Industry stakeholders are hopeful that the final amendments to the regulations to the Construction Industry Development Board Act will be gazetted by August, says inter- national law firm Clyde & Co Johannesburg branch partner Robert Scott.
He explains that the proposed amendments – published in the Government Gazette in May last year – are far reaching and applicable to all construction contracts, whether oral or written, in the public or private sectors. Ultimately, the regulations deal with prompt payment and adjudication, he adds.
“The main intention of the amendments is to introduce prompt payment provisions to ensure that contractors and subcontractors are paid timeously and that funds are available to complete projects. “The regulations will also provide for a fast-tracked adjudication procedure for any disputes [and] introduce the statutory provision that adjudication will be mandatory for all payment disputes.”
Regarding prompt payment, Scott notes that the regulations provide that any party that carries out work under a construction contract is entitled to regular and reasonable progress payments. “If the contract does not provide for regular and reasonable progress payments, then a contractor may submit monthly invoices or tax invoices in respect of the works completed, services rendered or goods supplied.”
The date of payment is to be stipulated in the contract but shall not be later than 30 calendar days after the submission of an invoice. Interest will accumulate at a punitive rate in the event of late payments.
Scott adds that, if the contract does not provide a method of determining the value of the work competed, the regulations outline a very detailed and specific manner in which the amount of progress payments are determined and how construction works are valued, taking into account the contract price as well as the prevailing rates and prices.
He points out that, in the current draft form, the regulations do not define the parameters of ‘regular and reasonable’ payments, and that this lack of clarity might be problematic.
However, should an employer fail to make monthly or weekly payments, the dispute “must” be referred for adjudication. Similarly, should the employer object to the amount stipulated in the invoice, the employer must first file a notice of intention to withhold payment within five days of receiving the invoice, and then refer the matter for adjudication.
“A party to a contract can, at any time, refer a dispute for adjudication once it has provided the other party with a notice of its intention to refer the dispute for adjudication,” Scott comments. He adds that the Construction Industry Development Board will accredit an adjudicator nominating body and select an adjudicator when requested to do so.
He notes that the appointment of an adjudicator must then be made in terms of the Standard for Adjudication, which has yet to be published. The board is also expected to maintain a list of accredited adjudicators to ensure that there are an adequate number of adjudicators to handle all disputes.
Adjudicators have 28 calendar days to resolve the dispute. Should this not be possible, the regulations provide that the adjudicator may be granted an additional 14 days to reach a decision, provided that the parties agree to the extension. The process cannot continue beyond the additional 14 days.
Scott explains: “Should the adjudicator fail for any reason to reach a decision, then a party to the dispute may serve a new notice of adjudication, thus referring the matter for adjudication again and requesting the appointment of a new adjudicator.”
He points out that decisions by an adjudicator are considered liquid documents, thus enabling a party to apply to court for an order that the decision be entered as a judgment and be made an order of court. This process does not require a lengthy and expensive trial and is relatively quick and easy.
The procedure for passing regulations differs, depending on the nature of the regulations; however, in this case, the draft regulations have been published for public comment and have been sent back to the Department of Public Works for further discussion, input and a final decision.
Should the Minister of Public Works now alter the regulations following public comment, he is not obliged by the Construction Industry Development Board Act to publish the altered regulations for public comment again and can simply publish the regulations in the Government Gazette, whereafter the regulations will be promul- gated either on the date published in the Government Gazette, or on a date stipulated in the Government Gazette. It is, however, hoped that the altered regulations will be published again for public comment.
Owing to this, Scott states that the success of the regulations will rest on the quality of the adjudicators.
“Clyde & Co sees the regulations as a positive development and hopes that they will fulfil their intended purpose; in jurisdictions like the UK and, more recently, Australia, adjudication has largely been a success,” he concludes.