Subcontracting Limits: A Review
Subcontracting Limits: A Review

Summary/Abstract: This paper aims to address the issue of subcontracting in works contracts and attempts to explore the essence, reasons and logic behind the limitations for subcontracting. An overview of the history and evolution of the relevant legislation is made with special emphasis to the origin of the subject, finding its roots on matters related especially to labor protection. Emphasis is given to the different modes evolved during the last decades especially with the introduction of the advanced communication and information technologies for the procurement, subcontracting and employment relationships and mechanisms in the sector; compared to which the relevant legislation, regulations and contractual texts have failed to provide adequate descriptions, explanations and competences and remained primitive in meaning.Construction works contracts mostly entail subcontracting limits in the form of a percentage of the total amount of the works contract. A review of the issue is revealing that there are several uncertainties, ambiguities and misconceptions on the descriptions, applications and evaluations with regards to the subcontracting issue. Studies of the literature and cases to inquire the reason behind the subcontracting limits generally produce conclusions to state that limits for subcontracting aim to enforce contractors to use mostly if not fully their own personnel, equipment and financial resources rather than transferring an unacceptable portion of their liabilities to others. On the other hand evaluation of the industry practice indicate that the construction industry is more and more depending on the expertise, specific machinery and equipment, specialized manpower and even more outsourcing of the administrative arrangements such as the construction and project management, financing mechanisms, accounting services etc. Most equipment, plant and materials procured do come with specialized manpower for the installation and operation of the same, thus even a simple procurement to constitute a component of the works can be considered subcontracting.

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