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Construction Industry Council - Technical Seminar on

STANDARD FORM OF DOMESTIC SUB-CONTRACT (Draft 14/1/2014)


on 7th April 2014 at CIC Resource Centre, Kowloon Bay

STANDARD FORM OF DOMESTIC SUB-CONTRACT



(Draft 14/1/2014)
Notes of Speech delivered by
Sr K C TANG
Chairman
Task Force on Standard Contract Provisions for Domestic Subcontracts, Construction Industry Council

(note: some terms abbreviated without "the" in this paper)

INTRODUCTION
Draft dated 14/1/2014
Task Force members
o Development Bureau
o Housing Department
o Hong Kong Construction Association
o Hong Kong Construction Sub-Contractors Association
o The Hong Kong Federation of Electrical and Mechanical Contractors
o Hong Kong Plumbing and Sanitary Ware Trade Association
o Hong Kong Construction Industry Employees General Union
o Hong Kong and Kowloon Electrical Engineering and Appliances Trade Workers Union
o The Hong Kong Institute of Surveyors
o some personal appointments
First Task Force meeting held on 28/6/2010
31 meetings held to-date
Intended for use on major sub-contracts
Not only for 1st tier sub-contracts but also for 2nd or lower tier sub-contracts
Except for the less sophisticated trade sub-contracts
A compromised document adopting fair, equitable and practicable provisions
Many desirable new features
Complete in scope but flexible enough for stipulation of project specifics

CONTENTS


SUB-CONTRACT AGREEMENT


o Recitals

o Article 1: Object of this Sub-Contract :

o Article 2: Sub-Contract Price :

o Article 3: Sub-Contract Periods :

o Article 4: Sub-Contract Documents :

o Attestation

SUB-CONTRACT PARTICULARS
o Appendix A - Contractors' All Risks and Third Party Liability Insurance Policy or Synopsis

A-

SUB-CONTRACT CONDITIONS


1. INTERPRETATIONS
2. SITE
3. WORKS
4. TIME

5. CONTRACT BASIS

CIC SFDSC Seminar 20140407a.doc 1


Construction Industry Council - Technical Seminar on
STANDARD FORM OF DOMESTIC SUB-CONTRACT (Draft 14/1/2014)
on 7th April 2014 at CIC Resource Centre, Kowloon Bay

6. PRICES
7. QUALITY
8. SUB-CONTRACTOR'S DOCUMENTS
9. GENERAL OBLIGATIONS
10. INSURANCES
11. TERMINATION
12. DISPUTE RESOLUTION
SUB-CONTRACT AGREEMENT

Terms to be read in conjunction with the Sub-Contract Particulars


Sub-Contract deemed to have taken effect from the Sub-Contract Award Date
Signed as a simple contract
Not recommended to proceed with the Sub-Contract Works before a formal contract award
Contractual implications of work or services done before the Sub-Contract Award Date to be
recorded in writing in advance and covered eventually by the Sub-Contract Documents

SUB-CONTRACT PARTICULARS

In table form to be partially completed for tendering and fully completed for contract signing
Text added to be shown in italics
Text deleted to be shown as struck through
Parties


o Ultimate Client
o Main Contractor
o Client-Contractor
o Sub-Contractor
o Contract Administrator
o Quantity Surveyor
Works


o Project
o Client-Contract Works
o Sub-Contract Works
Site


o Project Address
o Locations of Site for Sub-Contract Works
Sub-Contract Documents
o Sub-Contract Agreement
o Sub-Contract Particulars
o Tender Correspondence
o Sub-Contract Conditions as may be modified by Special Sub-Contract Conditions
o Tender Documents
Contract Type and Price


o Lump Sum Contract - Sub-Contract Price to be stated
o Remeasurement Contract - Sub-Contract Price to be stated
o Rates Only Contract - No Sub-Contract Price stated
Approach to remeasurement for Remeasurement Contract or Rates Only Contract
o options to be chosen for measuring from
 first set of working drawings + Variations
 final set of working drawings
 as-built drawings approved by a third party
 as-built drawings mutually agreed
 actual site remeasurement

CIC SFDSC Seminar 20140407a.doc 2


Construction Industry Council - Technical Seminar on
STANDARD FORM OF DOMESTIC SUB-CONTRACT (Draft 14/1/2014)
on 7th April 2014 at CIC Resource Centre, Kowloon Bay

o for authorized work properly carried out only


o including abortive work caused by Client-Contractor
Adjustment of prime cost rates
o normally - adjust only for [actual unit cost - prime cost rate ] x final quantity
o if deviation in aggregate values based on the final quantities exceeds pre-agreed
percentages, then further adjustments allowable for
 other costs, if the prime cost is for supply only, and
 profits and overheads
 by means of pre-agreed percentages
Percentage mark-up on costs for profits and overheads when calculating fair rates or daywork
rates based on actual costs (to be agreed if none stated)
o materials
o direct labour
o construction plant
o sub-sub-contract prices
Labour rates for carrying out work on daywork basis (exclusive of mark-up for profits and
overheads)
o working for a full normal working day
 skilled labour $ _____ / day
 semi-skilled labour $ _____ / day
 general workers $ _____ / day
o working overtime after a full normal working day:
 every 2 hours up to 4 hours = _____ normal day
 every 2 hours beyond 4 hours overtime = _____ normal day
o rates for working on shift or on holidays shall be agreed
Percentage addition for administrative charge on payment on behalf of the defaulting party
Phasing
o enabled
o portions of the Site
 Dates for Access to the Site
o Sub-Contract Works Sections
 Phase / Section / Stage / Whole
 Commencement Date (or a mechanism to determine it)
 Date for Completion (or a mechanism to determine it)
 Periods / durations in Calendar Days
 Rate of Liquidated Damages for each Calendar Day's Delay to
Completion (If none or "N/A" stated, general damages apply)
Maximum amount of liquidated damages payable for the whole Sub-Contract
Normal daily working hours


