【Haichuan EPC】What are the regulations regarding project subcontracting, and can steel structure work be subcontracted to specialized firms?
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In the process of contracting construction projects, professional subcontracting is a topic that generates considerable debate; some people believe it is permissible, while others do not. What are the specific regulations? Are there any relevant laws, regulations, or legal bases? Engineering subcontracting can generally be divided into specialized engineering subcontracting and labor service subcontracting (also known as specialized work subcontracting). Common specialized engineering subcontracting tasks include: foundation works, steel structure projects, curtain wall installations, plumbing and electrical installation work, fire protection systems, ventilation and air conditioning systems, intelligent building systems, and interior decoration projects. Subcontracting of labor services includes carpentry work, masonry work, plastering work, painting work, rebar work, cold working, anti-corrosion work, waterproofing work, blasting work, concrete work, scaffolding work, formwork work, welding work, and more. In accordance with Article 29 of the Building Law of the People’s Republic of China (effective as of March 1, 1998), a general contractor for construction projects may assign certain portions of the contracted work to subcontractors that possess the appropriate qualifications ； However, apart from the subcontracting stipulated in the general contract, it must be approved by the project owner. In the case of a general construction contract, the construction of the main structure of the building must be carried out by the general contractor itself. General contractors are prohibited from subcontracting projects to entities that do not possess the appropriate qualifications. Subcontractors are prohibited from further subcontracting the projects they have been assigned. Meanwhile, referring to the \"Administrative Measures for the Identification, Investigation, and Punishment of Illegal Acts in the Contracting out and Undertaking of Construction Projects\" (issued on January 3, 2019), Article 12
Illegal subcontracting can be identified, and the situations listed below all constitute illegal subcontracting: (1) When a contracting unit subcontracts the project it has been assigned to an individual. In practice, contracting units do not directly assign projects to labor contractors or sign contracts with them; instead, they usually find a labor service company or a professional firm to enter into a contract, thereby avoiding legal risks – this is also the standard practice. (2) When the general contractor or specialized contractor subcontracts the project to a unit that does not possess the appropriate qualifications; there is nothing more to say about this. (3) If the general contractor for the construction assigns the work related to the main structural elements of the project, within the scope of the general contract, to other entities, steel structure works are excluded from this; this provision indicates that steel structure works can be subcontracted as specialized tasks. The main consideration here is that the general contractor undertakes the project based on its general contracting qualifications. If the contract includes steel structure work but the contractor does not possess the necessary qualifications for working with steel structures, then, in order to ensure the quality of the work, such specialized tasks can be assigned to entities that have the appropriate qualifications and capabilities. It can also be seen from this that there is no relationship of inclusion or coverage between the general construction contracting qualification and the specialized qualifications. (4) When a subcontractor subcontracts again the non-labor components of the specialized work it has been contracted to carry out; this provision states that the specialized work assigned as a subcontract cannot be subcontracted further. (5) When a professional contractor subcontracts the work it has been contracted to; that is, labor subcontracting cannot be further subcontracted. Professional engineering work cannot be further subcontracted, nor can labor services subcontracting be subjected to additional subcontracting. (6) In addition to charging for labor services, professional contractors also charge for the cost of major building materials, as well as large and medium-sized construction machinery and equipment and key reusable materials. Furthermore, it is also considered illegal subcontracting when, in a general contract for project construction, the contractor assigns parts of the work assigned to them to other entities for completion, without such provision in the contract and without the approval of the project owner. When the general contractor for construction subcontracts the work related to the main structure of the project to other entities (labor services can be subcontracted), this also constitutes illegal subcontracting, with the exception of steel structures. In summary, in the case of subcontracting in violation of regulations, the prerequisite for lawful subcontracting of professional projects is that (1) the subcontracting party must possess the appropriate qualifications, hold a qualification certificate of the corresponding level, and undertake projects within the scope permitted by its qualification level. (2) Except for the subcontracting stipulated in the general contract, it must be approved by the project owner. (3) In the case of a general construction contract, the construction of the main structure of the building (excluding steel structures) must be carried out by the general contractor itself; it is not allowed to subcontract or divide the work among other parties.
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