by Girard R. Visconti
A general contractor in the ordinary course of business subcontracts a portion of its work to another subcontractor or material supplier as to purchasing materials, equipment, etc., from a supplier.
Therefore, it is important to bind your sub or supplier to various documents that you are bound to with the owner. For example, it is extremely important that your sub or supplier be bound to the specification and drawings in question as well as other documents such as general conditions, supplementary conditions, special conditions, etc., that may affect the work that you are subbing or the material that you are purchasing.
For example, any warranties or guarantees that you give to the general or the owner should be passed on to your particular sub or supplier in question. Other examples include insurance requirements, payment provisions (including the retention), change order procedures, especially overhead and profit allowances, temporary site facilities, liquidated damages, etc.
In the event that you have an arbitration clause with the owner, it is suggested that you have the same arbitration clause with your sub or supplier that you have with the owner for consistency of arbitration procedures and results. In the event that you go to arbitration, chances are you could demand arbitration against your supplier and consolidate the matters.
A sample purchase order can be used for a guideline in drafting your own purchase orders to meet the requirements of your particular organization, which generally could be used with a vendor.
Of course, when subcontracting a portion of the work, a standard subcontract agreement should be utilized.
It is imperative that when issuing a subcontract or purchase order to a supplier, that at a minimum the following should be included:
- Commencement or completion dates.
- Any schedule that the sub is bound to.
- Specific attachments as to specifications and drawings.
- Insurance requirements.
- Any dispute resolution procedures between the subcontractor and the general contractor.
These are just some of the basic suggestions that should go in the purchase order to avoid substantial issues between the sub and the general.
Girard R. Visconti, Esq. is partner at Savage Law Partners, LLP.