The profile of contractual issues associated with subcontracts in Malaysian construction industry

Abstract

Subcontracting is a common practice in construction especially when it involves the specialist works. It is normal for the main contractors to subcontract part or all of the work under the main contract to domestic or nominated subcontractors. However, the complexity of construction process, together with high demand and expectation by the employer had exposed the subcontract works with the risk of disputes. The disputes involving subcontracts are also very much a part of the seemingly ever increasing litigations in the construction industry. The main objective of this research is to develop a profile of contractual issues associated with subcontracts in the Malaysian construction industry. The study is limited to subcontract cases in the Malaysian court between 1974 to 2012. Altogether 59 court cases were selected and analysed. This study highlighted that there are 19 common contractual issues associated with subcontracting. Out of these, 10 cases of nonpayment by the main contractor have been identified as the most significant issues that led to the disputes. The study also suggested that the majority of cases involve main contractors and domestic subcontractors with 29 cases, where nonperformance by the subcontractor found as the major issue. Followed by main contractors and nominated subcontractors with 10 cases where non-payment by the main contractor remains as the major issue. The study also shows that the defendants in the cases are mainly main contractors. It is hoped that the profile will provide a useful knowledge and guideline for improving construction contract planning and implementation.