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A Nominated Subcontractor Agreement is essential when you need to formalize a three-way construction relationship in Indonesia where the employer selects specific subcontractors but maintains the main contractor's overall project responsibility. This specialized contract ensures compliance with Indonesian construction laws while protecting all parties' interests through clear responsibility allocation and coordination mechanisms.

When do you need this document?

You need this agreement when your construction project requires specialized expertise that only certain subcontractors can provide, such as proprietary building systems, advanced mechanical installations, or specialized architectural features. It's particularly crucial for large infrastructure projects, commercial developments, or industrial facilities where the employer wants direct control over key subcontractor selection while keeping the main contractor accountable for overall project delivery. The agreement is also necessary when tender conditions specify that certain work packages must be performed by employer-nominated specialists, or when regulatory requirements mandate specific certified subcontractors for critical project components.

Key legal considerations

Your agreement must clearly define the scope of nominated works to prevent disputes over responsibility boundaries between the main contractor and subcontractor. Payment provisions require careful structuring since the main contractor typically remains liable for subcontractor payments even though they didn't select the nominated party. You must include comprehensive coordination clauses that establish how the nominated subcontractor will integrate with other trades and follow the main contractor's program and site procedures. Liability allocation is critical - while the main contractor maintains overall project responsibility, specific liability for nominated works quality and performance should be clearly assigned. Insurance requirements must align with both the main contract and Indonesian regulatory standards, ensuring adequate coverage for all parties.

Legal requirements in Indonesia

Your Nominated Subcontractor Agreement must comply with Law No. 2 of 2017 on Construction Services, which governs all construction contractual relationships and requires proper business licensing for all parties. Under Government Regulation No. 22 of 2020, both main contractors and nominated subcontractors must hold valid construction service business licenses (IUJK) appropriate for their scope of work. The agreement must incorporate Indonesian Civil Code provisions regarding contract formation, performance obligations, and breach remedies. Labor law compliance under Law No. 13 of 2003 on Manpower is mandatory, particularly regarding worker safety, social security contributions, and employment conditions. Payment terms must conform to Indonesian commercial practices and may not contradict regulations on fair payment in construction contracts. Dispute resolution clauses should specify Indonesian jurisdiction and may include arbitration under Indonesian Arbitration Law, ensuring enforceability of decisions within the Indonesian legal framework.