Defects Liability Period
o commencing on the day following the Substantial Completion of the relevant Sub-Contract
Works Section (or the whole if not divided into sections)
o until a date to be pre-agreed
Tender Documents
o attached hereto / bound separately and signed / not provided (delete if not applicable)
o Conditions of Tendering
o Form of Tender
o Sub-Contract Particulars (partially completed by Client-Contractor for
tendering)

o Special Sub-Contract Conditions
o Tender Specification
o Pricing Schedules
o Schedule of Tender Drawings
o Tender Drawings
CIC SFDSC Seminar 20140407a.doc 3
Construction Industry Council - Technical Seminar on
STANDARD FORM OF DOMESTIC SUB-CONTRACT (Draft 14/1/2014)
on 7th April 2014 at CIC Resource Centre, Kowloon Bay

oOther documents (e.g. tender addenda, which are listed separately here but
should be regarded as part of one of the above documents)
Tender Correspondence (submitted with the Tender and further written exchanges
before contract award, and accepted by the Contract Parties to form part of the Sub-Contract)
Order of precedence for interpretation of Sub-Contract Documents (unless a separate Numerical
Order is stated)
o Sub-Contract Agreement
o Sub-Contract Particulars
o Tender Correspondence
o Form of Tender or the Tender
o Special Sub-Contract Conditions
o Sub-Contract Conditions
o Pricing Schedules (#)
o The Preliminaries section of the Sub-Contract Specification (#)
o Sub-Contract Drawings (#)
o Sections of the Sub-Contract Specification other than the Preliminaries section (#)
o (#) option given to specify that if they are referring to the tender / contract documents
for the Client-Contract Works, then the order of precedence of the referred parts shall
follow that stated in the tender / contract documents of the Client-Contract Works. To
avoid doubt, it is preferred to specify the exact order of precedence instead of referring to
elsewhere.
Payments


o Retention Percentage = 10%
o Maximum Retention (not applicable to Rates Only Contract) = 5% of the
original Sub-Contract Price
o Payment Application Due Date (#)
o Payment Advice Due Date (#)
o Payment Invoice Due Date (#)
o Payment Due Date (#)
o (#) periodical dates, e.g. the 15th and 30th of each month, the 25th of each month, or,
if falling on holidays, the next working day, until no more outstanding payment
Excusable Events and Compensable Events
Delays or disruptions by reason of Excusable Compen-
Events sable
Events


(a) force majeure Yes No
(b) inclement weather conditions and/or their adverse Yes No
consequences
(c) the issuance of tropical cyclone warning signal No. 8 or above Yes No
or of a Black Rainstorm Warning, and/or the adverse
consequences of cyclone or rainstorm
(d) an Excepted Risk Yes Yes
(e) fire, lightning, explosion, flood, bursting or overflowing of water Yes No
tanks, apparatus or pipes, earthquake, aircraft and other aerial
devices or articles dropped from them, not caused by the Sub-
Contractor or any person for whom the Sub-Contractor is
responsible

CIC SFDSC Seminar 20140407a.doc 4


Construction Industry Council - Technical Seminar on
STANDARD FORM OF DOMESTIC SUB-CONTRACT (Draft 14/1/2014)
on 7th April 2014 at CIC Resource Centre, Kowloon Bay

Delays or disruptions by reason of Excusable Compen-


Events sable
Events


(f) late provision by the Client-Contractor of instructions or Yes Yes
information expressly specified by this Sub-Contract to be
provided by a specific time
(g) late provision by the Client-Contractor of instructions or Yes Yes
information (including clarification of any contradictions,
discrepancies, divergences or uncertainties in or between
documents provided by the Client-Contractor, and including
outstanding or new information) required for the progressing of
the Sub-Contract Works, after taking into account any
mitigating effect which could have been afforded if the Sub-
Contractor had requested for such instructions or information
reasonably in advance of the occurrence of the delays or
disruptions
(h) such opening up for inspection of work covered up or such Yes Yes
testing of materials or work and the consequential making
good which are additional to the contract requirements, were
instructed by the Client-Contractor, and proved that the
materials and work are according to this Sub-Contract
(i) the carrying out of a Variation or the happening of an event Yes Yes
deemed to be a Variation
(j) increase in the work to be carried out pursuant to provisional Yes Yes
items in this Sub-Contract of sufficient magnitude that the
increase could not have been apparent from this Sub-Contract
(k) a postponement of the Date for Access to any portion of the Yes Yes
Site unless this Sub-Contract has provided for such occurrence
(l) a postponement of the Commencement Date of a Sub- Yes Yes
Contract Works Section unless this Sub-Contract has provided
for such occurrence
(m) a suspension of the provision of the whole or a portion of the Yes Yes
Site as instructed by the Client-Contractor beyond that
anticipated and specified by this Sub-Contract and not being
due to a breach of contract or other default by the Sub-
Contractor or any person for whom the Sub-Contractor is
responsible
(n) a suspension of the progress of the whole or a part of a Sub- Yes Yes
Contract Works Section as instructed by the Client-Contractor
beyond that anticipated and specified by this Sub-Contract and
not being due to a breach of contract or other default by the
Sub-Contractor or any person for whom the Sub-Contractor is
responsible

CIC SFDSC Seminar 20140407a.doc 5


Construction Industry Council - Technical Seminar on
STANDARD FORM OF DOMESTIC SUB-CONTRACT (Draft 14/1/2014)
on 7th April 2014 at CIC Resource Centre, Kowloon Bay

