Major Changes in Construction Industry

CIDB to regulate Private Sector Contracts

The Construction Industry Development Board (hereinafter “the CIDB”) along with The Minister of Public Works published draft amendment regulations for comment pertaining to Prompt Payment as well as compulsory Adjudication Procedures to be followed by the construction industry.

Background and effect of regulations if accepted

Prior to these proposed regulations one of the main focus areas of the CIDB were the Register of Contractors as provided for in Chapter 3 of the Construction Industry Development Board Act, Act No 38 of 2000 (hereinafter “the act”).

In terms of the provisions of section 18(1) (which forms part of chapter 3) of the act a contractor may not undertake, carry out or complete any construction works or portion thereof for public sector contracts unless he or she is registered with the Board and holds a valid registration certificate issued by the Board.

The effect hereof was that the CIDB mainly regulated the relationship between a contractor and the public sector and then only if the contract was for the performance of a combination of goods and services. The role of the CIDB in the construction industry as a whole is however much wider as can be seen in the provisions of Section 4 of the act which deals with the objects of the CIDB.

In order to fulfil its obligations to the construction industry as a whole the CIDB gazetted these draft regulations. These regulations will have the effect that the CIDB now will also actively regulate the relationship between private sector contractors as well as the relationship between private sector employers and private sector contractors (in relation to prompt payment and adjudication procedures) and no longer only if it’s a provision of a combination of goods and services, but also regulate the relationship where a party carried out any construction works, or supplied any goods or rendered any services in the construction industry.

Prompt Payment

The regulations pertaining to prompt payment provides for:

  • Prohibition of conditional payment provisions (26B)
  • Entitlement to progress payments (26C)
  • Date of liability for payment (26D)
  • Notice of intention to withhold payment (26E)
  • Right to suspend performance for non-payment (26F)
  • Validity of contract (26G)
  • Prohibition (26H)
  • Service of notices (26I)

Adjudication

In terms hereof every contract must provide for an adjudication procedure, which must substantially comply with these Regulations and if that contract does not contain such a procedure, or in the case of a verbal contract, the provisions of this Part of the Regulations and the Standard for Adjudication apply to that contract.

The regulations pertaining to adjudication provides for:

  • The right to refer disputes to do adjudication (26J)
  • Status of adjudication (26K)
  • Appointment of adjudicator (26L)
  • Powers and duties of adjudicator (26M)
  • Advisor and representative (26N)
  • Confidentiality (20 60)
  • Period within which adjudicator must make decision (26p)
  • Manner in which adjudicator must make decision (26Q)
  • Effective adjudicator’s decision (26R)

General

It should be noted that these regulations, if promulgated will not apply to any contract that has been entered into before the commencement date.

The provisions of the regulations will however form part of all construction works contracts and all construction works related contracts entered into after the commencement date and the contracting parties must adhere thereto.

Contact Us

Should you require advice on the implication of these regulations or any other advice pertaining to construction law kindly contact Jaco Hamman at jaco@hahnlaw.co.za or visit our website at www.hahnlaw.co.za

Jaco is a partner of the firm and a member of the Society of Construction Law Africa.

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