Fast building but slow payment becoming the norm in SA warns JBCC
Unreasonable demands for fast-track construction – coupled with unreasonable delays in payment – are two of the major challenges facing the South African building industry at the moment, says Uwe Putlitz, CEO of the Joint Building Contracts Committee (JBCC).
Putlitz went on to say the building industry has drastically changed from a craft-oriented builder whose staff carried out the bulk of the work to one where more work is done by specialist subcontractors often using sophisticated manufacturing and installation techniques – generally completing work faster than only 50 years ago.
“This need for speed and utilisation of outside resources pose new challenges for the building contractor. Training and retaining qualified staff is not easy in an uncertain economy where retrenchments at the end of a project are common as there is not a steady work-flow – largely due to political uncertainty, both locally and internationally.
“Without timeous payment contractors are not going to retain the services of qualified subcontractors for future contracts. Yet prompt payment in the industry remains problematic as many owners/employers simply do not pay on time, and do not honour regular payment commitments in full by the due date. This causes a ripple effect where subcontractors and suppliers are not paid leading to insolvency and unemployment. The Construction Industry Development Board (CIDB) is seeking to manage this problem by introducing best practice guidelines to eliminate ‘pay when paid’ practices in the industry but proper implementation could still take a long time.”
Putlitz says JBCC agreements embody such payment-commitment criteria already. “But agreements can be changed and stipulated payment dates simply be ‘unilaterally’ removed at the negotiation stage. Faced with the prospect of late payment, or no work at all, the other party – usually the subcontractor – will reluctantly have to accept the amendments or simply lose his or her appointment. That’s hardly the definition of a unilateral agreement, but it’s often the case.
“So, sad to say, it is indeed the specialist subcontractor who often struggles to find a regular flow of work … and then to get paid in full, and on time. And yet the building industry continues to ignore the important role of subcontractors and they are treated shabbily. The skill of subcontractors is essential for the industry to perform satisfactorily. Subcontractors deserve to be treated as an integral member of the construction team. It is time that starts to happen,” Putlitz adds.
JBCC is a non-profit company representing building owners and developers, professional consultants, and general and specialist contractors who all provide input for the compilation of JBCC agreements (building contracts) that portray the consensus view of the committee’s members.