Delays or disruptions by reason of Excusable Compen-


Events sable
Events


(o) a postponement or suspension of the Sub-Contractor's work on Yes Yes
site due to a lack of effective Employees' Compensation
Insurance or Contractors' All Risks and Third Party Liability
Insurance to be maintained by the Client-Contractor to cover
the Sub-Contractor's people or activities on site
(p) a delay or disruption caused by a Separate Contractor Yes Yes
(q) a delay caused by a statutory undertaker or utility company Yes No
carrying out work in pursuance of its statutory obligations
rather than a commercial contract, and failing to commence or
to carry out its work in due time provided that the Sub-
Contractor has taken all practicable measures to cause it to
commence, carry out and complete its work on time
(r) a failure of the Client-Contractor to supply or supply on time Yes Yes
materials that he agreed to provide for the Sub-Contract Works
(s) a delay by a Government department in giving an approval or a Yes Yes
consent which is not the Sub-Contractors responsibility to
obtain
(t) an unreasonable delay by a Government department in giving Yes No
an approval or a consent which is the Sub-Contractors
responsibility to obtain, provided that any disallowance of
approval or consent attributable to the Sub-Contractors lack of
adequate submission shall not be considered as unreasonable
(u) a special circumstance considered by the Client-Contractor as Yes No
sufficient grounds to fairly entitle the Sub-Contractor to an
extension of time
(v) an act of prevention, a breach of contract or other default by Yes Yes
the Client-Contractor or any person for whom the Client-
Contractor is responsible
o The scope of each of the event definitions is mutually exclusive. Any deletion or scope
reduction of an event definition shall not expand the scope of the remaining unchanged event
definitions.

APPENDIX A TO SUB-CONTRACT PARTICULARS


Contractors' All Risks and Third Party Liability Insurance Policy or Synopsis

In table form to be completed for tendering


Text added to be shown in italics
Text deleted to be shown as struck through
Three options
o actual policy or synopsis attached
o referring to specified part and clause of the Tender Documents or Tender
Correspondence
o synopsis as described in the table in the Appendix

INTERPRETATIONS

CIC SFDSC Seminar 20140407a.doc 6


Construction Industry Council - Technical Seminar on
STANDARD FORM OF DOMESTIC SUB-CONTRACT (Draft 14/1/2014)
on 7th April 2014 at CIC Resource Centre, Kowloon Bay

Parties


o Ultimate Client
o Contract Administrator (named because he they may affect Sub-Contractor's pricing)
o Quantity Surveyor (named because he they may affect Sub-Contractor's pricing)
Clerk of Works

o
Main Contractor

o
o Upper-tier Contractors
o Client-Contractor (Contract Party)
Sub-Contractor (Contract Party)

o
Sub-sub-contractors

o
Separate Contractors

o
o Property Manager (mentioned because of possibility of working on existing
premises)
Headings and clause references
o for identification purposes only
o not be read to restrict or enlarge the scope of application
o referred to as: Clause 1, Clause 1.1, Clause 1.1.1, Clause 1.1.1(a), Clause 1.1.1(a)(1),
paragraph (a), item (1)
Day and counting of periods
o calendar day unless otherwise stated
o 1 day means 24 hours
o within 1 day means within 24 hours, not within the same day
o "Commencing from Commencing after
Physical objects
o Site
 one or more areas or spaces
 continuous or not
 on plan or on elevation
o Materials
 means materials and goods
 includes equipment or machinery for incorporation into the Sub-Contract Works
o Construction plant
 means construction plant, equipment or machinery used for carrying out the Sub-
Contract Works
o Temporary site facilities
 includes construction plant and all other things all as may be provided on site
temporarily
Documents
o Sub-Contract Drawings
 Tender Drawings included in the Tender Documents
 any other drawings submitted with the Tender and expressly accepted to form
part of the Sub-Contract
o Sub-Contract Specification
 Tender Specification included in the Tender Documents
 any other specification submitted with the Tender and expressly accepted to form
part of the Sub-Contract.
o Pricing Schedules
 may be called schedule of works, bills of quantities, schedule of quantities and
rates, schedule of rates, quotations or other similar names
 showing Sub-Contractor's rates and prices for the execution of the Sub-Contract
o Sub-Contract Price Build-up
 the build-up of the Sub-Contract Price for Lump Sum Contract or Remeasurement
Contract
 as given in the Pricing Schedules and/or the Tender Correspondence

CIC SFDSC Seminar 20140407a.doc 7


Construction Industry Council - Technical Seminar on
STANDARD FORM OF DOMESTIC SUB-CONTRACT (Draft 14/1/2014)
on 7th April 2014 at CIC Resource Centre, Kowloon Bay

Sub-Contract Rates
o the rates inserted in the Pricing Schedules as may be modified by the Tender
Correspondence
o deemed to be all inclusive
o not be adjusted for pricing error
Variation
o a change (addition, omission, substitution, alteration, modification, etc.)
o to the specified design, quality or quantity, time or manner
o as instructed by Client-Contractor
o includes deemed Variation
Common terms deemed to be equal


o Substantial Completion and Practical Completion
o Defects Liability Period and Maintenance Period
o Defects Rectification Certificate and Certificate of Completion of Making Good Defects
and Maintenance Certificate
Excepted Risks
o war ... excluding disorder of Sub-Contractor's people
o faulty design provided by the designers engaged by Ultimate Client or Client-Contractor
o radioactivity ...
o aerial devices
Approval
o submissions to be submitted by Sub-Contractor in good time before use
o Client-Contractor to reply in writing within a reasonable time

