MDA Law
CONSTRUCTION OUTLOOK 2023
RECENT LEGISLATION
NEW PREFERENTIAL PROCUREMENT REGULATIONS
There is much hype surrounding the Preferential Procurement Regulations which came into effect on 16 January 2023 in accordance with the Preferential Procurement Policy Framework Act (PPPFA 5 of 2000). This new Regulations was invoked by the Constitutional Court judgment in Minister of Finance v Afribusiness, NCP CCT279/20 which declared the old 2017 Preferential Procurement Regulations invalid and held that the Minister had exceeded his powers in prescribing the 2017 Regulations.
The new Regulations are aimed at widening the selection process by an Organ of State when awarding a tender to a supplier by removing the pre-qualifying criteria in Regulation 4 of the old Regulations which limited the bidder from proceeding if they lacked Broad-based Black Economic Empowerment (B-BBEE) status criteria. Regulation 3 of the New Regulations states that an Organ of State must first consider the point preference system together with the specific goals of the tender;
It has been argued that an Organ of State would interpret the specific goals as defined in the Act which includes categories of persons historically disadvantaged by unfair discrimination on the basis of race, gender, and disability including the implementation of programmes of the Reconstruction and Development programmes to apply to B-BBEE criteria. While the new Procurement Regulations may be criticised for being too “lenient”, it is considered to be “placeholder” until the passing of the New Procurement Bill to be before Parliament end of March 2023.
OCCUPATIONAL HEALTH AND SAFETY AMENDMENT BILL (OHS)
The OHS will be gazetted and signed into Legislation in the first half of 2023.
The aim of the new Amendment Bill is to enforce stricter penalties on businesses for non-compliance of the provisions of the OHS Amendment Bill. Section 7 of the Act fails to elaborate on the OHS policy to be implemented by businesses. This is remedied by Section 7 of the Amendment Bill which requires a business to develop its own Health and Safety Management System. The Safety Management Plan which is a comprehensive plan entailing health and safety procedures of its employees, the public and impact of the Environment. The Management Plan will not only lead to compliance with legislation but is also considered during the tender process. In addition to the Plan, a business must undertake to conduct its own risk assessment as per its own Risk Assessment Plan. A Health and Safety inspector may now be entitled to issue on the spot administrative fines which range from R25000.00 to R50000.00.Penalties are stipulated in section 38 of the Bill deals with breaches in Schedule 1 with maximum fines ranging between R500 000.00 to R5 000 000.00 and the maximum imprisonment range between 2 and 5years imprisonment. Companies must we aware of the penalties assigned for non-compliance with the OHS Amendment bill and should appoint an external health and safety practitioner to assist with integrating their policies and management plans accordingly.
EMPLOYMENT EQUITY ACT AMENDMENT BILL
The Employment Amendment is set to come into effect in September 2023.
The main objective of the Amendment Bill is to empower the Minister of Labour to identify sectoral numerical Employment Equity (EE) targets and ensure equality in the workplace across all qualified employees from designated groups in terms of new Section 15A. The Minister is also tasked with establishing a criteria in respect of the issuing of the Compliance Certificate. This objective is tied in with the Amendment to Section 53 of the Bill which states that before a State Contract can be awarded, the Employer must be in possession of the Compliance Certificate. Small businesses with the less than 50 employees, irrespective of the turnover are excluded from the definition of ‘designated employer’ and are not required to follow the conditions entrenched on a designated Employer. This is to lessen the burden of the Employer of a small business.
The designated employer is required to report on the compliance of the sectoral targets before the end of 2024 and furnish reasons for not achieving the targets. The new Bill is of vital importance in ensuring equal representation of suitably qualified people from designated groups to achieve sustainability and socio-economic development.
COMMUNITY UNREST
The Construction Industry has been hit knock after knock due to disruptions caused by load shedding, looting, flooding in Kwazulu-Natal and the ongoing community unrest. Socio-economic factors, political instability and desperation to survive has led to community unrest of violent disruptions on construction sites. Community unrest is headed by the “construction mafia” which has taken it upon themselves to obtain economic transformation by the threatening businesses and construction companies.
The construction mafia creates their own local business forum which demands 30% of the economic value of the contract in exchange for the protection of the construction companies.
Failing to enter into negotiations with the construction mafia leads to violent disruptions and threats to the construction companies;
It is recommended that in order to attempt to mitigate the risks caused by the construction mafia, education and awareness is the key between all parties to the Construction Contract. The Construction Industry Business Development Board has developed a Standard for Contract Participation Goals (CPG) for Targeting Enterprises and Labour through Construction Works Contracts(2017);
This guideline establishes CPG’s is aimed at ensuring that small, emerging contractors are engaged with on certain projects. Thus, promoting sustainable business development. All parties must actively carry out the practices set out in the CIBD and understand the CPG’s and targeted areas once the tender is accepted.
SOUTH AFRICA DECLARED A NATIONAL STATE OF DISASTER
On 9th February 2023, President Cyril Ramaphosa has declared load shedding a National State of Disaster in terms of the National Disaster Management Act 2002;
Construction Companies should be alerted that this would open the flood gates to endless lists of risks that could jeopardise the performance of its Works. This could include unlawful and violent disruptions to the Site or Works, lead to shortage of supplies, downtime caused by load shedding and unplanned power outages. Contractors should take all necessary steps to mitigate against any loss and fully understand their rights and obligations in terms of the Contract. Contracts are required to always notify and communicate with the Employer and the Employer’s agents on the impact an event will have on the time required to carry out the performance of its Works.
GENERAL CONDITIONS OF CONTRACT (GCC) 2023 HAS BEEN RELEASED FOR COMMENTARY.
The much anticipated GCC 2023 has been released for commentary on 20 February 2023.
The GCC 2023 is aimed at ensuring the responsibility of all parties to the Contract and deals with contractual obligations of the Employer, Employers Agent and Contractor to act in good faith and mutual co-operation in terms of the Contract.
Clause 2.2 (Advance Warning) is a new clause which states that it is now the responsibility of the Employer, Employers agent and Contractor to notify each other in advance of any circumstance which may adversely affect the time, cost or quality of the Works. It is the duty of the Employer’s agent to advise on methods to mitigate or avoid the risks caused by the event;
Clause 5.1.1 is an amended clause regarding time calculations which states that where a specific time-span is stipulated in the Contract for carrying out any task, or for the acquisition or termination or lapsing of any right or fulfilment of any obligation or the duration of any event or circumstance, the special non-working days set out in the contract and the day on which the time-span commences shall be excluded from calculation of the time span;
The subheading in Clause 8.3 is amended from Excepted risks to Employer’s Risks. Subclause 8.3.1.2 is a new event which includes, “A State of Emergency, State of Disaster, or any other declaration by the Government that prevents the Contractor from performing its obligations in terms of the Contract”.
It can be conceded that the above risk was included after the President had declared a National State of Disaster on 9th February 2023 due to the on-going load shedding crisis.
Contractors who suffered a loss due to the Employer’s Risks can claim for an extension of time and additional costs under the provisions of Clause 10.1.
The highlight of GCC 2023 is the simplified dispute resolution clauses and the promotion of amicable settlement between the parties as successful settlement results in the suspension of the adjudication process under clause 10.4.
Ultimately, the GCC 2023 emanates a sense of hope to all parties to the Construction Contract especially the Contractors by ensuring fairness of the obligations imposed by each party and for encouraging amicable settlement.
