Construction industry urged to recommit to Code of Good Practice to solve current challenges
A group of construction industry stakeholders has urged the industry to return to basics in order to overcome its current challenges successfully. The call was made at a stakeholder meeting initiated by Master Builders Association North, as mandated by a recent sub-contractors’ committee meeting.
The stakeholder meeting consisted of Master Builders South Africa, represented by Mr Roy Mnisi, MBA North, represented by Mr Mohau Mphomela, the South African Property Owners Association (SAPOA), represented by Mr Neil Gopal, and the Association of South African Quantity Surveyors (ASAQS), represented by Mr Yunus Bayat.
“It’s no secret that the construction industry is in crisis, with several of the leading companies either liquidated or in business rescue – clearly there is a need for a period of self-examination,” says Mohau Mphomela, MBA North Executive Director. “It’s essential we overcome our challenges not only for our own sakes, but also for the sake of the country: construction remains one of the biggest potential creators of jobs. According to Statistics SA’s recent Quarterly Labour Force Survey, the sector still accounted for 24 000 jobs and contributed to the modest growth in the number of employed people.”
One of the key issues identified at the meeting is the established practice of making unauthorised amendments to Joint Building Contracts Committee (JBCC) and Master Builders South Africa contract documents. These standard documents are designed to simplify the administration of construction contracts, implement best practices and industry standards, and spread risk equitably across the construction value chain. They represent the consensus view of all industry stakeholders, and build on the accumulated experience and wisdom of these bodies, which are co-signatories of the contracts.
Mr Mphomela says that the practice of amending JBCC and other Built environment contracts to, for example, insert conditions such as “pay-when-paid” puts all players in the value chain at risk. Such practices contribute greatly to the industry’s malaise.
“JBCC and Master Builders contracts are designed to create a fair and standardised business environment, and to ensure that all parties are protected. Amending them is not only bad business practice in the long run, it is illegal,” he notes. “We are seeing the results around us. Unauthorised amendments to these documents, especially payment clauses, should be immediately flagged and reported to the Master Builder Regional Associations, ASAQS and SAPOA.”
Adopting the “pay-when-paid” principle often means, for example, that smaller contractors get paid late or not at all. Most cannot deal with unpredictable cash flows and are forced to shed staff or even go out of business.
Tender procedures were also identified as cause for concern. Although public tenders are by law required to be transparent, this is not enforced. The meeting called for all public tenders to be open to ensure transparency. Conversely, there is no regulation regarding the transparency of private tenders, and therefore no requirement for reporting on why contracts are awarded to particular contractors. In an open market system, contractors are advised to be careful of entering into contracts that expose their companies to low or no margins.
“The various professional and industry organisations all have codes of good practice that spell out the standards expected of their members. If the industry recommits to following these codes and acting ethically, many of these challenges will be reduced,” Mr Mphomela concludes.