Scope for ‘exporting’ JBCC contracts

Building contracts formulated by the Joint Building Contracts Committee (JBCC) are appropriate for use outside South Africa.

There is, in fact, substantial scope for contractors to use the locally produced Standard Form of Contract (SFC) for projects in sub-Saharan countries, according to Uwe Putlitz, CEO of the JBCC.

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“The principle of an equitable distribution of project risks between the employer and the contractor as covered in the JBCC’s SFC still applies outside our borders – but may require more intensive control and management,” Putlitz states. “Most major South African contractors cannot survive only on local work and are already using JBCC contracts for projects throughout Africa, often working with SA developers and consultants, sometimes in conjunction with a local company in a joint venture.”

He says, generally, the former British colonies in Africa that are now part of the Commonwealth follow similar legal principles to South Africa and use English as business language. However, many of these countries place less emphasis on dispute avoidance and thus may not allow for the bouquet of such tools including mediation, adjudication or arbitration in preference to litigation as contained in the local JBCC SFC. 

“The former Francophone and Lusophone countries largely follow continental practices that differ from the principles of common law used in Commonwealth countries – so some caution would be required in applying JBCC SFCs in these countries.

“The concept of SFCs has developed internationally over more than a century and the principles of contracting are essentially same, regardless of the country of use. But, depending on the nature and location of a project, the control and management by ‘remote control’ may require additional collaboration agreements with local consultants and contractors. To limit queries from authorities or from contractors during construction, the contract documentation may have to be more comprehensive, and possibly evolved with a local respondent to capture available product specifications or construction techniques to facilitate quality management. The interpretation of local building and safety regulations may require, for example, minimum dimensions marginally different compared to South African regulations and this could result in project delays.

“A point to consider is whether the building/construction project could be carried out in the ‘conventional manner’ or if it may be preferable to follow a ‘design and build’ option with a local contractor.”

Putlitz says either way, the employer must undertake appropriate feasibility studies on the selection of and/or purchase of a suitable site and/or existing building(s) and obtain geotechnical information and applicable environmental approvals. The employer must also compile a brief or a detailed schedule of project requirements, and, for a ‘conventional’ project approach, appoint professional consultants to prepare designs in accordance with the project brief. The consultants may on the employer’s behalf apply for statutory approval from the local authority including town planning and building plan approvals. Or, for example, in a ‘design and build’ option, the contractors’ consultants may complete tender documentation as part of the procurement process

The employer and the contractor also need to ensure that they understand their respective contractual obligations.

“Assuming the technical performance criteria are dealt with, the financial and other administrative criteria must then be identified and managed. What currency is applicable? How are rates of exchange and export or import of capital dealt with, and what local consumption or other statutory taxes apply? What about profits? Are they to be repatriated to South Africa? And what are the tax implications?

“How is insurance dealt with? If based in South Africa, the insurer may require a higher premium depending on the assessment of the local risk. For example, no local equivalent of the South African ‘Strike-Riot-Civil Commotion’ insurance may be available in some African countries, which will significantly change the employer’s risk profile – and insurance premiums.

“It is important that all design documentation and statutory compliance certificates are filed safely so that they can easily and correctly be retrieved and shared with members of the project team. During the construction process, all members of the project team must comply with the administrative requirements of the SFC – this includes all notices, minutes of site meetings, contract instructions, etc as well as compliance certificates as various trades are commissioned before such service or equipment can be used. The employer must apply for an occupation certificate from the local authority before the completed building may be occupied. Occupation without such certificate is illegal and any damage will not be covered by insurance.

“The maxim that a project is not complete until all relevant paper work has been done is the same throughout Africa. This applies to as-built documentation, all product or service warranties, and operational information to use and maintain a building competently over its lifespan. Therefore, it is important that such information is safely filed where it can easily be retrieved and be passed on to successive owners,” Putlitz adds.


 

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