JBCC GUIDE TO COMPLETION AND PAYMENT (A SELECTION)

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JBCC

®

_GUIDE

_{TO COMPLETION AND PAYMENT (A SELECTION)}

JBCC® Principal Building Agreement (Edition 6.2 - May 2018)

JBCC® N/S Subcontract Agreement (Edition 6.2 - May 2018)

JBCC® Minor Works Agreement (Edition 5.2 - May 2018)

CONTENTS 1

EXPLANATORY NOTES AND INSTRUCTIONS 2

COMPLETION Waiver of Contractor’s Lien

Certificate of Site Possession

Contract validity period

1.0 INTERIM COMPLETION 6

Construction period

Certificate of Interim Completion

2.0 PRACTICAL COMPLETION 8

Construction period

Certificate of Practical Completion - PBA

3.0 FINAL COMPLETION 12

Contract validity period

Certificate of Final Completion – PBA

4.0 SECTIONAL COMPLETION 15

5.0 LATENT DEFECTS LIABILITY PERIOD 16

Latent defects liability period

PAYMENT 6.0 INTERIM and FINAL PAYMENTS 18

7.0 RECOVERY STATEMENT- PBA 20

8.0 PAYMENT CERTIFICATE - PBA 22

9.0 PAYMENT NOTIFICATION - PBA 24

10.0 RECOVERY STATEMENT - NSSA 26

11.0 PAYMENT ADVICE - NSSA 28

12.0 RECOVERY STATEMENT – MWA 30

13.0 PAYMENT CERTIFICATE – MWA 32

14.0 ADVANCED PAYMENT 34

Example calculation for Advance Payment

–

PBA + NSSA

INTEREST 15.0 INTEREST CALCULATIONS 35

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EXPLANATORY NOTES AND INSTRUCTIONS

DISCLAIMER

The purpose of this publication is to give guidance on the most effective application

of the provisions of the JBCC May 2018 agreements. This guidance is given in good

faith. JBCC disclaims all liability for any loss, damage or expense that may be incurred

in using this guide

__________________________________________________________________________

Introduction

This selection from the composite and updated guide by the JBCC® serves as a desktop reference manual for consultants and contractors alike. It seeks to simplify the tendering for and the administration of the JBCC® building agreements and to avoid/minimise disagreements arising from poor contract administration - in the interests of standardisation of documentation and good practice in the building industry. This selection from the guide has been prepared to further promote the understanding of the abovementioned objectives and should prove to be an important aid in:

 Contract educational and training courses

 Fostering good and consistent management by all concerned

 Clearly defining and identifying the responsibilities of the contracting parties

 Defining notice periods and time bars required to protect the parties against prejudice or error

 Setting standard methodology for dealing with contractual responsibilities and obligations

 Ensuring the maintenance of the independent duty of the principal agent to act fairly between the parties The JBCC® agreements are recommended/suitable for building projects and the suite consists of types of agreements for larger and smaller projects to suit different circumstances. These are the Principal Building Agreement (PBA), the N/S Subcontract Agreement (NSSA) and the Minor Works Agreement (MWA) and they are available from the vendors listed on the website jbcc.co.za or online from ‘Contracts on Demand’

How this guide is structured

Completed ‘waiver of the contractor’s lien’ and ‘certificate of site possession” forms

The ‘completion’ process is described in five stages with completed certificates of interim, practical and final

completion of the works as a whole or in sections. The concept of ‘latent liability’ of the contractor is explained in detail

Aspects of the ‘payment’ process are described in notes and illustrated with completed payment and related certificates supplemented by the calculation of interest and the CPAP

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The contractor waives in favour of the employer any lien or right of retention that is or may be held in respect

of the works to be executed on the site

This waiver shall only come into effect on provision by the employer of a security for payment in fulfilment of

obligations in terms of the identified agreement

For and on behalf of the contractor who by Signature of Witness signature hereto warrants such authorization

Waiver of the Contractor's Lien

for use with the:

Principal Building Agreement

Edition used: Ed 6.2 May 2018

Minor Works Agreement

Edition used: N/A

Contractor

_{Defect-proof Builders}

Employer

_{ABC Developments}

Works

_{Cosy Flats}

Site

₉_{Drummer Street, Symphony Village…}

AGREEMENT

®

This done and signed at

Symphony Village

Date

2019-02-01

Name of Signatory

Peter World

Capacity

CEO

Contractor

Defect-proof Builders

Street Address

22 Straus Avenue, Symphony Village…..

Code

0865

Postal Address

Private Bag 12, Symphony Village

Code

0222

E-mail

Mobile

+27765643333

Fax

N/A

Telephone

+277778088

JBCC® PBA or MWA Waiver of Lien © Aug 2019

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®

Certificate of Site Possession

for use with the:

Principal Building Agreement

Yes

Minor Works Agreement

No

PROJECT DETAILS

Works

Site

Employer

Contractor

Principal Agent

Agent

Note: A professional Land Surveyor may be appointed to perform this function

The following particulars of the site were pointed out to the contractor by the agent Pegs

Benchmark

Other features

Information attached hereto:

This certificate records the hand-over of the site to the contractor for the purpose of constructing the works in

terms of the agreement. A copy of this certificate shall be provided to the contractor

Ed 6.2

Cosy Flats

Erf 346 Symphony Village

ABC Developments

Defect-proof Builders

Design Services Unlimited

Star Surveys-Peter Straight

NW corner GPS: S25 23.096' E30.395'

Stormwater catchpit, Dvorak Street

Fig tree ("F" on Site Plan) behind building to be preserved

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CONSTRUCTION PERIOD

(PRIVATE)

 After ‘practical completion’ the works can be used for the intended purpose by the employer, subject to the issue of “occupation certificate” by local authority

 After practical completion the contractor is not obliged to execute any further contract instructions except those relating to the completion of outstanding work

CONSTRUCTION PERIOD

(PUBLIC)

5 YEAR

LDLP

DLP

90 DAY

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 Interim Completion applies only in the N/S Subcontract Agreement

 The intended date for practical completion may be revised by the PA

 Where the (revised) date for practical completion is not met, the contractor may be liable for penalties to the employer

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The period to rectify items on the List for Completion and to attend to defects that become apparent up to the end of the defects liability period (DLP)

The period for making good latent defects that appear up to the end of the latent defects liability period (LDLP)

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COMPLETION

INTRODUCTION

All JBCC

®

agreements follow the same procedures to achieve Interim, Practical and Final Completion. The procedures described in the JBCC

®

agreements to achieve each of the three degrees of completion must be applied strictly to minimise disagreements later. Other than payment, completion is the most important aspect of the agreement and therefore no “short cuts” should be taken in certifying any of the degrees of completion. The procedures and time bars applying to completion and to payment must be strictly adhered to by the principal agent and be observed by the parties

1.0 INTERIM COMPLETION

(in terms of the JBCC

®

NSSA only)

1.1 PURPOSE

The contractor generally requires the work of all subcontractors to be completed before the date of practical completion to permit the timeous commissioning of services and general cleaning of the site before relinquishing possession of the site/works to the employer

Note: Stage completion: The contractor and the subcontractor may agree which aspects of the subcontract works must be

completed before interim completion can be achieved in a particular project (only applies in the NSSA)

1.2 SUBCONTRACT CONSTRUCTION PERIOD AND PROGRAMME

▪ The subcontract construction period set by the principal agent in the pre-tender information and stated in the subcontract data

▪ Where the contractor has been appointed at the time of calling for the subcontract tender, the principal agent must consult the contractor in setting the date for interim completion. The contractor and the subcontractor must agree the subcontract programme in harmony with the works as a whole

▪ The parties may agree to vary the start of the subcontract programme and the intended date of interim completion 1.3 ACHIEVEMENT OF STAGE COMPLETIONS AND INTERIM COMPLETION

▪ Criteria for stage completions must be set at the start of the subcontract construction period to avoid possible disputes later ▪ The contractor must inform the principal agent if the assistance of an appointed specialist agent will be required for the

inspection for achievement of interim completion

▪ On achievement of interim completion, the responsibility for the subcontract works passes to the contractor. This does not relieve the subcontractor of his responsibility in respect of defective or incomplete work

1.4 DAMAGES

▪ The subcontractor may be liable for damages to the contractor for the late achievement of interim completion. The subcontractor must be allowed enough time to achieve stage and/or interim completion set by the contractor

▪ Where the subcontractor is prevented from fulfilling obligations due to default of the contractor, other subcontractors or a direct contractor, the subcontractor shall be entitled to damages. Adjustments to the subcontractor’s completion dates are not dependent on the contractor obtaining similar adjustments in terms of the agreement with the employer

▪ The calculation of damages must be shown in the subcontract recovery statement - see page 27

1.5 OPERATING AND INSTRUCTION MANUALS

▪ On achievement of interim completion, the subcontractor shall hand over to the contractor all operating and instruction manuals, guarantees etc. as well as the applicable statutory/regulatory approval certificates (compliance certificates)

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– 90 DAY 5 YEAR

DLP

LDLP

SUBCONTRACT PERIOD

C’s CONSTRUCTION

PERIOD

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 Where S/C is delayed by C and/ or other S/C’s = may claim damages from C  C assesses time claims from S/C; PA

assesses monetary claims

 S/C – product warranties commence on date of PC

 C and S/C agree programme

 S/C gives notice to C for assistance/ inspection by PA/ agent

 PA/ agents direct standard of work and quality of finish

 C inspects S/C’s works, issue list for interim completion and certificate of interim completion

