Understanding the Sub-Contractual Relationship for Proper Management of Construction Projects

Project participants in any construction project include: owners, engineers, main contractors, subcontractors, suppliers, and manufacturers. Each participant possesses its own obligations towards the successful execution of the project. Subcontractors’ share of the performed construction work is around 70% to 90%. As such, one of the most important contractual relationship is that between the main contractor and its subcontractors. Since it is forecasted that the amount of the subcontracted work will substantially rise in the coming years, proper management of the contractual relationship between main contractors and their subcontractors is needed. Some previous research studies provided directions on the ultimate means that general contractors should use to manage their subcontractors; however, they fall short in addressing this critical need from a contractual point of view. Accordingly, this paper offers guidance on the contractual relationship between main contractors and subcontractors with an emphasis on the back-to-back provisions as specified in the U.S. standard forms of contract: American Institute of Architects (AIA), ConsensusDocs, and Engineers Joint Contract Documents Committee (EJCDC). The back-to-back relationship refers to the fact that parts of the contractors’ contractual obligations and responsibilities are passed to their subcontractors. As such, the authors first studied and compared the back-to-back provisions under national standard forms of contract. Second, the authors analyzed previous law cases to offer practical perspectives on the key causes of disputes between contractors and their subcontractors. Third, the authors prepared a checklist to help contract administrators in undertaking necessary contract revisions so that to reduce the amount of claims and disputes between general contractors and subcontractors. Ultimately, the guidelines presented in this paper will help in establishing a smooth execution of the contractual obligations and responsibilities of contractors and subcontractors. Further, the recommendations provided in this research is believed to fill potential contractual gaps in subcontract agreements.