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GUIDE – CONSTRUCTION CONTRACTS IN SOUTH AFRICA
LAST UPDATED - MARCH 2019
BOWMANS Guide - Construction Contracts in South Africa
32
04 IntroductiontoConstructionContracts
06 TypesofConstructionContracts
11 WorkingwiththeEmployer’sRepresentative
13 SecurityAgainstConstructionRisks
16 DisputeAvoidanceandResolution
19 Usefullinks
20 OverviewofBowmansConstructionTeam
22 KeyContacts
Contents
BOWMANS
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BOWMANS Guide - Construction Contracts in South Africa
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Introduction to Construction Contracts
Construction plays a vital role in Africa’s development, not only in respect of its physical infrastructure, but also in its broader economic and social development. This Guide provides some basic knowledge and understanding in relation to construction contracts, industry standard forms and typical approaches to risk allocation in construction projects.
WHAT IS A CONTRACT?
So,whatisaconstructioncontract?In
basicterms,itisanagreementbetween
anemployer(sometimesreferredtoas
theclient)andacontractortoconstruct,
repair,modify,renovateorevendemolish
somethinginanagreedtimeframe,for
anagreedpriceandtoagreedstandards.
Itshoulddescribe:
• Whatwillbedone;
• Howlongitwilltaketocomplete;
• Howmuchitwillcostandthe
paymentterms;and
• Theconsequencesoffailingtomeet
therequirementsofthecontract.
Onceproperlyconcluded,eachpartyhas
alegalobligationtodothethingswhich
theconstructioncontractspecifies.Like
anycontract,ifabreachoccurs,the
otherpartywillhavecertainremedies,
suchasclaimingforadditionalcosts
causedbythebreach.
ROLE PLAYERS IN THE
CONSTRUCTION PROCESS
Althoughtheconstructioncontract
typicallyonlyhastwoparties,
(theemployerandcontractor),there
areanumberofotherroleplayerswho
contributetotheconstructionprocess.
Theroleplayersaresetoutbelow:
Employer
Professional Team
Requires the construction
work and provides payment
Commissioned to construct the
works or to design/ construct
the works
Settles disputes between
the parties
Acts on behalf of the employer
and may be referred to as
engineer, project manager,
principal agent, etc.
Group of consultants appointed
by the Employer, including
e.g. architect, structural engineer,
cost consultant, environmental
consultant, etc.
Appointed to perform parts of
the design/ works on behalf
of the contractor
Contractor
Subcontractors
Adjudicator/
Arbitrator/ Court
Employer’s
Representative
BOWMANS Guide - Construction Contracts in South Africa
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Types of Construction Contracts
Thetypeofconstructioncontracttobe
usedforaprojectwilldependonvarious
factorssuchas:thenatureoftheworks
tobeexecuted;whetherdesignand
constructionarecombinedorseparated;
thesplitofresponsibilitiesbetweenthe
contractorandtheprofessionalteam;
theapproachtoriskallocation;financing
terms;andmarketpracticeinaparticular
industryorregion.Thissectionofthe
Guidecontainsasummaryofthevarious
procurementstrategiesavailablefora
constructionproject,takingaccountof
thesefactors.Itthenconsiderssome
ofthemostcommonlyusedindustry
standardformcontractsinAfrica.
CHOICE OF PROCUREMENT METHOD
Everyconstructionprojectisunderpinned
byaprocurementstrategywhich
determinesthestructureofthe
contractualarrangements,therolesand
responsibilitiesamongthevariouskey
playersandtheapproachtotheallocation
andmanagementofrisk.Thereare
generallyconsideredtobethreemain
procurementmethods:(i)Traditional
Procurement(ii)DesignandBuild(iii)
ConstructionManagement/Management
Contracting.Partneringandalliancing
basedprocurementmethodsarealso
availablebutarelesscommonlyused,
particularlyinAfrica.
