ECA(SA) CONTRACTUAL COMMITTEE FIGHTS UNFAIR BUSINESS PRACTICES
By Lucas Bowles, Regional Director, ECA(SA) East/South Cape
The ECA(SA)’s National Contractual Committee met on 22 November
2018 to discuss a number of issues, including performance guarantees and to consider the request from the Joint Building Contracts Committee (JBCC) that all its constituent members respond to proposals from its Drafting Panel.
The proposals include the introduction of a new clause in the JBCC contract documents to provide for retention monies to be invested in an interest-bearing account administered by Federated Employers Mutual Trust (FEM), for deposit and release based on certificates issued by the principal agent.
The perception, now firmly established in the minds of principal contractors, is that retention monies belong to them. As a result, specialist subcontractors have been prejudiced and deprived of millions due to this unfair business practice.
The ECA (SA) is of the view that this amendment to the contract document, if approved, would be a significant improvement and would release large sums of money to subcontractors, which in past years were retained by principal contractors to the detriment of our members.
Other proposals include:
- The introduction of amendments to simplify the manner in which the ‘Variable’ and ‘Fixed’ Guarantees are to be reduced from the initial 10% of the contract sum until all retention is paid out.
- The introduction of an amendment to release Guarantees and Retention at Final Completion and not as part of the Final Account as is presently the case.
The ECA (SA) welcomes these proposals and has indicated to JBCC that it fully supports this new approach by the Drafting Panel.
CIDB Stakeholder Forum
The Contractual Committee welcomes the involvement of the ECA [ SA] National Director, Mark Mfikoe, in the affairs of the Construction Industry Development Board (CIDB). Mark attended his first meeting of the CIDB Stakeholders Forum in October 2018.
Secured Payment Trust Fund
As discussed at the Annual Congress of Master Builders [ South Africa] in September2018, a copy of the Building Construction Industry Security of Payment Act 2002, as applicable in certain states of Australia, has been sent to the CEO of FEM, Ndivhuwo Manyonga at her request. She has expressed interest in looking at the legislation with a view of exploring ways of assisting contractors and subcontractors to secure monies due to them by way of a Trust Fund to be established for the Construction Industry in South Africa.
Secured payment for subcontractors was first proposed by ECA(SA) in the late nineties but was rejected after fierce opposition from the Building Industries Federation of South Africa (Bifsa) at the time.
As time passed and Master Builders South Africa (MBSA) now also represents large numbers of subcontractors, the secured payment system is now seen as possibly the only way to address the culture of non-payment, which has crippled the Construction Industry and resulted in the demise of many flourishing building contractors in South Africa.
The Contractual Committee is hopeful that progress can be made in establishing a pressure group of interested and affected stakeholders in 2019, that would lobby decision makers and prepare the way for the introduction of similar legislation in South Africa in the near future.
The Contractual Committee members are:
Herman Kriel (chairman)
Graham Clarke (vice-chairman)
Pieter du Toit
Danie du Preez