Drawing on practical experiences across the supply chain, all three professionals emphasise the necessity of a cooperative attitude regarding all parties when managing NEC Contracts, and Subcontractors are no exception.
“We need to harness and nurture the relationship with our supply chain, not churn through subcontractor after subcontractor.”
Glenn’s opening remarks capture the theme of the webinar perfectly. Managing subcontractors effectively means consistently applying the NEC processes with all parties. Choosing the right subcontract agreement is pivotal, so obligations and behaviours align from top to bottom.
To set the tone, attendees were asked:
“You’re nine months into a twelve-month ECC Option C project with a 50% contractor share, and now ready to award the final subcontract package for perimeter fencing. Which subcontract contract/option would you choose for this package?”
The results showed most had chosen:
- ECS subcontracts using Options A or B
- The Short Subcontract (ECSS)
Very few chose a bespoke form or Option C.
Glenn and Neil agree that the best choices are Option A/B or the short subcontract, because:
- Bespoke forms lose the benefits of NEC processes.
- Option C is unnecessarily complex for simple works, and many subcontractors lack the systems to manage it properly.
- Using NEC back-to-back simplifies rights, obligations, early warnings, compensation events, and programme management across the chain.
Why back-to-back NEC contracts work best
Passing NEC obligations along the supply chain helps contractors meet their own obligations to the client. It improves early warnings, programme management, change control, transparency, and entitlement.
It also makes life easier for the contractor under clause 26: they don’t need to submit subcontract documents for acceptance under the NEC.
However, when referring to the term “back-to-back”, this should not be understood as the automatic or indiscriminate flow-down of all main contract obligations and liabilities to subcontractors. Rather, the intent is to use NEC contracts that are aligned with, and complementary to, the main contract, but which are proportionate to the scope, scale and value of the subcontract being procured, and appropriate to the specialist capability of the subcontractor appointed.
This distinction is important if we are serious about supporting the supply chain through initiatives such as the use of simpler contracts, achieving fair risk allocation, and fostering sustainable supply chains.
Purchase Orders vs Proper Subcontracts
Ian highlights the issue where contractors are letting sizeable, complex subcontract packages under simple purchase order (PO) terms. While POs work well for straightforward procurement, they lack the contractual structure needed for construction activities. Thereby, creating major risks due to missing essentials like time, quality, change control, communication rules, programming, risk management and dispute processes.
Tender stage with Subcontractors
When in pre-contract with Subcontractors, there should be clear expectations. These are: how to manage subcontracts, seek evidence to ensure that they understand the principles and rules of NEC contracts, and, if using the ECS, insist on a programme to demonstrate their understanding of the Scope and clause 31 requirements.
Building on this, Ian explained that effective tender processes focus on alignment rather than exclusion. Requesting evidence of NEC experience, such as relevant project examples, key personnel, or anonymised compensation event quotations, helps ensure systems and governance are compatible from the outset. Regular collaborative programme reviews further reinforce transparency and reduce surprises as the project progresses.
Subcontract Specific Document
The panel also stressed the value of preparing subcontract conditions before tender, allowing sufficient time to develop clear and accurate documents.
Ian pointed out that: “Well-defined subcontract documents clarify obligations for everyone. Tailor it to the individual/organisation. This prevents them from reading hundreds of pages of documents, reduces confusion and supports more effective delivery across the supply chain.”
Inefficient/ineffective administration that causes problems across all main options are:
- Miscommunication (verbal instructions, protracted email exchanges) and various versions of the truth (value of CEs, PWDD)
- Lack of clarity/version control – no history (Scope is rarely updated as it should be…)
- Compliance issues – issues of TQ’s, RFI’s, NCRs, and worst of all – breach of contract (payment!)
- Performance / Commercial monitoring difficulties
These recurring factors can all lead to disputes. To elaborate on this, Neil brought up the age-old documentation quote from Max Abrahamson, which states that the three lessons a party will learn in a dispute are the importance of records, records, and records.
Neil: “You can’t argue with the fact that if you’ve got a photograph or signed daywork sheets, it’s proof, it’s evidence.”
The System in Place Needs to be Robust
Effective subcontract management under NEC relies on clear processes, robust records, and consistent use of digital systems. Cloud-based contract management platforms help formalise subcontractor acceptance, terms, and communications, reducing reliance on informal emails or verbal instructions.
This becomes particularly critical on cost-reimbursable contracts such as NEC Option C. Defined costs are only recoverable if subcontractors are paid in accordance with their contracts. Poor subcontract administration exposes contractors to disallowed costs during client audits, which can directly erode already thin margins. Even small disallowances can eliminate profit on a project, making strong systems and competent subcontract management essential.
The Digital Divide in Managing Subcontractors
Bringing back up the recent survey on Subcontractor/Contractor relationship in using a digital system, only 33% were using one. Even though there has been improvement within the construction industry since this, Glenn reiterates that Subcontractor adoption is still several years behind the curve for where it needs to be.
Using digital platforms across subcontract packages allows contractors to monitor programme acceptance, outstanding compensation events, and performance in real time. It also supports early intervention when problems emerge, helping teams address root causes rather than assigning blame.
However, it is also important to emphasise that systems alone do not deliver good outcomes. Digital tools do not remove the need for those using them to be competent, informed, and properly educated in the scope, contract mechanisms, programme, record keeping, and commercial (payment) implications of the contract under which they are operating. This links directly to the clause 10 behaviours. To act in the spirit of mutual trust and cooperation, parties must:
- Do what the contract says (which requires a proper understanding of it), and
- Seek to do so fairly, respectfully, and collaboratively with the other parties and stakeholders involved.
Confidence in capability and capacity to deliver is therefore fundamental. In practice, education, expertise, and skills should remain the number one priority when selecting and appointing contractors and subcontractors on major projects. Digital systems definitely support this capability, but should not be treated as a substitute for it.
Ultimately, the panel reinforced that collaboration does not happen by accident. Contractors should lead by example by treating subcontractors as they expect to be treated by clients, following contractual timescales, paying fairly, and maintaining transparent records. Investing in systems, education, and consistent behaviours benefits not just individual projects, but the wider industry.