 C revises date of interim completion

 S/C complete late = damages

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2.0 PRACTICAL COMPLETION

2.1 PURPOSE

The principal agent must specify in appropriate detail in the contract data at tender stage what quality of work and degree of completion the contractor must produce to achieve practical completion to limit subjective interpretation thereof. This will vary from one project to another depending on the nature and purpose of the building

The professional consultants and the team of contractors have been appointed to provide the employer with a building that “... can effectively be used for the intended purpose…” Achievement of practical completion is the most important of the various stagesof completion required in terms of the agreement

2.2 CONSTRUCTION PERIOD

▪ The principal agent at the tender stage determines and specifies in the contract data the intended date when possession of the site is to be given to the contractor, and the intended date for practical completion of the whole works, or the intended dates for practical completion where the works is to be completed in sections - but not both!

▪ Where JBCC Agreements are used for public sector works, the construction period is defined in months

• During the construction period the principal agent must “inspect the works, or a section thereof,at appropriate intervals to give the contractor interpretations and direction on the standard of work and the state of completion of the works required of the contractor to achieve practical completion”… and likewise for work by subcontractors

• Any such interpretations and direction given to the contractor may not be construed as approval of any work or component inspected by the principal agent

2.3 ACHIEVEMENT OF PRACTICAL COMPLETION

• “The contractor shall inspect the works to satisfy himself that the specified degree of completion of the works has been achieved” and give timeous notice to the principal agent to inspect the works on or before the anticipated date of practical completion

• The contractor must make provision in his programme (possibly as a sub-programme for the 3-4 weeks before the date for practical completion) for the inspection period required by the principal agent. The principal agent may require reasonable notice of the date(s) when the contractor intends such inspection to take place

• The principal agent and other specialist agents must decide during such inspections if the works is “... substantially complete and can effectively be used for the purpose intended ...”

• Where the degree of completion of the works does not comply with the specifications, the principal agent must forthwith issue a single “comprehensive and conclusive list for practical completion recording the defects and/or outstanding work to be completed to achieve practical completion. The principal agent may not add to this list for practical completion once it has been issued but he can issue a contract instruction at any time where, for example, a water pipe bursts that must be repaired without delay

• The principal agent can issue an ‘updated’ list for practical completion that excludes remedied defects

• Where the degree of completion of the works complies with the specifications, the principal agent must issue the certificate of practical completion and a list for completion

• Whilst other appointed agents may assist in such inspections the issue of the certificate of practical completion is solely the responsibility of the principal agent

• Where the principal agent does not issue the (updated) list for practical completion or the certificate of practical completion within five (5) working days of such inspection, the contractor may give notice to the principal agent to comply within a further five (5) working days - failing which practical completion will be deemed to have occurred on expiry date of such notice

• After certification of practical completion, the employer may impose the penalties stated in the contract data (from the intended or revised date for practical completion until the actual date of practical completion when possession of the site is relinquished to the employer by the contractor). Similarly, the contractor may be entitled to recover damages from a subcontractor or vice versa

• The issue of the certificate of practical completion may not occur before the intended/revised date for practical completion, unless agreed by the parties, as the contractor’s obligation is to hand over the works on the date for practical completion and not earlier

• The principal agent must issue a certificate of practical completion (and later a certificate of final completion) to the contractor for each defined section. The certificate for the last section is for the whole works. Thus, multiple completion dates are applicable to product warranties, the defects liability period and the latent defects liability period

2.4 CONSEQUENCES (On achievement of practical completion): ▪ The (legal) responsibility for the works passes to the employer

▪ The employer is entitled to possession of the works and the sitebut must apply for an occupation certificate from the local authority before the building may be put use

▪ The Contract Works Insurance reduces until final completion, the employer’s building insurance applies ▪ The contractor is not obliged to carry out any contract instruction for additional works

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▪ The contractor is no longer liable for penalties (that may apply before the date of practical completion) ▪ The principal agent must prepare the final account within sixty (60) working days

▪ The value of the Guarantee for Construction (variable) reduces to 4% of the contract sum

▪ The Guarantee for Construction (fixed) expires and the payment reduction reduces to 2,5% of the contract sum ▪ The Guarantee for Payment remains valid until the final payment has been made by the employer

▪ The contractor becomes entitled to compensatory interest (PBA only)

2.5 PRACTICAL COMPLETION CRITERIA (source: Stanley H Segal - Segal Architects)

The principal agent must specify at tender stage in the [CD] or in the preliminaries document any aspects of the works that do not have to be ready for practical completion to be certified. Such items must be noted on the list for completion issued concurrently with the certificate of practical completion. Other buildings to be described by the principal agent in the [CD] when preparing the tender enquiry document if not listed hereunder