SITE

Provision of Site
o to be provided by Client-Contractor on specified access dates for shared use
o security to be the responsibility of Client-Contractor
o but if exclusive possession of a portion is given, then security of such portion to be the
responsibility of Sub-Contractor
Site access
o entry and exit points as specified or as determined by Main Contractor (not necessarily
Client-Contractor) from time to time
o Client-Contractor to submit all necessary applications and pay any necessary fees and
charges, unless otherwise specified
o Sub-Contractor to submit early requests with supporting documents
House rules of Property Manager
o to comply
o deemed Variation if House Rules become more stringent after contract award
o Client-Contractor to pay any security deposit
Site visit
o deemed done before tendering
o no claim due to ignorance or misinterpretation of the site conditions
Site investigation and condition survey reports
o whole record to be given if given for tendering
o given in good faith without any warranty as to accuracy or completeness
o deemed to be for information only
Access during Defects Liability Period
o Client-Contractor to provide access
o use of existing facilities such as gondolas or lifting platforms subject to payment by Sub-
Contractor of reasonable amounts for consumables and other costs due to the use of the
facilities
Objects of antiquity
o deemed to be the property of Ultimate Client

CIC SFDSC Seminar 20140407a.doc 8


Construction Industry Council - Technical Seminar on
STANDARD FORM OF DOMESTIC SUB-CONTRACT (Draft 14/1/2014)
on 7th April 2014 at CIC Resource Centre, Kowloon Bay

o subsequent action deemed to be a Variation

WORKS

Sub-Contract Works include


o permanent work
o temporary work, unless specifically excluded
o services
o care and custody of materials supplied by Client-Contractor for incorporation into the Sub-
Contract Works after handing over to Sub-Contractor
o design of any part of the permanent work, if specified
o service and maintenance, if specified
o provision of warranties and guarantees, if specified
Sub-Contract Works exclude
o materials supplied by Client-Contractor before handing over to Sub-Contractor
o materials or workmanship or method or work not according to the Sub-Contract
o work or services carried out without authority
o work or services specified to be carried out, provided, procured, given, issued, etc. by
Client-Contractor, which shall be deemed to be free of charge
Design of permanent work
o to be the responsibility of Client-Contractor
o unless otherwise specified or unless Sub-Contractor has provided the design for whatever
reasons
Development of design
o Sub-Contractor to develop design intent drawings into detailed design, if so specified
Preparation of shop drawings
o building services installations (deemed to include also plumbing and drainage)
understood as schematic and layout design drawings
o Sub-Contractor to prepare shop drawings for fixing
Design of temporary work

o to be the responsibility of Sub-Contractor, unless otherwise specified
Sub-Contractor's design to be approved
o to be submitted to Client-Contractor for comment and approval before implementation
o to be fit for the intended purpose
Testing and commissioning
o all mechanically, hydraulically, electrically or electronically operated parts of the Sub-
Contract Works and any parts of the Sub-Contract Works connected by and including
pipes, ducts, conduits, trunking, wiring or cables
o to be tested and commissioned
o to the extent of being capable of reasonable beneficial use with minor defects before
substantial completion of the Sub-Contract Works
General attendance
o Client-Contractor to procure for Sub-Contractor's shared use of all established temporary
site facilities, unless otherwise specified
o Client-Contractor to provide working platform or scaffolding complete with catch fans for
work higher than 2 m above the supporting surface below
o Client-Contractor to allocate spaces on the Site for the erection of Sub-Contractor's
offices, workshops and stores

TIME

Contract commencement
o to take effect and commence on the date of the letter awarding the Sub-Contract
Consent to commencement

CIC SFDSC Seminar 20140407a.doc 9


Construction Industry Council - Technical Seminar on
STANDARD FORM OF DOMESTIC SUB-CONTRACT (Draft 14/1/2014)
on 7th April 2014 at CIC Resource Centre, Kowloon Bay

o Sub-Contractor to submit all applications required by law to be submitted by him and to


pay all associated charges before commencement of work on site or when due
Commencement and completion of Works
o each Sub-Contract Works Section
o to commence on respective Commencement Date as specified
o to substantially complete on or before respective Date for Completion as specified or
current Date for Completion fixed under the Sub-Contract
Working time
o to observe normal daily working hours, any working days and working hours restrictions
imposed under the Sub-Contract or at law
o when requested by Sub-Contractor, Client-Contractor at Sub-Contractor's expense but
without extra charge to apply to the relevant party or Government authority for working
outside the restricted time
Notices and claims
o notice of delay or disruption to be submitted within 14 days after commencement of the
event causing or likely to cause delay or disruption to regular progress or completion
o detailing
 the event and relevant circumstances
 estimated extent of the delay or disruption to the progress
 estimated length of the delay to the completion
 whether this is an Excusable Event or an Compensable Event
 estimate of likely amount of direct loss and/or expense expected to be incurred
o update notices at monthly intervals
o monetary claim with evidence to be submitted as soon as the amounts are fully known
and reasonably calculable
o notices not to be submitted later than the latest of
 the current Date for Completion of the relevant Sub-Contract Works Section
 its extended Date for Completion previously claimed by Sub-Contractor
 its Date of Substantial Completion
o monetary claim not to be submitted later than 3 months after the direct loss and/or
expense having been incurred, progressive submission permitted
o Client-Contractor entitled not to form his opinion as to the extent of delays or disruptions
 before Sub-Contractor submits a notice of delay or disruption
 or in respect of a notice submitted later than the specified latest time
o Client-Contractor entitled not to certify payment for reimbursement of direct loss and/or
expense if the monetary claim is submitted later than the specified latest time
o Client-Contractor entitled to take into account only of the information currently submitted
without an obligation to demand for further information from Sub-Contractor
o Sub-Contractor to bear the consequence of his own non-submission, late submission or
insufficient submission of notices or information
Mitigation of delay or disruption
o Sub-Contractor to continuously use his best endeavours to prevent or mitigate delay or
disruption
o without obligation to accelerate to recover delay caused by an Excusable Event
Determining time effect
o to be responded to within 30 days after receipt of notice of delay or disruption
o extension of time to be granted for Excusable Event to compensate the working time lost
o extension of time to be granted for Excusable Event occurring in the period of Sub-
Contractor's own delay after the relevant current Date for Completion, but only for the net
effect
o Client-Contractor may review and adjust any extension of time previously granted in light
of further evidence at any time before settling the Final Account, but shall not reduce the
extension of time previously granted unless previously misled by Sub-Contractor
Valuing cost effect
o to be responded to within 30 days after receipt of monetary claim