Traditional Procurement
Traditionalprocurement(sometimes
referredtoas“generalcontracting”
or“design-bid-build”)isregardedas
themostcommonlyusedmethodof
procuringbuildingworks.Themain
distinguishingfeatureisthatthedesign
andconstructionprocessesareseparate.
Theemployer’sprofessionalteamwill
designtheworksandpreparethe
tenderdocuments,includingdrawings,
specificationsandbillofquantities.
Contractorsaretheninvitedtosubmit
tendersfortheconstructionoftheproject
onacompetitivebasis.Theemployer
carriesdesignrisk,althoughinsome
projectsthecontractorisresponsiblefor
certaindiscreteelementsofthedesign.
Theemployerwilltypicallyappointa
memberofhisprofessionalteamto
administerthecontract.
Variouspricingmechanismsare
usedintraditionalprocurementbut
themainoptionsare:(i)lumpsum,
(ii)re-measurementand(iii)cost
plus(sometimesreferredtoas
“costreimbursement”).
Lump sum:Asingle“lumpsum”price
fortheprojectisdeterminedbeforethe
workscommence.Thisisanappropriate
optionwheretheworksarewelldefined
atthetimeoftenderandthereisalow
likelihoodthattheemployer’srequirements
willchange.Althoughthepricemayalter
duringthecarryingoutoftheworks
(e.g.duetovariations,provisionalsums,
theoccurrenceofcertain“relevantevents”,
etc.),thispricingoptiontendstogivethe
employerareasonableamountofprice
certaintyattheoutsetoftheproject.
Re-measurement: Thepricefortheworks
isnotdeterminedwhenthecontract
isenteredinto.Itiscalculatedbased
onthe“re-measurement”oftheactual
workcarriedout.There-measurement
calculationisundertakenusingagreed
rates/unitpriceswhichthecontractor
originallytenderedonthebasisofthe
drawingsandbillofquantitiesprovidedby
theprofessionalteam.Asthetotalcostof
theworksisnotdeterminedattheoutset,
employerstendtocarrygreaterriskunder
are-measurementcontract.Itistherefore
suitablewherethereisalackofcertainty
astothevolumeofworkrequired,even
thoughthedesign,specificationand
qualityrequirementscanbereasonably
welldefinedattenderstage.
Cost-plus:Thecontractorisreimbursed
theactualcostsincurredincarryingout
theworks(i.e.labour,plant,materials,
sub-contractors,etc),plusanadditional
feetocoveroverheadsandprofit.This
optionisappropriatewherethescopeof
theworkcannotbewelldefinedatthe
outsetbuttheemployernevertheless
requiresanearlystartonsite.Asthe
contractistypicallyenteredintoon
thebasisofanestimateofthecosts
only,cost-pluscontractsaregenerally
highriskforemployers.Asameansof
incentivisingefficiencyandcostcontrol,
a“targetcost”mechanismissometimes
used,wherebythecontractorandthe
employersharetheriskofcostoverruns/
savingsonapre-agreedbasis.
Design and Build
Thekeyfeatureofdesignandbuild
procurementisthatthecontractor
carriesresponsibilityforboththedesign
andtheconstructionoftheworks,
totheemployer’srequirements.The
approachtothepreparationofthe
designwilldifferfromprojecttoproject,
dependingonthedegreeofinfluencethe
employerwishestohaveoverthedesign
developmentprocess.Forexample,
onsomeprojectstheemployerwill
BOWMANS
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Guide - Construction Contracts in South Africa
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isliableforbadmanagement,planning
andcoordination.Theconstruction
manageristypicallypaidonthebasisof
reimbursablecostsplusamanagement
fee,coveringbothpre-constructionand
constructionphaseactivities.Underthe
ManagementContracting(MC)model,
bycomparison,contractsforthevarious
packagesofworkareenteredintobythe
managementcontractordirectlyrather
thanbytheemployer.
