How clients can set the rules for looking after subcontractors

Key Points

• Specialist subcontractors are often the lifeblood of an NEC project but are not always treated with the respect and fairness they deserve.
• Fairness to specialist contractors starts with how the client sets up the NEC main contract, including insisting on use of tendered suppliers, banning retentions, using PBAs and DiPPAs, and promoting conflict avoidance.
• To promote collaboration and fairness, clients should also mandate the use of NEC contracts along the supply chain.

In the UK construction industry, main contractors manage to make a passable return on capital employed despite razor-thin profit margins. This is achieved by leveraging the capital of their subcontractors, who are better described as specialist contractors.

The true specialists in their fields are often the lifeblood of a project but are not always treated with the respect and fairness they deserve. Head clients in the industry have both the power and the opportunity to influence the behaviour of main contractors to ensure fairness for these specialist contractors. This is not just about doing the right thing; it is also a matter of improving project outcomes.

Many construction professionals have seen too many lives turned upside down because subcontractors were not paid what they were owed or were squeezed by unfair terms. One of the authors, Yosof Ewing, experienced this firsthand when his father’s business was forced into liquidation due to non-payment by big construction firms. That is why the authors are so passionate about changing the narrative. It is time for clients to take the lead and champion a fairer construction industry. This article sets out some simple actionable ways they can make that happen.

In the NEC4 Engineering and Construction Contract (ECC) the defined term ‘Subcontractor’ is used. Throughout this article the term ‘specialist contractor’ is used.

Main contracts

Fairness to specialist contractors starts with the client and how they set up their contracts with main contractors.

Standard forms

The October 2024 plea from the Construction Leadership Council provides a clear direction: make only necessary changes to standard forms of contract (such as Z clauses in NEC contracts) and any proposed changes should come with an explanation issued to bidders for information only. This practice would make the client’s team carefully consider each alteration, ultimately reducing unnecessary amendments. Less tinkering means less complexity and fewer disputes later.

King’s College London’s annual report into the causes of adjudication consistently reports the biggest cause is due to an inability to understand and manage the contract. The authors contend that this is too often due to the unnecessary complexity introduced into the contract by the legal profession, who it could be argued have no incentive to change as the annual cost of disputes globally is more than US$80 billion (Crux Report, 2025).

Tendered suppliers

During the tender evaluation process, main contractors often showcase the quality of specialist contractors they plan to engage. But sometimes these specialist contractors, whose expertise won the bid, are not used.

Clients should include clauses to ensure that the specialist contractors actually do get used. This was the subject of an article by one of the authors including a minor Z clause to make this happen (Patterson, 2020). After all these people are the experts, so treating them well can only lead to higher productivity and a quality product.

Retentions

The Construction Leadership Council has also highlighted the problems caused by retention practices and provided guidance to eliminate them (CLC, 2022). Retention harms specialist contractors, tying up their cash flow and adding unnecessary financial strain. There are too many stories of main contractors simply not releasing retentions when required by the subcontract. Clients should take the lead by not requiring retentions from their main contractor and stating in the scope that the main contractor is not to include retentions in its subcontracts.

If that is not done, then an option is for the client to require the specialist contractor to be given the opportunity to provide a retention bond instead of actual retention. Another sound option to protect the specialist contractor’s retention from main contractor insolvency is to require the main contractor to put the retention money into a trust. All such options just need a requirement to be stated in the main contract scope.

Project bank accounts

Project bank accounts (PBA) and digital parallel payment accounts (DiPPA) are increasingly becoming the norm, particularly for government clients.

These tools provide transparency and ensure timely payments to specialist contractors. Including NEC4 ECC option Y(UK)1 for a PBA and mandating a digital parallel payment account can significantly improve payment governance and compliance.

The scope could include: ‘The Project Bank Account must provide for payments to be made to all levels of the supply chain through the account. The account must be capable of being in place before the first amount is due for payment.’ This will need a minor amendment to the time in clause Y1.2.

‘The Contractor is referred to DiPPA project bank accounts of the type provided by Saible. This is a new form of digital project bank account which the contractor may wish to adopt. Other providers may be available and the Client does not mandate the use of any particular provider. The Contractor provides evidence that the account selected directly provides for the protection of payments to the complete supply chain.’

Additionally, requiring assessment dates across the supply chain to align with those in the main contract ensures smoother cash flow for everyone involved. Such an obligation can be simply included in the scope.

Conflict avoidance

Conflict is costly, time-consuming and detrimental to relationships. The RICS Conflict Avoidance Pledge is a straightforward commitment to resolving disputes collaboratively. Clients should require main contractors and their supply chains to sign this pledge. Doing so fosters a culture of fairness and collaboration from the outset.

Clients should also review and consider included the words NEC has offered to include for an independent ‘Conflict Avoidance Panel’ with options W1 or W2. Alternatively, for significant contracts, clients should consider using NEC4’s option W3 on a dispute avoidance board instead of adjudication under options W1 or W2. Note that NEC has offered guidance on how W3 can be used in the UK when the Housing Grants Act applies to a ‘construction contract’ under the Act.

Subcontracts

The following obligations can easily be included in in the main contract scope.

Type of subcontract

To promote collaboration and fairness, clients can mandate the use of NEC contracts along the supply chain. For subcontracts over a specified amount (say £50,000), the NEC4 Engineering and Construction Subcontract (ECS) or NEC4 Engineering and Construction Short Subcontract (ECSC) should be used without additional risk-passing clauses. This will help ensure that specialist contractors are treated equitably and not burdened with unfair risks.

Retentions

If the client leads the way by including no retention in the main contract, the same should apply to subcontracts. This consistency sends a clear message: fairness is a priority. If the client allows the contractor to apply retentions in its subcontracts, it should at least require the contractor to give the specialist contractor the option of providing instead a retention bond.

Payments

Clients can enforce fair payment practices by requiring: certified payments to subcontractors within three weeks of the subcontract’s assessment date; records to be kept of payment timelines, including dates of applications for payment, final dates for payment and actual payment dates for subcontractors; and explanations of any nonpayments, ensuring transparency and accountability. The last two points can simply be included as records required to be kept and made available to the project manager (ECC clauses 52.2 and 52.4).

Clients could also introduce mechanisms to retain amounts owed to specialist contractors from the main contractor if payments are not made on time. This creates both a tangible incentive for timely payments and reduces the risk for specialist contractors.

Human-centred approach

The above recommendations are about humanity as much as business. By fostering fairness, trust and collaboration, clients can transform the construction industry into a place where specialist contractors feel valued and supported, and where their mental health is not compromised in the pursuit of main contractor shareholder profit. This is not just an ethical imperative; it is a strategic one.

Projects thrive when the entire supply chain is empowered to deliver their best work without fear of exploitation or financial insecurity. The time for this critical change is now, and clients are uniquely positioned to lead the charge. Let us rewrite the rules to prioritise fairness and humanity, ensuring that no contractor, specialist or otherwise, is left behind.