Starndard legal agreements



Construction Market Development Panel


Tel: 012 343 7136 or perhaps 012 481 9030

Send: 012 343 7153

Email: [email protected] org. za

1 )

Choosing a proper

form of contract for

engineering and construction


September june 2006

Second edition of CIDB document 1010


The Green Paper on Creating a great Enabling Environment for Reconstruction, Growth and Development inside the Construction Industry has a vision for a development industry insurance plan and strategy that stimulates stability, encourages economic growth and foreign competitiveness, makes sustainable job and addresses historic unbalances as it produces new industry capacity. This paper, when considering what is needed to promote new industry capacity and the growing sector calls for, amongst others:




the simplification of deal documents to enable them to be more readily comprehensible, specifically to people whose native language is certainly not English;

the streamlining of payment methods and surety arrangements; plus the continued report on contract documents to ensure that circumstances do not comprise barriers to increased involvement.

It also shows that a partnering approach within the framework of public sector procurement may possibly enhance sector performance.

In order to make procurement reform effective in the manner intended, companies in the engineering and construction industry want, amongst others, to revisit the conventional forms of deal which are utilized. The current strategy of having, likely, as many standard forms of contract as there are exercises in the industry, as well as a considerable number of in-house forms of agreement, neither creates efficiency neither does it enable a concentrated approach to skills training essential for development and growth. This kind of applies to both private and public sector work. Even though the ideal of standardisation using one system of standard forms of contracts for all executive and structure works in South Africa can be, probably, as illogical as it is for each customer to have its own form of contract; a balance must be found among these two two extremes.

2 .

Concerns in lowering the number of types of contract used

The two primary considerations inside the reducing the number of forms of agreement in use in South Africa happen to be:


standardisation; and

Greatest Practice Guide C2: Choosing an appropriate kind of contract for executive and building works Sept, 2005: Edition 2 of CIDB record 1010

Webpage 1


having documents capable of catering for a wide range of customer requirements.

The first stage in any initiative aimed at standardisation is to limit the choice of the forms of deal. The construction market, together with the Interministerial Task Group for Construction Industry Creation, based on an assessment of a range of forms of contract against some criteria (see Annexure 1), drew up a list of documents published by simply four diverse bodies in 2000 to limit the quantity of forms of deal in use1. This list was created to ensure that customers could deliver projects utilizing a wide range of contracting and prices strategies that happen to be based on sound drafting practices. Obviously, varieties of contract which usually apply just to specific subsectors of the sector, eg the roads sector, were not within the list. The recommended varieties of contract happen to be those included in the following number of documents: •




FIDIC (French acronym for International Federation of Consulting Engineers) 1999 General Conditions of Contract for Structure Works (GCC 2004) JBCC Series 2150

NEC3 family of standard contracts

The second stage in standardisation is to offer compatibility between standard forms of contract and also other standard papers used in procurements, eg specifications relating to the scope with the work, tender data and methods of way of measuring and payment. Ideally the...



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