QLD GUIDE
Red flags in subcontract terms: a Queensland subcontractor's pre-bid checklist
Most subcontract pain is written into the terms before you ever price the job. This checklist walks through the clauses worth reading first, why they hurt, and what you can do about them while you still have leverage: before the bid goes in.
Items marked verify refer to legislation or regulator guidance that changes over time. Check the linked official source before relying on them.
A tender package lands on Thursday afternoon, closing the following Wednesday. The drawings and scope get most of the attention, and the subcontract terms get a skim on the last night. That is backwards. Your rates are only as good as the terms they sit under. A sharp price on a contract with uncapped liability, open-ended liquidated damages and a two-day notice bar is not a sharp price. It is a bet.
This checklist is written for Queensland subcontractors in building, civil and industrial electrical work, including HV/LV. It is general information drawn from project practice, not legal advice. The law changes and every contract is different, so treat each regulatory point marked verify as a prompt to check the current official source and, where the dollars justify it, get advice before you sign.
Why read the terms before you price
Once you are the preferred tenderer, your leverage drops fast. The head contractor has carried your number into its own bid, the program is locked and the conversation becomes "we can't change the head contract terms now." Before submission you can still do three things: price the risk, qualify it in your offer, or walk away. After award, you mostly just carry it.
A practical habit: give the subcontract a 45-minute read on day one of the tender, with a highlighter and the list below. Anything that hits a red flag goes to the estimator and the person signing off the bid, not to a note at the bottom of the email.
1. Liquidated damages and delay exposure
- Rate and cap. Is there a daily LD rate, and is it capped at a percentage of your subcontract value? An uncapped rate flowed down from the head contract can exceed your whole margin within weeks.
- Back-to-back flow-down. Watch for wording that makes you liable for "all damages the contractor incurs under the head contract." On a small package that can mean carrying the head contractor's full LD rate.
- Sole remedy. Does the contract say LDs are the contractor's only remedy for delay, or can it also claim general damages on top?
- Extension of time. Are there clear grounds for an EOT, including delays caused by the head contractor, other trades, late access or late information?
What to do: price a realistic delay allowance, ask for a cap (commonly expressed as a percentage of subcontract value) and qualify that LDs are the sole remedy for delay.
2. Liability, indemnities and consequential loss
- Overall liability cap. Is your total liability capped, and at what multiple of the subcontract price? No cap at all is one of the most serious red flags in any package.
- Consequential loss. Is there a mutual exclusion of indirect and consequential loss, such as lost production or lost revenue? For industrial and utility sites, a plant outage can be worth more than your whole job.
- Indemnities. Are you indemnifying the head contractor for losses "arising out of or in connection with" the works, regardless of who caused them? Look for proportionate wording: losses to the extent caused by you.
- Insurance alignment. Check that what you are asked to indemnify is actually something your public liability and professional indemnity policies respond to.
3. Payment terms and security of payment
Queensland has strong security of payment laws, but contracts still contain terms that test them. Under the Building Industry Fairness (Security of Payment) Act 2017 verify, a "pay when paid" provision in a construction contract has no effect. The Act's notes also point to the QBCC Act 1991 verify, under which a provision in a subcontract for payment of a progress payment later than 25 business days is void.
- Payment period. How many business days from claim to payment? Compare it to the statutory limits and to your own cash flow.
- Conditions on payment. Look for clauses that make payment depend on the head contractor being paid, on certification by a third party, or on paperwork that is out of your control.
- Claim dates and form. Note the reference dates and what a valid claim must include. The QBCC's getting paid guidance verify is a useful plain-English starting point.
- Set-off. Can the head contractor deduct amounts it claims under other contracts with you? Broad set-off rights can freeze cash across several jobs.
For the claim side, see our BIF Act payment claims checklist.
4. Security, retentions and bank guarantees
The QBCC Act verify sets a condition that, before practical completion, the total of retentions withheld and securities held under a subcontract is not more than 5% of the subcontract price, with some exceptions. Read the security clause with that in mind.
- Amount and form. Cash retention, bank guarantee or insurance bond, and at what percentage?
- Release triggers. When is half released, and when is the balance released? A release tied to the head contractor's final certificate can hold your money for years.
- Recourse. Can security be called on without notice or before a debt is actually due?
- Trust arrangements. Check whether project or retention trust requirements apply to the job. The QBCC explains them under trust accounts verify.
5. Design responsibility and scope creep
- Fitness for purpose. A warranty that the works will be "fit for their intended purpose" is broader than doing the work in line with the documents. It is often uninsurable for a construct-only trade.
- Design by stealth. Watch for phrases such as "complete the design" or "everything necessary for a complete and operational installation," and for a precedence clause that puts the specification below the head contractor's general requirements.
- Documents you have not seen. Terms that bind you to head contract documents, site rules or standards that were not included in the tender package.
6. HV/LV and industrial electrical specifics
Industrial electrical packages carry risks that general building subcontracts often ignore. Electrical work in Queensland sits under the Electrical Safety Act 2002 verify, and the Electrical Safety Office verify publishes guidance, but the contract decides who carries the commercial risk.
- Switching and access. Who provides HV switching, isolations and permits, and what happens to your program if outages are cancelled or moved by the asset owner?
- Network and utility interfaces. Are connection approvals, network operator inspections and energisation dates your risk or the head contractor's?
- Long-lead equipment. Transformers, switchboards and RMUs can have long lead times. Check who carries price escalation and late delivery.
- Testing and commissioning. Are the testing scope, witness points and acceptance criteria clearly defined, or do they say "as required"?
7. Changes, notices and time bars
Variation and claim clauses decide whether you get paid for extra work. Short notice periods, strict forms and "no notice, no claim" wording can wipe out valid entitlements. This one is big enough to have its own guide: time bars and notices in subcontracts: what to track.
8. Termination, suspension and disputes
- Termination for convenience. Can the head contractor end your subcontract at any time, and what do you recover: work done only, or demobilisation and committed costs too?
- Suspension. If the works are suspended, do you get time and costs?
- Disputes. Look for a clear, staged process. Note that statutory adjudication rights under the BIF Act verify sit alongside the contract; the QBCC explains the adjudication process verify.
Price it, qualify it, or walk away
Each red flag has three answers. Some risks you can price: a realistic delay allowance, extra supervision or a contingency against a long-lead item. Some you should qualify: a clear, specific departure in your offer such as "liability capped at 100% of subcontract value" or "LDs capped at 10% of subcontract value and sole remedy for delay." And some you should treat as a hard stop: if an uncapped liability clause or an unworkable payment chain will not move, the honest answer may be not to bid.
Keep qualifications short and specific. A page of vague exclusions tends to get ignored or scored down. Five precise departures, each tied to a clause number, get read.
If you want to turn this checklist into a number, the {https://tenderready0.gumroad.com/l/yrppp} tool walks through 41 red-flag checks, scores likelihood and consequence, and drafts a qualifications list for your offer. It is a decision aid, not legal advice.
Before the terms: is your paperwork ready?
Red-flag terms only matter if you get through prequalification first. If your licence, insurance and WHS documents are scattered, start there: our QBCC prequalification checklist covers what reviewers check.