Engineering,Procurementand
ConstructionManagement(EPCM)
contractscanberegardedasavariant
ofCMandMCmodels.Themain
differentiatingfeatureisthatanEPCM
contractorwillundertakedesignand
otherengineeringactivitiesaspartof
hisscopeofservices.Thelevelofrisk
assumedbyanEPCMcontractorin
relationtotheworkswillbedrivenby
projectspecificfactorsbuttypically,the
employerwillseektoincludeincentive
mechanismsintheEPCMcontractto
ensuretheEPCMcontractorhasadegree
ofresponsibilityinrelationtotheproject
programmeandbudget.EPCMmodels
aremostoftenusedinthemining,
petrochemicalandpowersectors.
appointadesignteamtoprepareaninitial,
conceptdesign.Thecontractorwillthen
berequiredtocompletethedesignand
undertaketheworks.Thecontractormay
usehisownin-housedesignersorappoint
externaldesignconsultantsortakeover
theemployer’sdesignteam.
Adesignandbuildcontractwillusually
bebasedonalumpsumprice(withno
billofquantities).Theemployerhas
greaterpricecertaintythanunder
traditionalprocurementbecausethe
contractorisrequiredtodesignandbuild
theworksforanagreedpriceandwithin
anagreedtimeforcompletion.While
adjustmentstothepriceandprogramme
maystillariseduetoe.g.variationsand
theoccurrenceofcertain“relevantevents”,
thereisgenerallylessopportunityfor
contractor’sclaimsunderdesignandbuild
contracts.Thismeansgreaterriskforthe
contractorandthereforeahigherprice.
Engineering,Procurementand
Construction(EPC)contractsaresimilar
todesignandbuildcontractsinthatthe
employerappointsthecontractortocarry
outbothdesignandconstructionbut
theemployerwillhavelessinfluenceover
designandthecontractorwillgenerally
carryagreaterlevelofriskintermsoftime,
cost,qualityandperformance.Forthis
reason,EPCcontractsareoftenreferredto
as“turn-key”contracts.Theyaretypically
usedforengineeringandinfrastructure
projectswhereperformanceandcost
certaintyarethemostcriticalfactorsfor
theemployer.EPCisalsocommonwhere
alimitedrecoursefinancingstructureis
usedtofundaproject.
Construction Management/ Management
Contracting
UndertheConstructionManagement
(CM)model,contractsforthevarious
packagesofworkareenteredintoby
theemployerbutthemanagementand
supervisionofthoseworkpackages,as
wellasthecoordinationofthedesign,
isundertakenbytheconstruction
manager.Theconstructionmanageris
appointedunderaformofprofessional
servicesagreement,withauthorityto
actonbehalfoftheemployerinrelation
tothemanagementoftheproject.
Whiletheemployertakestheriskinthe
performanceofthevariouspackage
contractors,theconstructionmanager
BOWMANS Guide - Construction Contracts in South Africa
10 11
BESPOKE OR STANDARD FORM
CONTRACT?
Oneofthekeydecisionstobemade
bytheemployer,whendesigningthe
procurementstrategyforaproject,is
whetherabespokeorindustrystandard
formcontractshouldbeadopted.
Overtheyears,industrynormsinrelation
toriskallocationacrossthemostcommon
typesofconstructionandengineering
projectshaveemerged.Thishasledtothe
developmentofanumberofinternational
standardformcontracts.Themost
commonlyusedstandardformsinAfrica
areFIDIC,NECand(inSub-SaharanAfrica)
JBCC.Oftenemployerswillelecttouse
astandardformcontractratherthan
preparingabespokecontractbecause
usinganindustryrecognisedsetofterms
makestheprocurementprocessmore
efficientandcompetitive.
InternationalstandardformssuchasFIDIC
andNEChavebeenaroundfordecades.
However,theyhaverecentlybeenupdated
inresponsetoindustryfeedback.
ThelongawaitednewFIDIC“Rainbow
Suite”waslaunchedinDecember2017.
ThechangestotheRed,Yellowand
SilverBooksareprimarilydesignedto
makethecontractsmorebalanced,
comprehensiveandprescriptive.They
alsoplacegreateremphasisondispute
avoidanceratherthandisputeresolution.