CIC SFDSC Seminar 20140407a.doc 10


Construction Industry Council - Technical Seminar on
STANDARD FORM OF DOMESTIC SUB-CONTRACT (Draft 14/1/2014)
on 7th April 2014 at CIC Resource Centre, Kowloon Bay

o any amount of any direct loss and/or expense compensable to Sub-Contractor assessed
from time to time shall be added to the Sub-Contract Price and included in the next
periodical payment
o Client-Contractor may review and adjust his valuation of the cost effect in light of further
evidence at any time before settling the Final Account
Damages for delayed completion
o at the respective Rate of Liquidated Damages for delayed completion stated in the Sub-
Contract Particulars
o general damages applies if no rate specifically stated
o Rate of Liquidated Damages to be reduced proportional to work value after a part of a
Sub-Contract Works Section is certified to be substantially completed
Substantial Completion
o all the work with the relevant section completed
o places clean and tidy
o Sub-Contractor's temporary site facilities demobilized to elsewhere
o to the satisfaction of Client-Contractor
o ready for handover to Client-Contractor
o excluding only work or services specifically specified by the Sub-Contract to be carried
out after Substantial Completion, and minor work which is not essential for the occupation,
use or functioning of the Sub-Contract Works
o Sub-Contractor to call for completion inspection
o Client-Contractor to inspect and notify of any outstanding work essential to Substantial
Completion within 7 days of inspection
o part of Sub-Contract Works deemed substantial completed if the relevant Client-Contract
Works certified as substantially completed by the Contract Administrator
o Client-Contractor to take over not later than 14 days after the state of Substantial
Completion is reached and be responsible for the care and custody thereafter
o Sub-Contractor may stay elsewhere on site until 7 days after Client-Contractors
instruction to demobilize

CONTRACT BASIS

Interpretation of Sub-Contract Documents


o various parts mutually explanatory and to be interpreted as a whole as far as possible
o in case of contradiction, order of precedence for interpretation as stated in the Sub-
Contract Particulars
o later documents takes precedence over earlier documents
o particular takes precedence over general
o details takes precedence over general
o specially prepared takes precedence over standard
Checking of Sub-Contract Documents
o Sub-Contractor to endeavour to complete a comprehensive check of those documents
available
o within 21 days after the award of the Sub-Contract
o report immediately after discovery of any problem
Supplementary information
o to be provided by Client-Contractor as necessary
o to be issued under an instruction if so required by Sub-Contractor
Instructions
o all to be issued in writing
o may be issued any time before the completion of defects rectification
o Sub-Contractor to notify any objection in writing within 6 working days after receipt, if an
instruction states that it should have no price or time implications
o Client-Contractor may employ others if Sub-Contractor does not comply with an
instruction within 3 working days after receipt of a warning notice, and contra-charge all
extra financial implications incurred

CIC SFDSC Seminar 20140407a.doc 11


Construction Industry Council - Technical Seminar on
STANDARD FORM OF DOMESTIC SUB-CONTRACT (Draft 14/1/2014)
on 7th April 2014 at CIC Resource Centre, Kowloon Bay

PRICES

Lump Sum Contract


o inclusive of everything originally described in the Sub-Contract
o Sub-Contract Price not to be adjusted except for:
 Variations
 adjustments of provisional quantities or provisional sums
 other adjustments permitted under or specified by the Sub-Contract
o no adjustment for arithmetical errors made when calculating the Sub-Contract Price
Remeasurement Contract
o quantities and Sub-Contract Price to be finally recalculated
o remeasuring authorized work properly carried out
o valuing at Sub-Contract Rates
o subject only to other adjustments permitted under or specified by the Sub-Contract
o any arithmetical errors made when calculating the Sub-Contract Price stated in the Sub-
Contract Particulars shall be disregarded when finally calculated
Rates Only Contract
o Sub-Contract Price to be finally calculated
o measuring authorized work properly carried out
o valuing at Sub-Contract Rates
o subject only to other adjustments permitted under or specified by the Sub-Contract
Adjustment for rises or falls in costs of labour and materials
o no adjustment, unless otherwise specified
Firm quantities
o quantities provided to Sub-Contractor for tendering deemed to be as firm quantities
unless otherwise described as provisional or for reference only
o not subject to remeasurement when settling the Final Account, and are only varied by
Variations
o deemed to be a Variation, if a firm quantity is judged based on actual need to be incorrect
according to the specified method of measurement, Sub-Contract Drawings or Sub-
Contract Specification
Reference quantities
o quantities estimated by Sub-Contractor for tendering deemed to be for reference only
unless otherwise described as firm or provisional
o also include reference quantities provided to Sub-Contractor for tendering and required to
be verified by Sub-Contractor for accuracy and corrected as necessary
o Sub-Contract Price deemed to be based on Sub-Contract Drawings and Sub-Contract
Specification notwithstanding any errors in the reference quantities
Provisional quantities
o to be remeasured on completion of the relevant work based on the as-built records or, if
mutually agreed, site measurement (excluding work done without authority)
o to be valued at Sub-Contract Rates
o Sub-Contract Rates not be adjusted because final quantities differ from provisional
quantities
o separate Sub-Contract Rates to be inserted to cover significant change in quantities
Lump sum priced items
o lump sum priced preliminaries items or measured items
o to be included in the final price if no change to the described scope of work
o not to be included in the final price, if no work executed
o to be adjusted in proportion to the change in scope on a fair and reasonable basis, if there
is a significant change to the described scope of work
Method of measurement
o method of measurement to be specified

