Subcontractors, take a stand!

  |  by Uwe Putlitz, Joint Building Contracts Committee

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.

The Joint Building Contracts Committee’s  (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 list clearly the respective obligations and rights of the parties, and state when certain actions have to take place.

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 just to put on record that some of the agreement’s listed clauses do not apply to the subcontractor. These clauses generally contain important rights of the subcontractor, such as the payment period and the method of payment, as well as the right to damages where subcontractors are delayed, to name just two.

Unfair deductions

All JBCC agreements require the employer to appoint a principal agent to act as a neutral party to administer the agreement 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 most likely to suffer.

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 frames specified in the contract, resulting in late or no payment to the subcontractor , often with unfair deductions.

“Pay when paid”

In this regard, it must be said that not all employers comply with their obligations to contractors either, despite the fact that JBCC agreements specifically exclude the convenient “pay when paid” policy in line with international trends. This policy, so common in the industry, cripples smaller contractors in particular and can destroy entire businesses.

South African legislation aimed at ensuring prompt payment to companies in the building industry was drafted some time ago but hasn’t been promulgated yet.

Two-way process

Potential disputes can be avoided and subcontractors can operate without strife, providing the prescribed procedures are followed. Both relevant JBCC agreements describe contract administration procedures using JBCC standard forms for the certification of payment and stages of completion.

This is a two-way process involving notice for information from the subcontractor to the contractor; from the contractor to the principal agent (and vice versa); requests for inspections; submission of payment claims; provision of payment and completion of 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. Sadly, subcontractors fear that they will not be awarded work on projects if they query the lack of comprehensive contract documentation and procedures. But they perform a major portion of building and construction work and must insist on inclusive treatment when it comes to contractual agreements.

Conact Uwe Putlitz, Joint Building Contracts Committee,  Tel 011 086 100-5222,