ThenewNEC4suiteofcontractswas
launchedinJune2017.Thechanges
bringmoreclarity,simplicityand
flexibilitytothestandardterms.New
measures,likevalueengineeringand
earlycontractorinvolvementwerealso
introducedtoenhancecollaboration
betweenemployerandcontractor.
Likethe2017FIDIC,thereisalsomore
emphasisondisputeavoidance.
Working with the Employer’s Representative
Employersusuallyelecttoworkthrough
arepresentativewhomaybeanarchitect,
anengineer,aprojectmanager,aquantity
surveyororanyotherqualifiedthird
party.Theemployergiveshisorher
representativetheauthoritytoactonhis
orherbehalfintheexecutionofcertain
provisionsofthecontract.
Therepresentative’sroleistooverseeand
administerthecontractandtheproject
itself.ItisimportantfortheContractor
todevelopagoodworkingrelationship
withtheemployerand/ortheemployer’s
representative,asthepartieswillbenefit
fromarelationshipbasedontrustand
co-operation.
Importantly,theemployer’srepresentative
isusuallythepersontowhomallnotices,
invoicesandclaimsmustbesubmittedand
isthepersonwhodeterminestheamounts
duetothecontractor.
Therearesomeimportantstepsa
contractorcantaketodevelopthis
relationshipsuchas:
• Reportallproblemstotheemployer,
throughtheappointedrepresentative,
asquicklyaspossible.Thisisvery
importantiftheproblemscouldcause
costincreasesordelaycompletion.
• Handoveringoodtimeallnotices,
advices,timedelayclaims,bad
weatherreports,certificatesfor
payment,invoices,listsofworkers,
planton-site,etc.
• Makesureclaimsaresubmitted
instrictcompliancewiththe
applicablecontractualprovisions,
inwritingwithintheperiodstated
inthecontract.Ifaclaimcannotbe
preparedwithintherequiredperiod,
extensionsshouldbesoughtprior
totheexpiryoftheperiod.Ifno
extensionisgrantedorcommunicated
priortotheexpiryofthetimeperiods,
theclaim(evenifnotfullycomplete)
andalldocumentsavailableatthat
timeshouldbesubmitted(explaining
BOWMANS Guide - Construction Contracts in South Africa
12 13
ifpossiblewhytheclaimcannot
becompletedandsubmittedon
time),withanyfurtherdocuments
andinformationrequiredtobe
providedthereafter.
• Onlymakereasonableclaimsfor
additionalpayment.Inflatedor
frivolousclaimswillberejected.
• Carryoutallwritteninstructions.Ifthe
instructionsaredifficultorimpossible
toexecute,talktotherepresentative
whoissuedtheinstructionsassoonas
possibletoseeifitcanbedoneina
differentway–donotdelay.
Ifthecontractordisagreeswithany
decisiontakenbytheemployer’s
representative,thecontractorshould,as
soonaspossible,givenoticeofadispute
intermsofthecontracttotheemployer’s
representative.Insomecontractstime
barsarealsoinplaceforwhenadispute
shouldbedisclosedandsubmittedtoan
adjudicatororarbitrator.Thecontract
shouldalwaysbestudiedtoseeifsuch
timebarsapply,andtoensurethatthey
arefollowed.
It is important for the contractor to develop a good working relationship with the employer and/or the employer’s representative, as the parties will benefit from a relationship based on trust and co-operation.
Security Against Construction Risks
Themanagementandmitigationofriskis
acorefeatureofanyconstructionproject.
Thecontractitselfwillallocatethevarious
risksbetweentheparties,basedonthe
generalprinciplethatthepartybest
abletocontrolormanageariskshould
carryresponsibilityforit.However,there
arepartiesexternaltothecontractwho
arealsolikelytoplayaroleinproviding
securityagainsttheserisks,including,
forexample,theparentcompanyof
thecontractor,majorsub-contractors,
insurancecompanies,banksandother
financialinstitutions.
