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Avoiding the pitfalls of tendering

The May technical meeting of the South African Institute of Refrigeration and Air Conditioning (SAIRAC) Port Elizabeth centre was led by Lucas Bowles, East/South Cape regional director of the Electrical Contractors’ Association [ECA (SA)], who presented on the pitfalls of tendering.

The meeting took place on 25 May at the Westview Club in Port Elizabeth, where Lucas Bowles of ECA (SA) presented the following tips to consider when tendering.

Tender stage
What type of contract are you tendering to? There is a difference between the various contracts – JBCC, NEC, GCC and domestic. If an item in the bill of quantities (BOQ) states supply, install and commission – you only get paid after commissioning in terms of the NEC contract.

  • If it’s a domestic contract, stipulate in your tender that you are working to JBCC standards.
  • What are the insurance excesses that you may be liable for?
  • Is there a local labour content that you need to comply to – Small, Medium and Micro-sized Enterprises (SMME) content? Are there set wage rates?
  • Where is the contract in relation to distance and time from the office?
  • Is your insurance company going to have an issue if you work in informal settlement areas?
  • Is the health and safety a standard plan or are there client specific requirements?
  • Is there a minimum wage rate that you may need to comply with that is higher than the prescribed NBCEI rates?
  • Who is the builder? If unknown, stipulate that you want a payment guarantee. You can always use it as a bargaining tool with regards to retention and guarantees.
  • What guarantees is the builder/client going to expect? Retention terms – Government Certificate of Competency (GCC) is 12 months after completion.
  • What period will you have to complete the contract? Check that it is realistic. Also check the penalty terms.
  • Is there a professional team and who are they? Preliminary and general costs – often individual items are asked for in the BOQ and method Type A or B to adjust preliminaries.
  • Look for the payment terms.

On award of tender

  • Ask for a payment guarantee. Chances are slim of actually getting this, but it is worth a try.
  • Offer a construction guarantee rather than getting caught up with retention. If possible, and consider the feasibility thereof.
  • Find out what dates your claims need to be submitted and what the process will be.

Claims

  • Put in a first claim early in the contract to get over any delays that may occur in registering on the client’s system.
  • Ensure that the claims are on time and in a format that the client/consultant wants.
  • Insist on a payment certificate advice from the builder/consultant.
  • Insist on a payment certificate from the principal agent, if applicable.
  • A payment certificate is equivalent to a cash cheque.
  • By insisting on a payment certificate/advice from the PA you will be made aware when retention payments are released.

During the contract

  • Ensure that you adhere to the programme.
  • If you are going to have a delay due to late delivery of material notify the principal contractor/client in writing so that you can avoid having a delay claim against you later.
  • If the principal contractor is causing delays to your progress, write to them, informing them thereof.
  • If snags or possible defects are pointed out to you by principal contractor or consultant, rectify immediately before you end up damaging work of another contractor and have contra claims against you.
  • If you are asked to carry out extra work ensure that you submit pricing as soon as possible so that your contract value can be adjusted – or extra time added to the contract. Ensure that you receive a variation order for the extra work.
  • If there is a chance that extra work could cause damage to the works of another contractor ensure that you submit, your concerns in writing to prevent contra charges.

Payment

  • If your payment is late notify the client/principal contractor immediately in a format that protects you.
  • If the payment problem persists notify the professional team and request direct payment. If you don't get direct payment at least the client can ask for proof of payment monthly from the principal contractor under JBCC.
  • Ensure that you issue written notification with regards to outstanding payments before you are issued with a contract instruction. Issue the notification as a suspension of works. In terms of JBCC the principal contractor cannot terminate your contract whilst he is in material breach of the contract.
  • When issuing the notice you can at the same time request a payment guarantee before lifting the suspension due to non-payment or, depending on your contract, request direct payment from the client.

General

  • The JBCC contract is a comprehensive document that has committees updating and changing requirements as time and court cases go by.
  • The principal contractors also have representation on the JBCC Technical Committee and there is no reason why they should not issue sub-contractors with documents such as payment advice notices as prescribed in the JBCC contract.
  • Ensure that you receive payment advice notices. The ECA (SA) delegates on JPC in the East / South Cape have again reminded the professional parties to ensure that their members adhere to this requirement always.
  • Where possible insist that you sign an unaltered document. Unilateral changes to the standard contract document is normally not in your favour as sub-contractor and stands to benefit only the principal contractor.

By expanding the list and sharing experiences with other members we all learn together and in so doing minimise the risks which all members are exposed to daily in a contractual relationship between principal and subcontractor.

Download the presentation (pdf)

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