Incentivising Subcontractor Performance

In any large construction project there is likely to be a chain of subcontractors beneath the head contractor, and even the smallest link in that chain may have the power to seriously derail the project schedule. While much focus in any project will be on the big-ticket items, there is a danger that substandard performance by a minor subcontractor could end up leading to significant problems. As the old proverb tells us: “For want of a nail the shoe was lost. For want of a shoe the horse was lost. For want of a horse the rider was lost. For want of a rider the battle was lost. For want of a battle the kingdom was lost. And all for the want of a nail.”¹

While the use of liquidated damages will operate (in part) to deter subcontractors from breaching their obligations, there will be situations where the poor performance does not amount to a breach and so does not trigger any liability (whether for liquidated damages or otherwise). There may however be a knock-on effect