Ingeneralterms,therearethreemain
typesofsecurityagainstconstruction
risks:(i)contractualformsofsecuritysuch
asdelayliquidateddamages,performance
liquidateddamages,retentions,etc;
(ii)insurancepolicies;and(iii)security
instrumentsissuedbythirdpartiessuch
asguarantees,bondsandlettersofcredit.
Inmostcases,allthreeofthesetypesof
securitywillbeadoptedaspartoftherisk
managementstrategyforaprojectbut
thelevelandvalueofthesecuritywillvary
dependingonthenatureandcomplexity
oftheproject,thefinancialstanding
oftheparties,pricing/commercial
considerationsandmarketpractice.
Liquidated damages
Liquidateddamagesprovideanemployer
withacontractualremedyagainstthe
riskofdelayandperformancefailure.
Theessentialcharacteristicofliquidated
damagesisthatthepartiesagree,in
advance,apredeterminedsum(or
meansofcalculatingthatsum)payable
bythecontractortotheemployerifa
particularbreachoccurs.Incommon
lawjurisdictions,thereareruleswhich
limitthescopeofliquidateddamages.
Insuchinstance,anemployerwould
notberequiredtoproveitsdamagesas
withanormaldamagesclaim,butsimply
thatthebreachoccurred.Inordertobe
enforceable,theymustbedesignedto
fairlycompensatetheemployerforthe
breachandnotactasapenaltyagainst
thecontractor.Inaddition,theymustbe
areasonablyforeseeableconsequenceof
thebreach.
Liquidateddamagesaremostcommonly
associatedwithdelaystothecompletion
oftheworks.Theyareusuallycalculated
dailyorweeklyandwillbecappedto
apercentageoftheoverallvalueof
theworks.Mostcontractswillspecify
thattheliquidateddamagesarethe
BOWMANS Guide - Construction Contracts in South Africa
14 15
soleremedyfordelay,savethatthe
employer’srightstoterminatethe
contractwillbepreserved.
Inprojectsinvolvinganoutputbased
specification,suchasthoseintheenergy,
water,waste/wastewatersectors,
theremayalsobeliquidateddamages
payablebythecontractorwherethe
requiredperformancelevelsspecified
intheemployer’srequirementsarenot
achieved.Thesetypesofregimesare
designedtorecognisethatwhilethe
contractorhasdeliveredafunctioning
plant/facility,theemployershould
stillbecompensatedforthelossof
expectedoutput.
Insurance
Manyofthemajorrisksinvolvedin
constructionprojects,intermsofloss,
damageandliability,canbeinsured
against.Themaintypesofinsurance
policieslikelytoberequiredinclude:
constructionallrisksinsurance;public
liabilityinsurance;employer’sliability
insurance;professionalindemnity
insurance;politicalriskinsurance;
environmentalinsurance;delayinstartup
oradvancelossofprofitinsurance.The
contractwillsetoutwhoisresponsible
fortakingoutandmaintainingeachof
therequiredinsurancesandatwhat
minimumlevelsofindemnity.Itwillalso
specifywhichoftheprojectparticipants,
withaninterestintheworks,shouldbe
namedinsuredonthepolicies.Given
thecriticalityoftheinsurancesasarisk
mitigationtoolandtheexpenseinvolved
inpurchasingcoverfromreputable
insurancecompanies,itisadvisableto
takespecialistadvicefromaninsurance
brokerwithgoodknowledgeofthe
localand,insomecases,international
insurancemarkets.
Security instruments
Dependingonthefinancialstanding
ofthecontractor,theemployermay
requireaparentcompanyguarantee
tobeprovidedasameansofbacking
upthecontractor’sobligations,both
intermsofperformanceandpayment.
Parentcompanyguaranteesare
consideredparticularlyusefulasa
meansofsecuringthecontractor’s
obligationtopaycompensation
followingtheearlyterminationofthe
contract,wherethesumsinvolvedare
likelytobesubstantial.
