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News
PUBLIC PROCUREMENT BILL PAVES WAY FORWARD FOR NEW SUB-CONTRACTING MODEL
Every single day we read of fraudulently awarded contracts with millions of rands being paid to contractors who abscond with the project only partly completed and , in some instances , not even started .
In light of the above , a single Procurement Bill which replaces a myriad of prior procurement legislation , and which seeks to address corruption is welcomed .
However , in its current format , the Bill gives Ministers and Departments the discretionary authority to establish their own empowerment criteria and targets . In addition , regulations which underpin the Bill must still be developed and published . The Bill also needs to comply with the provisions of the Constitution which stipulate that a procurement system must be equitable , transparent , competitive and cost effective . As with all legislation , the devil is in the detail , and it remains to be seen whether the Bill will pass constitutional muster when challenged .
Meaningful transformation is one of the key principles of the Public Procurement Bill . Once signed into law it will regulate and prescribe public procurement practices .
Public procurement will be targeted specifically at uplifting black-owned small and medium enterprises ( SMEs ) that sub-contract to principal contractors , especially those at the lower rungs of the Construction Industry Development Board ’ s ( CIDB ) Register of Contractors . According to the CIDB , there are sufficient construction SMEs across all the wards , districts and provinces to work alongside principal contractors on small construction projects . However , the availability of black sub-contracting skills and experience decline significantly as projects become more complex . This demonstrates a real need to develop black-owned sub-contracting capacity . This can only be done by extending the definition of ‘ value for money ’ when contracting construction services . It should also encompass meaningful transformation , which includes building black-owned sub-contracting capacity to participate in the anticipated “ tsunami ” of government infrastructure projects in the pipeline .
However , in order to achieve the level of transformation required , it is important to reassess the way in which subcontracting is largely being undertaken in the country . This is considering that issues , such as late and non-payment , undermine transformation .
“ While an important means of empowering previously disadvantaged contractors and transforming the construction industry , a vibrant subcontracting sector is also crucial to the sustainability of the construction industry . This business practice enables principal contractors to deal with uncertainties in the construction market and reduce operating costs and , in this way , improve their competitiveness . It impacts across all spheres of the construction industry , including division of labour , employment , productivity , quality and health , safety and environmental practices ,” says , Vaughan Hattingh , an executive member of the Construction Adjudication Association of South Africa ( CAASA ) and director of MDA Construction & Technology Attorneys .
Via CAASA , the industry has already taken a major step towards providing some measure of protection to subcontractors that previously had no or very limited recourse in the case of abuse , including late or non-payment by principal contractors . CIDB Grade 1,2 and 3 contractors are especially at risk when they are paid up 120 days after delivering construction services . Many of them then leave the industry indefinitely to find more sustainable livelihoods in other sectors .
CAASA ’ s Rules for Low Value Dispute Adjudication ( LVDA ) provides a growing band of emerging contractors and subcontractors with a cost-effective means of dispute resolution . The LVDA fixes an hourly rate to the adjudicator ’ s fee , capping it to a specified maximum amount which is linked to the lowvalue dispute amount claimed . In this way , certainty is provided to the parties as to how much the adjudicator will be paid for making the decision and the period within which it will be published . Moreover , the LVDA attempts to limit the amount of documentation and material that parties are allowed to submit to further streamline the process .
Vaughan Hattingh , an executive member of the Construction Adjudication Association of South Africa ( CAASA ) and director of MDA Construction & Technology Attorneys .
While a solid start , Hattingh believes that a significant paradigm shift is necessary in the way in which procurement entities , principal contractors and sub-contractors engage .
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RACA Journal I August 2024 www . refrigerationandaircon . co . za