Subcontractors carry out major and important portions of building and construction work – but are often last in the queue when it comes to recognition and legitimate treatment, says Uwe Putlitz, CEO of the Joint Building Contracts Committee (JBCC).
Putlitz says the 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 just to put on record that some of the agreement’s listed clauses did not apply to the subcontractor. 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.”
Putlitz says 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.
“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 either although JBCC agreements, following international trends, specifically exclude the convenient ‘pay-when-paid' policy common in the industry which cripples smaller contractors in particular and could destroy subcontractors’ entire businesses. South African legislation aimed at ensuring prompt payment to building industry companies was drafted some time ago but not yet promulgated,” Putlitz adds.
He says providing the prescribed procedures are followed, potential disputes can be avoided and subcontractors can operate without strife. “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 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,” Putlitz added.