CIC SFDSC Seminar 20140407a.doc 12


Construction Industry Council - Technical Seminar on
STANDARD FORM OF DOMESTIC SUB-CONTRACT (Draft 14/1/2014)
on 7th April 2014 at CIC Resource Centre, Kowloon Bay

o order of precedence: method described in item descriptions, special method, and


standard method
o same method of measurement to be used in settlement of Final Account
 even if more number of (but not duplicating) detailed items than those specifically
required by the method of measurement have originally been measured
o but if fewer number of items have been originally measured
 for firm or provisional quantities - missing measurement to be corrected and the
correction to be deemed to be a Variation
 for reference quantities - cost of the items not measured to be deemed to have
been allowed for elsewhere, the missing measurement to be deemed to be a
modification of the method of measurement and such modified method of
measurement to be used in the settlement of the Final Account
o if method of measurement not specified, then
 adopt the method of measurement which is reasonably apparent from the Sub-
Contract Documents
 all quantities to be measured the net quantities as fixed in position with no
allowance for wastage and, for work measured superficially, for laps
 ancillary items shown on Sub-Contract Drawings or described in Sub-Contract
Specification but not measured separately in the Sub-Contract Price Build-up
shall not be measured separately when valuing Variations, unless the proportion
of the ancillary items to the principal items has been significantly varied by
Variations
Provisional sums
o Client-Contractor to issue instructions with regard to the relevant work
o work to be valued based on the Valuation Rules
Prime cost rates
o for supply only: a provisional allowance for the unit supply cost delivered to the
designated place only of such materials qualified by the PC Rate
o for supply and fix / install / apply: a provisional allowance for the unit supply and fixing
cost charged by a sub-sub-contractor for the item
o Sub-Contractor not be obliged to enter into a contract with a supplier or sub-sub-
contractor selected by Client-Contractor for the purposes of supplying materials or
carrying out work covered by a PC Rate if the supplier or sub-sub-contractor requires
unreasonable payment terms, or has poor financial standing or poor track records
Variations
o Client-Contractor may issue instructions from time to time requiring a Variation
o to be valued based on the Valuation Rules
o valuation of work is not a condition precedent to its execution by Sub-Contractor.
Valuation Rules
o Sub-Contract Rates for work of the same or similar character carried out under the same
or similar conditions
o otherwise, the Sub-Contract Rates for comparable work shall be used as the base with
adjustment for the difference in character or conditions
 adjustment of rates for remaining items permitted in case of omission which
substantially varies the character of or the conditions under which any remaining
items of work are carried out
o fair rates, if there are no Sub-Contract Rates which can reasonably form a basis for
valuing the work
o daywork basis, if the work cannot be properly measured and valued to reflect the costs
o fair rates for work instructed to be carried out after Substantial Completion of the relevant
Sub-Contract Works Section through no fault of Sub-Contractor, with appropriate
reimbursement for extra costs incurred by Sub-Contractor including preliminaries not
recovered elsewhere
Payment timeline

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Construction Industry Council - Technical Seminar on
STANDARD FORM OF DOMESTIC SUB-CONTRACT (Draft 14/1/2014)
on 7th April 2014 at CIC Resource Centre, Kowloon Bay

o on or before each Payment Application Due Date - Sub-Contractor to apply for payment
until the release of final payment
o on or before the next Payment Advice Due Date - Client-Contractor to issue a Payment
Advice to notify the net amount payable and the details of its computation
o on or before the next Payment Invoice Due Date - Contract Parties to discuss and agree
any adjustments to the Payment Advice as may reasonably be requested by Sub-
Contractor, and Sub-Contractor to submit an invoice for the net amount payable as
stated in the Payment Advice subject to any agreed adjustments
o on or before the next Payment Due Date - Client-Contractor to Sub-Contractor the net
amount payable as stated in the Payment Advice subject to any agreed adjustments
o in case of non-payment in full on or before the next Payment Due Date
o interest chargeable at 1% below the judgment debt rate prescribed from time to time
by the Rules of the High Court for the period from the next Payment Due Date until
full payment of the amount payable
o suspension of the carrying out of the Sub-Contract Works permissible, if the amount
payable remains not fully paid within a prescribed period of not less than 14 days
after receipt by Client-Contractor of a warning notice from Sub-Contractor
o work to be resumed as soon as practicable within 14 days after receipt of the full
amount payable from Client-Contractor
Payment valuation
o includes materials not pre-maturely delivered to site
o includes off-site materials complying with specified conditions
o includes work partly or fully completed up to the relevant Payment Application Due
Date
o excludes those materials supplied by Client-Contractor and those materials or work
which are not according to the Sub-Contract
o takes into account the effect of the items stated in Clause 6.16.1 to make up the final
Sub-Contract Price, whether or not the cost effects have been finally agreed
o excludes retention fund
 subject to a maximum
 half to be released upon Substantial Completion and submission of any specified
warranties and guarantees
 balance to be released after 14 days after the expiry of the Defects Liability
Period
 related to each Sub-Contract Works Section
o excludes any other sums including damages for delayed completion due from Sub-
Contractor to Client-Contractor under the Sub-Contract or otherwise
o condition precedent to Client-Contractor exercising his right to make any deduction
against payment due to Sub-Contractor:
 prior notice to be served with factual and contractual basis for the intended
deduction and stating the amount of the intended deduction with detailed
breakdown
Settlement of Final Account
o a specific check-list given in Clause 6.16.1 for the computation of the final Sub-
Contract Price
o Sub-Contractor to submit his proposed Final Account within 3 months after the
completion of the whole of the Sub-Contract Works
o Client-Contractor to respond as soon as practicable
o both Contract Parties to agree the whole Final Account as soon as possible not later
than 12 months after Substantial Completion
o unilateral Final Account from Client-Contractor deemed accepted if no written
objection raised by Sub-Contractor within 3 months after receipt of the unilateral
Final Account
Final payment

