Subcontractors carry out major and important portions of building and construction work – but are far too often last in the queue when it comes to recognition and legitimate treatment.
JBCC’s Principal Building Agreement (PBA) and the Nominated/Selected Subcontract Agreement (NSSA) are both designed to link the employer with the contractor and subcontractor for the execution of the works. The agreements’ clauses are worded to clearly list the respective obligations and rights of the parties, stating the periods in which certain actions have to take place - and remedies where specified tasks or activities are not complied with.
But, based on sales statistics and liaison with the building industry, many contractors fail to appoint subcontractors using the NSSA, and often only briefly refer to this agreement in the appointment. Sometimes contractors put on the record that some of the agreements do not apply to the subcontractor. Some contractors even refuse to provide a subcontractor with a copy of the agreement. If subcontractors accept this blatant abuse they have only themselves to blame if their rights are ignored.
These clauses generally contain important rights of the subcontractor: such as the period for and the method of payment, and the right to damages where subcontractors are delayed, to name just two aspects.
All JBCC agreements require the appointment of a principal agent by the employer as a neutral party to administer the agreement fairly between the employer and the contractor and subcontractors. However, if this role is fulfilled by the employer or a main contractor, its execution is unlikely to be impartial and the subcontractor is the most likely to suffer.
It is not uncommon for the principal agents to fail to issue to each subcontractor payment notifications (SPN), which state the amount included for payment to subcontractors in each payment certificate issued to the contractor.
Similarly, contractors conveniently neglect to issue, in terms of the subcontract agreement, a subcontract payment advice (SPA) and a subcontractor recovery statement (SRS). By comparing the amount in the SPA with the SPA the subcontractor can identify discrepancies in payment from the SRS. This often includes penalty amounts deducted by the contractor from a subcontractor payment - illegally. In the subcontract agreement, proven ‘damages’ apply where the subcontractor has incurred expense and/or loss as a result of the actions by the contractor, or where the contractor has incurred expense and/or loss as a result of the actions by the subcontractor but not penalties. In this scenario, penalties cannot be enforced by the contractor.
The result is that subcontractors – somewhat intimidated and hungry for work - start work without having insisted on a signed original subcontract agreement. They seldom get a copy of such an agreement and therefore risk losing their rights. Similarly, the various administration forms, dealing mostly with payment, are seldom issued within the time limits specified in the contract resulting in late, or no payment, to subcontractors - often with unfair deductions.
In this regard, it must be said that not all employers comply with their obligations to contractors. JBCC agreements follow international trends and specifically exclude the convenient ‘pay-when-paid' policy common in the industry. This cripples smaller contractors in particular and can destroy smaller businesses. South African legislation aimed at ensuring prompt payment to building industry companies was drafted some time ago but has not yet been promulgated.
Potential disputes can be avoided and subcontractors can operate without strife if JBCC standard forms for the certification of payment and stages of completion are used. This is a two-way process involving notice from the subcontractor to the contractor, from the contractor to the principal agent (and in reverse) for information, the request of inspections, submission of payment claims, provision of payment and completion certificates as the work progresses.
JBCC Agreements are designed to serve both contractors and subcontractors fairly and to prevent unfair practices in both their interests. Subcontractors sadly fear that they will not be awarded work on a project if they query the lack of comprehensive contract documentation and procedures. But they carry out a major portion of building and construction work- and must insist on inclusive treatment when it comes to contractual agreements.
Further info: Uwe Putlitz, tel 011 086 100 5222/ www.jbcc.co.za