16 BUSINESS AND TRAINING
Subcontractors – typical challenges experienced executing building and civil works contracts
Uwe Putlitz is a registered professional Architect and Construction Project Manager , a Fellow of the Royal Institute of Chartered Surveyors ( RICS ) and is a visiting lecturer at the School of Construction Economics and Management at the University of the Witwatersrand . Having recently retired as the Chief Executive Officer of the Joint Building Contracts Committee ( JBCC ) he specialises in the avoidance of construction disputes by way of lectures , technical articles dealing with aspects of contract administration for various industry publications arising from the use of Standard-form Contracts including the Federation Internationale des Ingenieurs-Conseils ( FIDIC ), the General Conditions of Contract ( GCC ), the JBCC or the New Engineering Contract ( NEC ) to find an acceptable settlement without resorting to legal processes , where possible . More info : info @ buildstrat . co . za
By
Uwe Putlitz
Almost without exception , when asking any subcontractor what the biggest business challenge is , they will answer that it is getting paid in full on time …
Only in the JBCC suite of contract documents , must the principal agent inform the Subcontractor ( SC ) or the Nominated Subcontractor ( NSC ) of the amount due to him or her included in a certified amount due to the Principal Contractor ( PC ) using a ‘ payment notification form .’ In the N / S Subcontract Agreement , the PC is obligated to concurrently issue a ‘ payment advice ’ for the amount due to each SC / NSC . JBCC encourages using a ‘ recovery statement ’ to record transactions between the parties , the employer and the PC or the PC and the SC / NSC , ( for example , deducting an amount for abortive work ) to create a transparent audit trail . The ‘ payment advice ’ like the ‘ payment certificate ’ issued in accordance with the Principal Building Agreement , is a liquid document entitling the bearer to approach a court to enforce payment where this has not been received within the stipulated period .
Should no or partial payment be received by the due date , communicate with the PC to find out why the amount in a payment notification differs from the payment advice , if this is not clear from the recovery statement and / or why payment has been withheld . If no satisfactory explanation is forthcoming and the amount has not been paid , give notice of your intention to suspend the subcontract works on the expiry of the notice . The extreme remedy is to terminate the contract .
Subcontractors may be entitled to an extension of time , and possibly additional payment if :
• Construction information is provided late , is incorrect , or not issued
• Design changes are made by an agent during the construction period
• An agent is appointed late for the design or specification of the subcontract works
• The design agent , after following prescribed notice procedures , fails or delays the inspection or commissioning of the subcontract works
• An SC cannot commence subcontract works on the stipulated date due to delays by the PC or other ( sub ) contractors
• A nominated subcontractor ( NSC ) is appointed timeously for the design , supply and installation of a part of the works , but their design is not submitted , or accepted or rejected by the agent within the stipulated time
• An NSC is appointed late , even if their design is submitted and accepted or rejected on time by the agent
• A NSC is appointed late for the design , supply and installation of part of the works and their design submission , acceptance or rejection by the agent is late in terms of the programme
Small disagreements , if not addressed promptly , may develop into a dispute . To deal with any dispute – and for that matter any contractual or insurance claim – requires the presentation of an accurate and informative auditable report of the events and the resultant ‘ product ’ for evaluation by the contract administrator or , in a dispute resolution process , the adjudicator , arbitrator or mediator .
In the relationship between the PC and SC or NSC Subcontractors in the building and civil construction industries are employed by the PC and ( hopefully ) appointed using one of the industry-accepted Standard-form Subcontract Agreements . Sadly , standard contracts are often unilaterally modified or replaced with bespoke agreements to limit a subcontractor ' s rights with the introduction of various restrictions , including a ‘ pay when paid ’ clause ( in the EU , the UK and most Commonwealth countries , such clauses are illegal ). Contractors in the UK are now required to maintain a register of late or reduced payments – with defaulting contractors forfeiting the opportunity to be awarded any public sector work . In South Africa , challenging such clauses by an SC / NSC can result in losing an appointment . The risk of late or partial payment may be perceived to be less than having no work .
‘ Domestic ’ subcontractors ( DC ) typically perform the wet trades but may include electricians and plumbers chosen by the PC based on their skills and successful past working relationships . DCs are appointed using a standard-form subcontract agreement published by Master Builders South Africa . The same payment conditions apply as for an SC / NSC .
www . plumbingafrica . co . za @ plumbingonline @ plumbingonline @ PlumbingAfricaOnline November 2023 Volume 29 I Number 9