Inaddition,employersmayseeka
guaranteeorbondfromabankor
otherfinancialinstitutiontosecure
thefulfilmentofthecontractor’s
obligations.Theseinstrumentscanbe
on-demandorconditionalinnatureand
willsecureanemployeragainstcertain
non-performancesbythecontractor
underthecontract.Itisimportantto
rememberthatthesubstanceofthe
instrumentwilldetermineitsnature
andscope,i.e.whatitsaysonthetinis
notnecessarilywhatthetincontains.
AlthoughorganisationssuchasFIDIC
andtheICC(responsiblefortheUniform
RulesforDemandGuarantees)have
attemptedtostandardisetheterms
ofsuchinstruments,itisstillthecase
thatthesedocumentsareoftenheavily
negotiatedandthatthereis,insome
jurisdictions,alackofuniformpractice
inthisarea.Itisthereforeessentialthat
bothemployersandcontractorstake
specialistlegaladviceinrelationto
thesedocuments,particularlywhere
guaranteesarebeinggivenbyalocal
bankinrespectofaforeigncontractor,
inwhichcaseacounter-guaranteewill
begiveninfavourofthelocalbankby
thecontractor’srelationshipbankin
anotherjurisdiction.
Given the criticality of the insurances as a risk mitigation tool and the expense involved in purchasing cover from reputable insurance companies, it is advisable to take specialist advice from an insurance broker with good knowledge of the local and, in some cases, international insurance markets.
BOWMANS Guide - Construction Contracts in South Africa
16 17
Dispute Avoidance and Resolution
Mostinternationalstandardform
constructioncontractsprovidefora
disputeresolutionmechanism,including
theproceduretobefollowedwhena
disputearisesbetweenthepartiestothe
contract.Ifpartiesconcludeabespoke
constructioncontract,itisrecommended
thatthepartiesprovideforadispute
resolutionclauseandagreetoadispute
resolutionmechanismthatwillbe
bestsuitedconsideringthenatureof
constructionprojectanddisputesthat
mayarisebetweentheparties.
Contractual Claims procedure
Eachofthestandardformsof
constructioncontractprovidesfora
specificprocedurethattheparties
shouldfollowifeitheroneoftheparties
believesitisentitledtoclaimreliefin
termsofthecontract.Generallythe
partythatbelievesanevententitlesitto
reliefunderthecontractwillberequired
todeliveranoticetotheopposing
contractparty.Thenoticeusuallyhasto
providedetailsoftheevent,theeffect
ordamagecausedbytheevent,andthe
reliefwhichthepartyseeksasaresultof
theevent.Often,forthecontractor,such
noticemayhavetobeissuedwithina
prescribedperiodoftime,failingwhich,
thecontractormayforfeitanyentitlement
toreliefunderthecontract.Thesetypes
oftimeprescriptionsoftendonotapply
toanemployer’sclaim,althoughrecent
developmentsinsomeoftheinternational
standardformshavepavedthewayfora
morebalancedclaimsprocedure.
Wherethecontractorhasissuedanotice
ofclaim,hewillgenerallyalsoberequired
todeliverdetailsoftheclaimwithina
specificperiodoftimeafterdeliveryof
thenotice.Aswithdeliveryofthenotice
ofclaim,theparticularsofclaimmayalso
besubjecttoatime-barprovisionwhere
itissubmittedoutoftime.Theparticulars
ofclaimneedtoshowsupporting
evidencefortheclaim,includingdetails
onthequantumoftheclaimand,often,
arevisedprogrammeofworkswherethe
claimisoneforextensionoftime.
Thenoticeandparticularsofclaimare
submittedtotheemployer’sindependent
contractsmanager(referredtomostly
as“Engineer”,“ProjectManager”or
“PrincipalAgent”)fordetermination
withinaspecifiedperiodoftime.
Determination
Thecontractsmanagerwillmake
adeterminationuponassessment
oftheparticularsofclaim,which
determinationwillbeimplemented
upondetermination.Adetermination
formoneyis,mostly,giveneffecttoin
thenextpaymentcertificatethrough
inclusionofanadditionalsumdueto
eitherthecontractorortheemployer.
