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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
6. PRICES
7. QUALITY
8. SUB-CONTRACTOR'S DOCUMENTS
9. GENERAL OBLIGATIONS
10. INSURANCES
11. TERMINATION
12. DISPUTE RESOLUTION
SUB-CONTRACT AGREEMENT
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
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
INTERPRETATIONS
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
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
WORKS
TIME
Contract commencement
o to take effect and commence on the date of the letter awarding the Sub-Contract
Consent to commencement
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
PRICES
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
QUALITY
Quality liability
Materials, workmanship and methods to comply with this Sub-Contract
SUB-CONTRACTOR'S DOCUMENTS
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
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
DISPUTE RESOLUTION