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VAT201’s Cidb

HomeVAT201’s Cidb

THE PLIGHT OF SUBCONTRACTORS

Sub contract work contributes to the micro & macro economics of the population by involving small & upcoming  small construction firms.

For this reason, the CIDB as well as the government frown upon principal contractors who come up with sub contractor agreements that are not favorable to the sub contractor relationship.

For this reason, the CIDB recommends and sets standards and best practices for sub contractor agreements which can be used by principal party issues out sub contractor work.

We have created their links below and they can be downloaded and customized to your needs accordingly.

CIDB RECOMMENDED SUB CONTRACTOR AGREEMENTS

  • Sub contractor labor only – unskilled
  • Sub contractor labor only – engineering skills
  • Standard professional services contract
  • Supply of goods (Simple contract)
  • Supply of goods (Complex contract)
  • General conditions of purchase

DISALLOWED CONTRACTOR AGREEMENT TERMS

  • Pay when paid conditions
  • Unreasonable retention percentages
  • Unreasonable retention periods
  • Complex & expensive dispute resolutions without alternative dispute resolutions such as arbitration and litigation
  • Any terms that exceed those already contained in the principal contract

CONCLUSION OF ABOUT SUB CONTRACT AGREEMENTS

Sub contractor agreements entered into with other service providers, must be fair & equitable in a business sense. They must represent a mutual benefit between the parties and must be generated with legal terms that don’t go against the law. Sub contractor agreements drawn up without the above in mind, could put the principal contractor in problems. Sub contracts are normally viewed as a means by which the principal contractor can use the sub contractors financial, labour and time resources at an interest free basis and this can create abuse by the system. In this case, the South African courts have a tendency to determine if the sub contractor agreement entered into had a realistic bona fide mutual benefit for both parties. Because the sub contract agreement is normally drawn up by the principal contractor, the South African courts will try to look for those terms that could have been unfavourable to the contractor and will try to rule in favour of the sub contractor.

Therefore, it is very important that the sub contract entered into is just fair & equitable.

With this in note, we therefore, encourage our clients to use the CIDB recommended sub contractor templates placed above.

Users can also go for additional resources at the South African Federation of Civil Engineering Contracts (SAFCEC) or the Buiding federation of South Africa as well as the Joint Buildings Contract Committee.

Difference between a subcontract & a joint venture

There are so many differences between a sub contract & a joint venture, however, in this paragraph, I will just discuss the 2 main distinctive differences.

The main difference between a joint venture and a sub contract, lies in the sharing of managerial, financial, skills and liabilities of the contract. In a sub contractor agreement, the sub contractor will not directly share in the liabilities, losses and managerial conduct of the principal contractor. For example, a sub contractor might be issued to supply air conditioners only. Once the sub contractor fulfils his or her terms of the contract, he or she will hopefully get paid and get out of there.

In a joint venture agreement, the other party to the agreement, is available throughout the duration of the contract, from beginning to end.

Another distinctive feature of the joint agreement, is that if 2 or more partners registered on the CIDB form a joint venture,  they can bid for a higher CIDB grade contract, whereas a sub contractor agreement has no bearing on your CIDB level whatsover. Furthermore, a sub contractor does not have to be registered or to be in good standing, whereas, a joint venture formed for the purposes of securing,a higher CIDB grading, shall need to be registered with the CIDB.

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