Adeterminationforadditionaltimeis,
mostly,giveneffecttobyextendingthe
dateforcompletionandbyacceptance
ofarevisedprogrammeofworks.
Aclaimfordelaydamagesbythe
employermaybeimplementedassoon
asthecompletiondatehaspassedand
thecontractorhasnotyetcompleted
theworks.Thecontractsmanagermay
deductthedelaydamagesfromany
amountduetothecontractorinthenext
interimpaymentcertificate.
Thedeterminationwillincludeafinding
onthemeritsoftheclaimandtherelief
soughtbytheclaimingparty.
Somecontractsprovidethattheclaimmay
beresolvedbydisputeresolutionwhere
thecontractsmanagerdoesnotdetermine
samewithinaprescribedperiod.The
claimmay,likewise,bereferredtodispute
resolutionwhereeitherpartyisdissatisfied
withthedetermination,subjecttonotice
obligations.Somecontractsprovidethat
suchnoticeofdissatisfactionbegiven
withinaprescribedtimeperiod.
Dispute
Subjecttotheprovisionsofthecontract,
thepartiesmayresolveadisputeby
mediation,adjudication,arbitration,
litigationoranyothermechanismset
outbythecontract.
Certaincontractsrequiretheparties
tofirstendeavourtoreachamicable
settlementofthedisagreementwithina
specifiedperiodoftime(usuallybetween
seniormanagementrepresentativesof
theparties),failingwhichthepartiesmay
proceedwithformaldisputeresolution
procedures.Mostly,acontractwould
provideforresolutionofadisputefirstlyby
BOWMANS Guide - Construction Contracts in South Africa
18 19
adjudication(eitherbyasingleadjudicator
orbyaDisputeAdjudicationBoard),and
thereafterarbitration.
Somecontractsprovideforanadjudicator
orarbitratortobeagreedbetweenthe
partiesatthetimethecontractisentered
into.Ifthisisnotdone,thecontractwill
provideaprocessforthepartiestoagree
anadjudicatororarbitratorwhenadispute
arises.Failingagreement,anadjudicatoror
arbitratorwillbeappointedbyanominating
body(whichisagreedbetweentheparties
atthetimeofcontractconclusion).
Thepartywhowishestocommence
withaformaldisputeresolutionprocess,
willberequiredtomakeareferraltothe
adjudicatororarbitrator(onceappointed).
Thecontractsoftenprovideatimeperiod
withinwhichareferraltoadjudicationor
arbitrationshouldbemade.Thereferral
shouldsetouttherelevantbackgroundand
detailoftheclaimandsetouttheclaim(s)
requiredtoberesolved.Anadjudicatoror
arbitratormayonlymakedeterminationson
disputesreferredbytheparties.
Useful links
• Association of Arbitrators
(Southern Africa)
www.arbitrators.co.za
• Department of Trade and Industry
www.thedti.gov.za
• Tokiso Dispute Settlement
(Pty) Ltd
www.tokiso.com
• Arbitration Foundation of South
Africa (AFSA)
www.arbitration.co.za
• United Nations Commission on
International Trade Law (UNCITRAL)
www.uncitral.org
• International Chamber of
Commerce (ICC)
www.iccwbo.org
• London Court of International
Arbitration (LCIA)
www.lcia.org
• Construction Industry
Development Board
www.cidb.co.za
• Council for the Built Environment
www.cbe.org.za
• South Africa Federation of Civil
Engineering Contractors
www.safcec.org.za
• FIDIC
www.fidic.org
• NEC
www.neccontract.com
• JBCC
www.jbcc.co.za
• SCL
www.scl.org.uk
• Society of Construction Law
for Africa
www.sclafrica.org
BOWMANS
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Guide - Construction Contracts in South Africa
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Weareproudtobeoneofthemost
recognizedfullserviceconstructionteams
inthesectorinAfrica.
