OPTIMIZING SUBCONTRACT TERMS AND CONDITIONS OF PURCHASE ORDERS IN CONSTRUCTION: DEVELOPING BACK-TO-BACK MODELS WITH MAIN CONTRACTS

25 Feb

Master: Contract, claim and delay management in construction works
Author: Eng. Fahmi Abbassi
Supervisor: Prof. Giovanni Franchi

 

1.1 Introduction

This master thesis, titled Optimizing Subcontract Terms and Conditions of Purchase Orders in Construction: Developing Back-to-Back Models with Main Contracts, explores how to improve subcontract terms in construction projects by aligning them with main contract requirements. In construction, inconsistencies between subcontract and main contract terms can lead to delays, disputes, and heightened risks, which disrupt project success.

1.2 Basis of Study

The study is grounded in the need to streamline subcontract terms, ensuring they match the obligations, risk management, and performance standards set by the main contract. Through three case studies on real construction projects, the research investigates challenges arising from inconsistencies in payment terms, scope of work, and risk allocation. These issues highlight the necessity for a standardized back-to-back template that fosters clear communication and consistency between all parties involved.

 

1.3 Study Objectives and Goals

The main objective of this research is to develop a standardized back-to-back contract template that can be applied to subcontracts in construction projects. This template aims to harmonize the terms and conditions across both subcontract and main contract, reducing conflicts and promoting smoother project execution. Additionally, the study seeks to demonstrate that a one-size-fits-all approach is ineffective, advocating for a customized and precise method to align subcontract terms with the main contract’s specific requirements.

 

1.4 Conclusions

The findings of the study show that using a back-to-back contract model reduces conflicts and enhances coordination. By adopting this template, subcontract terms are better aligned with the main contract, which helps avoid misunderstandings and promotes efficient communication. However, the study also emphasizes that generic wording often falls short, and a tailored approach is needed for each project.

 

1.5 Lessons Learned

  1. Avoid Broad Language: Generic, all-encompassing terms often fail to address specific needs; a customized approach is crucial.
  2. Clarity in Risk Allocation: Precise documentation of risk allocation is essential to minimize misunderstandings and disputes.
  3. Balanced Responsibilities: Not all obligations should automatically shift to the subcontractor; thoughtful consideration of responsibilities can improve contract fairness.
  4. Address Unique Subcontract Issues: Specific issues at the subcontract level must be directly tackled, as they may not align with the main contract.
  5. Proactive Interface Risk Management: Identifying and managing risks between the main contractor and subcontractor improves coordination and minimizes project risks.

 

2.2 Tadawul Tower Project in Riyadh-KSA

 

2.3 Qiddiya and Seven Project in Riyadh-KSA