CIC SFDSC Seminar 20140407a.doc 14


Construction Industry Council - Technical Seminar on
STANDARD FORM OF DOMESTIC SUB-CONTRACT (Draft 14/1/2014)
on 7th April 2014 at CIC Resource Centre, Kowloon Bay

o to be settled within 30 days after completion of all defects rectification or 30


days after agreement or deemed agreement of the Final Account, whichever is the
later

QUALITY

Quality liability



Materials, workmanship and methods to comply with this Sub-Contract

o treatment of alternatives described


Material samples


Mock-up construction and performance testing


Testing and inspection


Defects liability
o final defects list not later than 14 days after the expiry of the Defects Liability Period
o others to be employed if Sub-Contractor continues with his failure to rectify for 7
days after a warning notice
Warranties and guarantees

SUB-CONTRACTOR'S DOCUMENTS

Shop drawings, calculations and method statements


Programmes
Progress reports
As-built drawings and records
Operating instructions and maintenance manuals

GENERAL OBLIGATIONS

Statutory obligations
Intellectual property
Assignment and Subletting
o Sub-Contractor may, after giving advance notice to Client-Contractor, assign the benefits
but not obligations under the Sub-Contract to a bank for the sole purpose of obtaining
financing, as long as Client-Contractor does not reasonably object
Care of Works
o Sub-Contractor to take responsibility for the care of the work, materials
o except for loss or damage arising from vandalism in such portion of the Site for which
Client-Contractor is responsible for security or arising from the Excepted Risks
o until 14 days after Substantial Completion
Injury to persons and property and indemnity
Provision of all things necessary
Workforce
Payment management to employees of all tiers
Temporary site facilities
Checking of documents and site conditions
Setting out
o Client-Contractor to provide adequate and accurate principal setting out points and levels
Cleanliness and tidiness
Protection
Safety measures
Environmental protection measures

INSURANCES

CIC SFDSC Seminar 20140407a.doc 15


Construction Industry Council - Technical Seminar on
STANDARD FORM OF DOMESTIC SUB-CONTRACT (Draft 14/1/2014)
on 7th April 2014 at CIC Resource Centre, Kowloon Bay

Employees' Compensation Insurance


o to be taken out by Client-Contractor
Contractors' All Risks and Third Party Liability Insurance
o to be arranged for by Client-Contractor
Maintaining insurances
Compliance with insurance conditions
Insurances not affecting liability
o the party who would have been liable in the absence of the insurance cover shall be
responsible for the amounts of excesses, losses, damage, fees, costs and expenses not
compensated by the insurances
o administrative charges incurred by a Contract Party in connection with handling insurance
claims shall be charged against the insurers rather than the other Contract Party
Insurances of materials before delivery
Insurances of construction plant and temporary buildings

TERMINATION

Determination by Client-Contractor
o reasons on the part of Sub-Contractor
 failure to proceed regularly and diligently with the Sub-Contract Works (including
rectifying defects)
 complete or substantial suspension of the carrying out of the Sub-Contract Works
(including rectifying defects)
 in breach of Clause 9.3 regarding assignment and subletting
 bankruptcy, winding up, liquidation, etc.
o notice
 required except for bankruptcy, etc.
 first a notice of default
 then a warning notice of determination later than 7 days but not later than 2
months after the receipt of the notice of default
 determinable if default has continued for not less than 7 days after the receipt of
the warning notice of determination up to the time when the notice of
determination is issued
Determination by Sub-Contractor
o reasons on the part of Client-Contractor
 in breach of Clause 9.3 regarding assignment
 failure to issue a payment advice by the Payment Advice Due Date
 failure to make the payment stated as due under the Payment Advice by the
relevant Payment Due Date
 postponement or suspension as instructed or due to any combination of the
Compensable Events, for a continuous period of more than 3 months beyond
any periods of postponement or suspension anticipated and specified by the Sub-
Contract
 bankruptcy, winding up, liquidation, etc.
o notice
 same as for Determination by Client-Contractor
Termination of Client-Contractor's Contract by himself
o employment of Sub-Contractor under the Sub-Contract to determine at the same time
Termination of Client-Contractor's Contract by Upper-tier Contractor
o employment of Sub-Contractor under the Sub-Contract to determine at the same time
Consequences after determination or termination
o give up site possession
o demobilize his people (and hand tools) from site
o in case of determination by Client-Contractor or termination of Client-Contractor's
Contract by Upper-tier Contractor

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Construction Industry Council - Technical Seminar on
STANDARD FORM OF DOMESTIC SUB-CONTRACT (Draft 14/1/2014)
on 7th April 2014 at CIC Resource Centre, Kowloon Bay

 leave on site all materials or Sub-Contractor's self-owned temporary site facilities


