On 9 December 2015, the Crown Commercial Service published important statutory guidance on the new subcontracting provisions under the Public Contracts Regulations 2015 (‘the PCRs’). The guidance is important as the sub-contracting rules found under Regulation 113 of the PCRs impose obligations on main contractors, in regard to their chosen sub-contractors.
The guidance explores the new obligations being imposed on contracting authorities, including:
- requiring the main contractor to provide basic details on their immediate subcontractors (Subcontracting Regulation 71.(3)) including their name, contact information, and evidence of their legal representatives; and
- ensuring prompt payment of invoices for the entire supply chain within 30 days (Regulation 113 of the PCRs) or else be faced with statutory interest charges, and making annual internet publications detailing their performance in this regard. This guidance is especially important given how stringent this obligation is. A difficult point arises if an amount is disputed between the contracting authority and the main contractor and leads to the withholding of pay; would the main contractor still have to pay their sub-contractors for work in connection with the disputed issues? This situation is especially difficult if there is no disagreement over the work between the main and sub-contractors and they otherwise enjoy a good working relationship. Otherwise a contractor will have to bear the cost of sub-contractor pay, even when it is the contracting authority at the top of the chain who have withheld payment.
Aside from the above, various new flexibilities have also been imposed on contracting authorities, including the ability to:
- check the credentials of subcontractors to see if there are grounds to exclude a subcontractor under Exclusions Regulation 57; and
- ask main contractors to provide basic information on their subcontractors and supply chains (Subcontracting Regulation 71.(7)).
The Regulations were designed to provide greater transparency and accountability down the subcontracting chain, but contracting authorities and main contractors alike should be aware of their obligations and the issues the obligations entail.