Main contractor but not main contractor : contract/risk/insurance

[andyscotland]

As well as my own project we're giving my mother in law a bit of help co-ordinating her own extension/internal alterations. It's a fairly simple timber frame extension, plus quite a bit of reorganising the inside of the house (widening doorways, swapping rooms about, new wetroom/kitchen/utility).

 

Her architect has recommended a builder who trades primarily as a joiner but will be acting as main contractor. However as he wants to keep below VAT registration he will do all the organising and project management but my MiL will be invoiced by and pay suppliers and trades/subcontractors direct. The only payment to/through his firm will be for his own labour.

 

He has done this before on a similar size of project and the reference we spoke to said it worked well. He has said (when asked) that he will provide the full main contractor service, e.g. taking responsibility for any issues with subbies workmanship or for example if it turns out he's underestimated what they'll charge.

 

My immediate reaction is to be quite nervous about this setup.

 

It feels to me like it's quite messy - if MiL is paying everyone direct then realistically any contractual relationship is also direct with each provider, rather than through the "main contractor"? The main contractor would obviously be liable for his project management services, but I'm not sure how he could realistically be liable for the actual work the subbies do.

 

So it will potentially all be OK if it all goes OK, but could become problematic if there are any issues.

 

I guess I'm partly worried about contractual issues for the build itself, and partly about insurance.

 

Obviously the nightmare would be if something major went wrong (structural damage to the existing house while widening doorways / electrician accidentally sets the place on fire) and all the respective insurers managed to argue it was someone else's liability leaving MiL hanging or in court. Notably the "main contractor"s insurance certificate lists his occupation as carpenter/joiner and has a lower contract works sum than his estimate for the project.

 

He will on paper be responsible for all the safety management and MiL is definitely a domestic client so I think from that angle that's unlikely to come back to her if there was an accident.

 

Smaller things like disputes with subbies / cost issues / mistakes could also have the potential to be awkward but I guess probably solvable one way or another.

 

We've asked for a copy of his proposed contract (since none of the standard main contractor ones will work) but he's not provided one : apparently the architect is going to draw one up.

 

Am I right to be nervous? Are there practical things we can do to reduce risk?

[nod]

This quite common 

But first of all you need to realise what ever he calls this arrangement he’s not a main contractor He’s project managing the job for 

Indeed a main contractor would be responsible for trade rates and poor workmen ship 

Under this arrangement with him being paid a wage you would have to chase individual trades for any problems that crop up at a later date 

But in saying that I’ve seen this work on many small jobs 

[joe90]

That’s how I used to work, I subbed out to other trades (that I trusted) but project managed and acted as main contractor. Ask him to provide references from previous customers, go see other customers to ask about their experience. Also read the contract the architect draws up.

[andyscotland]

@nod thanks - I think it's not helping my nerves that he has now a couple of times insisted to MiL that he will be main contractor and that there's no difference to using a firm where all the invoices go through them. Feels a little underhand because - as you say - I'm very aware he won't actually be main contractor in the traditional sense, he'll just be project managing.

[nod]

44 minutes ago, andyscotland said:

@nod thanks - I think it's not helping my nerves that he has now a couple of times insisted to MiL that he will be main contractor and that there's no difference to using a firm where all the invoices go through them. Feels a little underhand because - as you say - I'm very aware he won't actually be main contractor in the traditional sense, he'll just be project managing.

No you should be absolutely fine 

Back before all these design programs 

Your joiners title would have been Forman Sort deliveries out coordinate trades 

 

20 years ago most large sites where run by a former Brickie or joiner 

 

[Mr Punter]

The arrangement is normal.  Worth making sure that all the subbies have insurances if you are worried on that score.

[joe90]

Hi @andyscotland make sure insurance is mentioned in the contract drawn up by the architect.

[andyscotland]

Thanks everyone, much appreciated.

[andyscotland]

So the architect has just put forward a standard Scottish Minor Works contract (and the outdated 2011 edition at that). He'd previously said he didn't think an off-the-shelf contract would work and hasn't explained why he thinks that's changed.

 

Reading the contract it doesn't seem to me like it properly reflects the relationship at all, and definitely insurance is murky, the contractor has to have cover for defects/liability by his employees and subbies (of which there are none) but it says nothing about liability/cover for anything done by people he's found and is managing but who are working directly for the client.

 

Anyone know of a standard contract that would cover this setup better?

[Mr Punter]

A formal contract may be a bit of a sledgehammer and may require formal appointments as Contract Administrator, Principal Contractor, Principle Designer etc as well as documentation - Payment Notices, Early Warnings, Confirmation of verbal instructions, and take into account prolongations, specification changes etc.

 

On larger jobs a good deal of time is spent by the parties trying to improve their own financial outcomes under the contract terms.

 

Working with agreed plans, a priced specification and a payment schedule should cover most of the potential issues for you.  Whatever, if there is not good faith on both sides you are screwed.