Prime contractor

From CEOpedia | Management online
Prime contractor
See also

Prime contrator is an entity that has the complete responsibility for the delivery and, in some cases, the operation of a built asset and may be either a contractor, in the generally excepted meaning of the team, or a firm of consultants. The prime contractor needs to be an organisation with the ability to bring together all of the parties in the supply chain necessary to meet the client's requirements. There is nothing to prevent a designer, facilities manager, finanacier or other organisation from acting as a prime contractor.

However, by their nature prime contractors tend to have access to an integrated supply chain with substantial resources and skills such as project management. To date, most prime contractors are in fact large firms of contractors, despite the concerted efforts of many agencies to emphasis the point that this role is not restricted to traditional perceptions of contracting [1].

Prime contractor responsibilities

Responsibilities of a prime contractor toward a subcontractor:

  • first responsibility is to provide general instructions on observance and its related regulations
  • second responsibility is to provide technical instructions on taking safety measures at specific sites

It is not necessarily possible and sometimes completely impossible for a subcontractor to take effective safety measure with his sole efforts. This is a reson that these responsibilities of prime contractor is stipulated.

Even if these two responsibilities are not fulfilled: however, a prime contractor is not punished. These responsibilities are equivalent to instructions. A main objective of, the prescripyion of these responsibilities is to draw more attentions of a prime contractor[2]

Sanctions for prime contractor

Sanctions and penalties for prime contractors failing to comply with prompt pay requirements identified by the STAs included[3]:

  • withholding future prime contractors payments
  • interest of 1,5% to 2% per month on the amount owed or fixed-fee charges of $50 per day or some other amount
  • suspension of bidding privileges
  • in repeat or chronic cases the contractor may be suspended from bidding or revocation of prequalification

Prime contracting

Prime contracting is where an individual supplier (prime contractor) acts as the sole point of responsibility between the client and supply chain. As long as the supplier has the appropriate competence and experience, there is no restriction on who can assume the function. Prime contracting incorporates the following[4]:

  • open-book accounting where the actual costs incurred by the supply chain are revealed to the client
  • target cost pricing where the prices paid are established based on value for money for the client and a realistic profit for the supply team
  • whole-life costing where, before construction begins, a whole-life cost model is generated
  • pain/gain share where both the client and prime contractor benefit financially from reductions in project costs


  1. D. Cartlidge 2012, p.234
  2. A. Singh,J. Hinze, R.J. Coble 1999, p.59
  3. G.Smith 2005, p.24
  4. D. Lowe 2013, p.8


Author: Natalia Talarek