Weassistclientsthroughouttheproject
lifecycleofcomplexinfrastructureand
constructionprojects.Thisincludesall
stagesofdevelopmentanddeliveryand
extendstofinancinganddisputesunder
allformsofconstructioncontracts.
Wehaveawealthofexperiencethatcuts
acrossmultiplespecialistsectorsincluding
energy,manufacturing,mining,realestate,
transport,telecomsandutilities.
Ourthoroughunderstandingofvarious
standardformsofcontracts,including
FIDIC,theNECandtheJBCC,allowsus
tohelpclientsmanagetheirriskintandem
withtheirriskappetites.
Ourdisputesexpertiseextendsfrom
mediation,arbitrationandlitigation
tonegotiatingandstructuringmajor
settlementagreementswhichoften
dealwithinterconnectedandcomplex
commercialandregulatoryissues
relatedtothepublicsector.
Ourrecentexperienceincludesassisting
SouthAfrica’sprincipalenergyutility
withallaspectsofitstwonewflagship
coal-firedpowerplants;advisingan
Asianportauthorityonthefirstpublic
privatepartnershipportinEastAfrica;
andrepresentinganimportantmember
ofChina’srealestateindustrybeforethe
NationalEnvironmentalTribunalagainsta
thirdpartyseekingtohaltthedevelopment
ofitsAfricanrealestateheadquartersin
Kenya.Inaddition,wearepresentlyadvising
onthedevelopmentandconstructionof
EastAfrica’sfirstcarrierneutraldatacentre,
basedonasuiteofFIDICcontracts.
ThroughourfootprintinAfrica,includingthe
OHADAregion,andourstrongrelationships
withfirmsonthegroundinotherkey
jurisdictions,wearewellplacedtoprovide
cross-borderadvicespanningthefullrange
oflegalservicestoclientsdoingbusiness
inthissector.
Ourspecialistconstructionandengineering
lawyersserveclientsrangingfrom
majorcontractorstopromoters,leading
developers,funders,purchasers,tenants
andoccupiersamongothers.
Overview of Bowmans Construction Team
Ourspecialistservicesincludeassisting
with/advisingon:
• Applicablelegislationacrossthe
Africancontinent
• Theentirespectrumofconstruction
andengineeringlawandtherelated
regulatoryenvironment
• Variousstandardformsofcontracts,
includingFIDIC,theNECandtheJBCC
• Constructionaspectsoffinancing
agreements,purchaseagreements,
PPPprojectagreementsand
agreementsforlease
• Operationandmaintenanceand
facilitiesmanagementagreements
oncompletedprojects
• Constructionandengineering
disputesincludingmediation,
arbitrationandlitigation
BOWMANS Guide - Construction Contracts in South Africa
22 23
Key Contacts
ANDREW VAN NIEKERK
HeadofConstruction
Johannesburg,SouthAfrica
T: +27116699370
ALEX NJAGE
HeadofRealEstateandConstruction
Nairobi,Kenya
T:+254202899000
LIZE-MERÉ LUDICK
Partner
Johannesburg,SouthAfrica
T: +27116699473
TUMISANG MONGAE
Partner
Johannesburg,SouthAfrica
T:+27116699530
STEPHANIE MCDONALD
Consultant
CapeTown,SouthAfrica
T: +27214807819
To view profiles of our lawyers,
please visit www.bowmanslaw.com
Cape Town, South AfricaT:+27214807800
Dar es Salaam, TanzaniaT: +255768988640
Durban, South AfricaT: +27311091150
Johannesburg, South AfricaT: +27116699000
Kampala, UgandaT: +256414254540
Lilongwe, MalawiT: +265990318152
Lusaka, ZambiaT: +260962275329
Moka, MauritiusT: +23052980100
Nairobi, KenyaT: +254202899000
Follow us on Twitter:@Bowmans_Law
www.bowmanslaw.com Alliance Firms:
Aman Assefa & Associates Law Office, Addis Ababa, EthiopiaT: +251114702868
Udo Udoma & Belo-Osagie, Lagos, NigeriaT: +23412774920-2,+23412719811-3
