Subcontracting – Issues and Implications

Subcontracting is a practice prevalent in many industries, both local and international, but most widespread and common in the construction industry. Historically, subcontracting practice in the construction industry had existed since time immemorial, and it formed an integral part of building or construction projects. In Malaysia, subcontracting in its construction industry is no different, in that such practice had existed even before the colonial times.

The nature and characteristics of construction projects and the building or production process, which involve diverse work activities and tasks, require various resources and
technical capabilities, often beyond that of most contractors. With limited resources and capabilities, contractors normally subcontract or sub-let their building or construction works to subcontractors, so as to reduce their project risks, including construction time and costs, thereby enhancing their overall performance and profitability.

Subcontracting practice, which usually involves a contractor, who has been awarded a construction project by an employer, getting into a subcontract with another party, either an individual or a company, often known as a subcontractor, to undertake a part or parts of the construction works. The contractor has an overall contractual responsibility and liability for its execution and completion, accordingly.
Whilst subcontracting offers many advantages or benefits, its practice is also tainted with many issues, often problems relating to work performance, time, costs, quality, variations, payments, etc. From them, arise various implications, some with adverse consequences such as poor quality works, work delays or non-completion, lack or non-payment, works suspension or termination.
In this three parts article, BK Entrusty aims to provide readers with a better understanding of subcontracting in the Malaysian Construction Industry and its pertinent issues and implications, by the following article contents;
1. Introduction
2. What is Subcontracting?
3. Why Subcontracting?
4. Subcontract provisions
5. Pertinent issues and their implications
6. Conclusion

To obtain a copy of the article, kindly fill in the following form and click send.

More to explorer

What is Head Office Overheads?

The calculations of head office overheads or “extended home office overheads” have been puzzling many in the construction industry for a number