Who bares the risk?

I was in a meeting a few days ago explaining to a client the advantages of using managed sub-contractors over a main contractor and the subject of risk was raised.

It was put to me that if, by using sub-contractors, there is no formal contract in place such as a JCT that would be signed between a client and the Building Contractor, who bears the risk if something goes wrong.

The answer is - in ALL cases, the buck stops with the client if something goes wrong.

I was at the meeting because I had been invited to put together a team of Sub-contract tradesmen at relatively short notice because the Main Contractor who had previously secured the work, had gone into liquidation the day before signing contracts. I pointed out that the client was fortunate that the builder had not fallen over two weeks into the works rather than two weeks before as they would have had quite a mess on their hands, contract or no contract.

In my opinion, a formal contract is little more than an agreement of procedure, it is not in any way a guarantee that the works will be completed and cannot possibly cater for the eventuality that the building company is there one minute and not the next.

According to Builders Merchant News, 48 Builders go bust each week and having been a Main Contractor for many years until 2010, I can empathise with the problems that come with being a Builder, in the climate of the past 10 years.

It is easy for the client to be seduced by the cheaper tendered quote or by the fact that the Architect recommended or interviewed the Builder. The reality is that information can be manipulated and you have no real way of knowing whether or not the builder has purposely gone in cheap to “buy” the job to help his cashflow. Likewise, how can you know that his sub-contractors (the ones that will help maintain his program) are paid up to date. Yes you can have credit checks done but that only tells a small part of the story.

The way I see it, if you are employing individual sub-contractors, managed by a Project Manager, working on behalf of the client, then surely you are spreading the risk. Compartmentalising the works creates individual cells that only carry their own proportion of the threat. If a Building Contractor calls time he is effectively taking all the trades with him whether they like it or not, because they are employed by him and not the client.

Using managed Sub-contractors, if one individual tradesman or supplier get into trouble then of course it causes a problem but does not jeopardise the entire works.