contracts, it is up to the contracting entity to decide if it allows subcontracting or not. Usually it is permitted if it is not a very special project or scope.

In the case of private contracts, it is absolutely legal possible, unless the owner does not allow it.

Colombia Small Flag Colombia

Since subcontracting in Colombia is not legally prohibited, it is usually a contractual matter and, in some cases, contracts obligate the contractor to ask for authorization in the use this figure. Anyways, there is usually a full responsibility for the original contractor regarding all the obligations assumed as it is common that this type of contracts contains back to back obligations since this figure allows the terms of the main contract to go down to subcontract to the subcontractor.

Switzerland Small Flag Switzerland

Sub-contracting is generally permitted. Indeed, pursuant to article 364 al. 2 CO, the contractor is obliged to carry out the work in person or to have it carried out under his personal supervision, unless the nature of the work is such that his personal involvement is not required. In other terms, subcontracting is permitted if the nature of the work does not require the personal involvement of the contractor. Thus, sub-contracting is generally permitted, as the nature of the work is rarely “personal” in the context of construction works. The parties may however contractually restrict the right of subcontracting, and may, in particular, grant the principal the right to oppose the choice of the subcontractors (veto right) or to propose/impose some subcontractors (proposal right).

Australia Small Flag Australia

Yes. There are no statutory restrictions on subcontracting, however head contracts may restrict the amount or type of work that can be subcontracted or require prior authorisation to subcontract.

Norway Small Flag Norway

Subcontracting is generally permitted and commonly done. For NS 8405, 8406 and 8407 there are even corresponding sub-contracts available for this purpose.

The main contractor does however bear the full risk and responsibility for any subcontracted work, and under the NS contracts the employer is in some circumstances entitled to reject the contractor's choice of subcontractor.

Sweden Small Flag Sweden

Yes. It is permitted and very common. In a Swedish construction project, some 70-80% of the works is typically subcontracted.

Hong Kong Small Flag Hong Kong

Subcontracting is permitted in Hong Kong and indeed is the usual and wide-spread practice. To a very large extent, main contractors subcontract the direct execution of the construction work to their own choice of domestic contractors for the portion of the work it will not perform with its own workforce; the second-tier sub-contractor often then sub-contracts to a third-tier, and so on down the chain. Under traditional general contracting, the main contractor is responsible for all operations on the site and coordinating other contractors involved in the construction, whether or not sub-contractors have been engaged.

United Kingdom Small Flag United Kingdom

Yes. It is common for the main contractor to subcontract the majority of its obligations to third parties. Generally, the main contractor will remain liable to the employer under the main contract for any default arising from subcontractors’ performance. However, the main contractor is not vicariously liable in tort for the performance of its subcontractors. The employer is generally not entitled to sue a subcontractor unless it has a claim in tort or a direct third party right (see question 20).

United States Small Flag United States

Subcontracting in the United States is not only permitted but often encouraged. Most general contractors lack experience or expertise in a specific trade for which it must provide services as part of the overall project. Subcontracting also provides a way to reduce costs or to mitigate risk. Among the benefits, subcontractors are generally less expensive than hiring full-time employees, subcontractors warrant the services they provide, risk can be transferred through a subcontract, and subcontracts can easily be terminated. Subcontracts often contain “flowdown” provisions, allowing the terms of the principal contract to flow down through the subcontract to the subcontractor. This makes the subcontractor liable to the contractor for the same things for which the contractor is liable to the owner.

Serbia Small Flag Serbia

Subcontracting is permitted. However, only when and if the Law on Public Procurement is to be applied, in such case is the contracting authority obliged to state already within the tender documents whether the public procurement will allow that the bidder entrusts the execution of such public procurement to a subcontractor. While doing that, it has to be stated exactly which percentage of total procurement value may be entrusted to the subcontractor. However, by the virtue of the same law that percentage may not be larger than 50%.

UAE Small Flag UAE

Subcontracting is generally permissible (and utilised) in most projects in the UAE.

In addition to the particular contractual requirements that parties may agree to, Articles 890 and 891 of the Civil Code regulate subcontracting in the UAE.

Article 890 expressly permits subcontracting the whole or part of the works to another party unless the contract expressly prevents subcontracting. It also provides that the first Contractor shall remain liable to the Employer.

Article 891 simply establishes that the subcontractor shall have no right to claim against the Employer unless rights against the Employer have been assigned directly to the subcontractor.

Germany Small Flag Germany

Subcontracting is a widely used practice in the construction industry. However, most contracts require the customer’s agreement beforehand. In case a subcontractor is hired, the project's general contractor continues to have full responsibility for project completion within the parameters and deadlines stipulated in the main agreement. Many contracts contain subcontracting clauses that define precisely the requirements a subcontractor has to fulfil.

Austria Small Flag Austria

There are only restrictions in respect of public procurement. Where contracts are awarded by private clients, the only way restrictions on sub contracting can be imposed is by contract.

France Small Flag France

For public contracts, the subcontracting of the entire scope of the contractor agreement is prohibited, and the partial subcontracting of the essential parts of contractor agreement can be prohibited by the public authorities;

For private contract, the project owner can freely prohibit or authorize subcontracting by the contractor.

Subcontracting is in any case subject to a strict and mandatory body or rules laid down inter alia by a law dated 31st December 1975, aiming to protect subcontractors.

These rules provide notably for the obligation for the main contractor to have the names and the payment terms of the subcontractors approved by the project owner and to provide a guarantee of payment to the subcontractors.

These rules bind the main contractor but are also a source of obligations and of potential liabilities for the project owner towards the subcontractors. For instance, under certain conditions, the subcontractors will benefit from a direct right of payment by the project owner in case of a default by the main contractor.

Greece Small Flag Greece

As a principle, unless the parties have expressly agreed otherwise, the contractor is under the obligation to personally perform the assigned construction works and therefore has no right to further subcontract any of its works to a third party (684 GCC). That said, in practice, a typical construction or EPC Contract provides for the contractor's right to subcontract any part of the works but not the whole of the works, which would lead to substitution. Further to the above, when it comes to large-scale projects, it is quite common for a construction or EPC Contract to specify certain categories of subcontractors, the appointment or replacement of which requires prior approval by the Employer.

As far as the public contracts are concerned, subcontracting is not only permitted but also encouraged, aiming to improve access of SME's to public procurement. In this context, in its procurement documents, the contracting authority asks the tenderer to indicate any share of the contract it may intend to subcontract to third parties and to specify any proposed subcontractors (Article 58 of Public Procurement Law). The above requirement notwithstanding, the contractor may request the contracting authority to approve a subcontract during implementation of the project, provided, however, that the main contractor continues to perform at least 70% of its scope of works (Art. 165 of Public Procurement Law). In this respect, it is noted that, as a principle, any subcontractors engaged in public projects must comply with the eligibility and qualification criteria set out under the respective tender documents (Art. 131 para. 3 of Public Procurement Law).

Saudi Arabia Small Flag Saudi Arabia

Subcontracting is common but in government contracts requires the express consent of the concerned government agency. Subcontracting without such consent makes the government contract voidable.

Updated: June 4, 2018