Nominated vs Non-Nominated Subcontractors in AU Construction

What it is

A nominated subcontractor is a trade that the principal (owner, developer or superintendent) selects and directs the head builder to engage. The builder then signs the subcontract, pays the subbie, manages them on site and is liable for their work, even though the builder did not pick them.

A non-nominated (or domestic) subcontractor is one the builder chooses freely under their own selection criteria. Most subbies in Australian residential and small commercial work sit in this category.

The distinction matters because the contractual liability sits with the builder either way but the commercial control does not. With a nominated trade the builder wears the risk for someone the principal forced onto the job.

How nomination works in AU contracts

Nomination is a feature of older head contracts and still appears in commercial work, government tenders and some larger residential developments. The Australian Standard contract suite handles it through specific clauses.

Under AS 4000:2025 General Conditions of Contract, nomination appears in clause 9 (subcontracting). The principal lists nominated trades in the Annexure. The builder must engage those trades and is liable for their acts and omissions. The principal does not contract with the nominated subbie directly.

Under AS 2124 (the older form still used in some legacy contracts), nomination works similarly with a separate clause structure but the same liability outcome for the head contractor.

Why principals nominate

Principals nominate for quality control, to lock in pricing they have pre-negotiated, to use a trusted specialist, or because a particular product (lift, curtain wall, specific facade system) only comes through one installer.

Why this is rare in residential work

Most residential head contracts (HIA, Master Builders) do not include a nomination mechanism by default. Where an owner wants to dictate a trade, it usually gets handled as a Provisional Sum item or as a separate principal-supplied work item, not as a nominated subcontract.

Risk that the builder carries

The builder takes on three discrete risks when a trade is nominated:

• Performance risk. If the nominated tiler is slow, the builder still owes the principal the program. There is no automatic extension of time just because the trade the principal picked is dragging.
• Quality risk. If the nominated trade installs defective work, the builder owes the rectification under the head contract defects liability clause. The builder then has to recover from the subbie, which can be a fight if the subbie disputes the spec the principal gave them.
• Insolvency risk. If the nominated subbie goes bust mid-job, the builder is liable to find a replacement at potentially higher cost. The principal does not automatically wear the price increase.

Clause 9 of AS 4000 confirms the head contractor is liable for the acts, defaults and omissions of nominated subcontractors. The risk for the head contractor is that the nominated party becomes insolvent or is otherwise unable to cover the loss.

How a builder protects themselves

Before accepting a nomination, a competent builder will negotiate at least three things:

Right to object

The contract should give the builder the right to reasonably object to a nomination on credit, capacity or capability grounds. AS 4000 includes a mechanism where the contractor may refuse to subcontract on reasonable grounds. The principal must then either remove the nomination or take the work out of scope.

Back-to-back terms

The subcontract with the nominated trade should be back-to-back with the head contract on program, quality, defects, security of payment and dispute resolution. Any gap is a gap the builder wears.

Indemnity from the principal

For pure nominations (where the principal picks and the builder has no real choice), some builders push for an indemnity from the principal for performance failures that flow from the nomination itself, for example where the principal has misrepresented the subbie's capacity. This is hard to get but worth asking.

Novated subcontractors

Novation is a related but distinct mechanism. Under novation the principal first contracts directly with the subbie (typically a designer or specialist) during the design phase, then transfers (novates) that contract to the head builder at construction phase. The builder steps into the principal's shoes.

Novation creates similar issues. The builder is locked into terms it did not negotiate and a trade it did not pick. AS 4000 treats novated subcontractors the same as nominated ones for liability purposes under clause 9.

When to push back

In Australian residential work, if a principal contract puts forward a nominated subbie that the builder does not know, the right move is usually to push for one of three alternatives: drop the nomination and let the builder use their own trade, convert it to a principal-supplied separate contractor with the principal carrying the risk, or take it out of scope as a Provisional Sum so the cost variation flows back to the owner. Accepting a true nomination on price-fixed terms without these protections is a quiet way to lose money on a job.