for use by others, unless instructed or agreed by the Client-Contractor
 remove from site temporary site facilities not owned by the Sub-Contractor 7
days after the date of determination (7 days for freezing of use and negotiation
for future use)
o in case of determination by Sub-Contractor or termination of Client-Contractor's Contract
by himself
 remove from site all materials and temporary site facilities provided by the Sub-
Contractor 7 days after the date of determination (7 days for freezing of use and
negotiation for future use)
o items not removed from site may be sold or disposed of when their owners or Sub-
Contractor fail to do so within 7 days after being instructed
o jointly take records of the status and quantities of the work done and materials and
temporary site facilities on site
o in case of determination by Client-Contractor
 Client-Contractor as soon as practicable to employ and pay other persons or his
own workers to carry out and complete the Sub-Contract Works
 if not employed within 6 months after determination, the employment shall be
deemed to have been effected by the end of the said 6 months
Computation of balance of payment
o in case of determination by Client-Contractor
 Sub-Contractor to bear the direct loss and/or expense caused to the Client-
Contractor by the determination, including damages for delayed completion of the
Sub-Contract Works calculated up to the original completion date of the
completion sub-contract
 computations of the balance of payment with supporting documentation to be
exchanged as soon as practicable within 2 months after the Client-Contractor
employs other person to carry out the Sub-Contract Works
o in case of determination by Sub-Contractor or termination of Client-Contractor's Contract
by himself
 Sub-Contractor to be paid the value of work done and materials that the Sub-
Contractor has paid for, or is legally bound to pay for, and has transferred or will
transfer the ownership title to these materials to the Client-Contractor
 Client-Contractor to bear the direct loss and/or expense caused to the Sub-
Contractor by the determination or termination (Client-Contractor to include this
as part of his direct loss and/or expense under his own contract in case of
termination of Client-Contractor's Contract by himself)
 computations of the balance of payment with supporting documentation to be
exchanged as soon as practicable within 2 months after the determination or
termination
o in case of termination of Client-Contractor's Contract by Upper-tier Contractor
 Sub-Contractor to be paid the value of work done and materials that the Sub-
Contractor has paid for, or is legally bound to pay for, and has transferred or will
transfer the ownership title to these materials to the Client-Contractor
 Client-Contractor to bear the direct loss and/or expense caused to the Sub-
Contractor by the termination, if the termination is invoked not principally due to
some breach of contract or other default by the Sub-Contractor
 Sub-Contractor to bear the direct loss and/or expense caused to the Client-
Contractor by the termination, if the termination is invoked principally due to some
breach of contract or other default by the Sub-Contractor
 no mutual claim for direct loss and/or expense in other cases
 computations of the balance of payment with supporting documentation to be
exchanged as soon as practicable within 2 months after the termination, except
that the deduction for direct loss and/or expense caused to the Client-Contractor
may be raised later but within 1 month after receipt of direct loss and/or expense
claim from the Upper-tier Contractor

CIC SFDSC Seminar 20140407a.doc 17


Construction Industry Council - Technical Seminar on
STANDARD FORM OF DOMESTIC SUB-CONTRACT (Draft 14/1/2014)
on 7th April 2014 at CIC Resource Centre, Kowloon Bay

Final Account after determination or termination


o discuss and agree the balance of payment as soon as practicable
o respond with agreement or counter-offer to the other party's submission within 1
month after receipt
o unilateral Final Account from Client-Contractor deemed accepted if no written objection
raised by Sub-Contractor within 1 month after receipt of the unilateral Final Account
Payments after determination or termination
o any outstanding balance of payment calculated to be made once every 2 months
o final balance of payment to be made within 14 days after the signing of the Final Account
or after the deemed agreement of the unilateral Final Account

DISPUTE RESOLUTION

Appointment of dispute resolution advisor


o may be jointly appointed
o based on a mutually agreed terms of reference
o payment to the advisor equally shared
Procedures
o Contract Parties not precluded from using other dispute resolution methods mutually
agreed between themselves
Reference to Designated Representatives
o each Contract Party to designate within 14 days after the Sub-Contract Award Date
o dispute to be firstly resolved by the Designated Representatives
Reference to third-party neutral
o shall be used, if dispute not resolved by the Designated Representatives within 28
days after the dispute having been referred to them
o use a mutually agreed more expedient and less costly method whereby a mutually agreed
and appointed third-party neutral, being an expert in conducting the process or an expert
in the matter in dispute, will, depending on the method selected, impartially advise,
mediate, conciliate, adjudicate, certify, determine, adopt a shorter form of arbitration, or
use other means to resolve the dispute such that the share of liabilities and costs between
the Contract Parties can be established
o pre-agree whether the method resorts to a settlement agreement mutually agreed
between the Contract Parties or a decision of the third-party neutral and, in the latter case,
whether the decision is for reference only, or temporarily binding unless otherwise
overruled by arbitration, or final and binding
o exchange proposed lists of dispute resolution method within 5 working days after notice
to resolve disputes
o select one method from the combined list by progressive elimination of those having the
greater difference in preferences within the next 5 working days
o use facilitative mediation resorting to a settlement agreement mutually agreed between
the Contract Parties, if no agreement reached within the latter 5 days
o exchange proposed lists of third-party neutral within 5 working days after selection of
dispute resolution method
o select one person from the combined list by progressive elimination of those having the
greater difference in preferences
o request the Hong Kong International Arbitration Centre to nominate, if no agreement
reached after the latter 5 working days
o document
 the scope of the dispute to be resolved and the terms of reference of the third-
party neutral
 the rules to be followed for conducting the process
 the extent to which the information exchanged during the process is confidential,
privileged and not be disclosed by the recipients of the information outside the
process
o conclude appointment within 5 working days after agreement or nomination

CIC SFDSC Seminar 20140407a.doc 18


Construction Industry Council - Technical Seminar on
STANDARD FORM OF DOMESTIC SUB-CONTRACT (Draft 14/1/2014)
on 7th April 2014 at CIC Resource Centre, Kowloon Bay

o share equally payment to the third-party neutral


Reference to arbitration
o may be used, if dispute not settled within 2 months after the appointment of the third-
party neutral or within such other time as agreed between the Contract Parties
o arbitrator to be agreed between the Contract Parties within 14 days after a request to
appoint, otherwise a request be made for appointment by the Hong Kong International
Arbitration Centre
o be a domestic arbitration conducted according to the Arbitration Ordinance (Chapter 609,
Laws of Hong Kong) and, unless otherwise agreed by the Contract Parties, according to
the Domestic Arbitration Rules of the Hong Kong International Arbitration Centre
Arbitrator's powers
Sub-Contractor to continue to proceed diligently
Governing law
o laws of Hong Kong

CIC SFDSC Seminar 20140407a.doc 19

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