Proposed amendments to regulations under the CIDB Act

The Minister of Public Works published a notice in the Government Gazette on May 29 2015 calling for the public to comment on the proposed amendments to the regulations published under the Construction Industry Development Board Act 2000 (CIDB Act).

The proposed amendments to the regulations seek to make provision for the prompt payment of contractors, service providers and suppliers under construction works contracts and construction works related contracts (as defined in the regulations), as well as to make compulsory the referral of disputes under these contracts to adjudication.

Prompt payment

The following changes are sought to be introduced to the regulations under the CIDB Act in relation to prompt payment:

• Rendering unenforceable any provisions in a contract that make payment by a payer (defined as any party to a contract who, in terms of that contract, has an obligation to pay another party to that contract or a contract relating to that contract) to a contractor, service provider or supplier conditional upon payment being received by a third party. Such conditional payment will, however, still be enforceable where, in relation to the payer, a court order to commence business rescue proceedings has been made or the payer has become insolvent.

• A contractor, service provider or supplier will be entitled to progress payment, notwithstanding anything to the contrary contained in the contracts.

• The date from which payment by the payer becomes due and payable is the date stipulated in the contract, provided such date may not be more that 30 days after the date on which the invoice was rendered. Should the payer pay the amount due under an invoice or tax invoice more than 30 days after such invoice was rendered, the payer will be liable to pay interest on such outstanding amount at the repurchase rate determined by the South African Reserve Bank, plus 6%.

• A party to a contract may not withhold payment unless he or she gives effective notice in terms of the regulations of his or her intention to withhold payment, which may be withheld only if there is a reasonable ground in terms of the contract for the withholding of such payment. Should a payee not be satisfied with the reasons provided for the withholding of payment, it must refer such dispute to adjudication.

• Should a payer not pay a due amount in full, and, further, not provide notice for withholding of payment, the payee will have a right to suspend performance of his or her obligations under that contract.

Adjudication

Every construction works contract and construction works related contract must provide for an adjudication procedure.

All disputes under such contracts must be referred to adjudication before arbitration proceedings can be instituted. A party dissatisfied with the decision of the adjudicator can refer such dispute to arbitration, as contemplated in the Arbitration Act, or take such decision of the adjudicator on review, as contemplated in section 6 of the Promotion of Administrative Justice Act 2000.

A decision of an adjudicator will be binding on the parties and must be given effect to, even though either party intends to refer such dispute to arbitration or take a decision under review.

Further, the proposed regulations provide for the appointment of the adjudicator, the powers and duties of the adjudicator, the rights of parties to be represented by lawyers or otherwise in adjudication proceedings, the confidentiality of adjudication proceedings, the period within which the adjudicator must make a decision, the manner in which the adjudicator must make his or her decision, and the effect of the adjudicator's decision.

– Sasha Baker, senior associate, and Ronan Bekker, candidate attorney, Hogan Lovells (South Africa)

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