2.5.1 RESIDENTIAL - PRIVATE DWELLING

The state of completion where the works may be occupied by the owner/tenant with minor disruption to carry out remedial work to items on the list for completion during the defects liability period to achieve final completion 2.5.2 RESIDENTIAL - BLOCK OF FLATS/CLUSTER HOME/TOWNHOUSE/HOSTELS

The state of completion where the works may be occupied by the owner/tenant with minor disruption to carry out remedial work to items on the list for completion during the defects liability period to achieve final completion 2.5.3 RESIDENTIAL - HOTEL AND/OR RETIREMENT HOME

The state of completion where the works may be occupied by the owner/tenant to install built in furniture, fittings and equipment with minor disruption to carry out remedial work to items on the list for completion during the

defects liability period to achieve final completion

2.5.4 INDUSTRIAL BUILDINGS - WAREHOUSE/FACTORY/DISTRIBUTION CENTRES

The state of completion where the works may be occupied by the owner/tenant to install fixtures, fittings, plant and equipment and where loading bays and parking areas are available for the owner/tenant use and disruption to carry out remedial work to items on the list for completion during the defects liability period to achieve final completion 2.5.5 COMMERCIAL - OFFICE BUILDINGS

The state of completion where the works may be occupied by the owner/tenant with minor disruption to carry out remedial work to items on the list for completion during the defects liability period to achieve final completion 2.5.6 COMMERCIAL - SHOPPING CENTRES

The state of completion where the works may be occupied by the owner/tenant to install fixtures, fittings, plant and equipment and where loading bays and parking areas are available for the owner/tenant use and disruption to carry out remedial work to items on the list for completion during the defects liability period to achieve final completion 2.5.7 HEAD OFFICE BUILDINGS FOR SPECIFIC BUILDING OWNER/TENANT

The state of completion where the works may be occupied by the owner/tenant with minor disruption to carry out remedial work to items on the list for completion during the defects liability period to achieve final completion 2.5.8 BUILDINGS FOR EDUCATION - SCHOOLS/UNIVERSITIES/COLLEGES

The state of completion where the works may be occupied by the owner/tenant to install fixtures, fittings, plant and equipment and where loading bays and parking areas are available for the owner/tenant use and disruption to carry out remedial work to items on the list for completion during the defects liability period to achieve final completion 2.5.9 CORRECTIONAL SERVICES - PRISONS

The state of completion where the works may be occupied by the owner/tenant to install fixtures, fittings,plant and equipment and where loading bays and parking areas are available for the owner/tenant use and disruption to carry out remedial work to items on the list for completion during the defects liability period to achieve final completion 2.5.10 HEALTH CARE BUILDINGS - HOSPITALS/CLINICS

The state of completion where the works may be occupied by the owner/tenant to install fixtures, fittings,plant and equipment and where loading bays and parking areas are available for the owner/tenant use and disruption to carry out remedial work to items on the list for completion during the defects liability period to achieve final completion 2.5.11 PUBLIC BUILDINGS - THEATRES/MUSEUMS/LIBRARIES/FIRE STATIONS

The state of completion where the works may be occupied by the owner/tenant to install fixtures, fittings,plant and equipment and where loading bays and parking areas are available for the owner/tenant use and disruption to carry out remedial work to items on the list for completion during the defects liability period to achieve final completion

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-

PA in tender documents specifies

start + duration of construction

period + completion criteria



PA/agents direct standard of work +

quality of finish required



C notice to PA to inspect for PC



PA inspects works, issues List for

Practical Completion, and if ready,

issues Certificate of Practical

Completion and List for Completion



C claim revision of date of PC



PA assesses EOT claims and

certifies penalties if PC not achieved

by intended or extended date

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▪ Note: Issue Certificate of Practical Completion

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employer occupies works, penalty liability ends,

contract works insurance > building insurance,

value of security reduces

▪ Note: PA + C +SC resolves final account

DLP

LDLP

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3.0 FINAL COMPLETION

3.1 PURPOSE

The definition of final completion requires the principal agent to certify “... the stage of completion of the works to be free of defects…” The issued certificate of final completion is “…conclusive as to the sufficiency of the works and that the contractor’s obligations have been fulfilled other than for latent defects”

3.2 ACHIEVEMENT OF FINAL COMPLETION

▪ The defects liability period (DLP) automatically comes into force on the calendar day following the date of practical completion and ends at midnight ninety (90) calendar days from that date … or when defects on the list for final completion have been satisfactorily completed (but not before expiry of the ninety (90) calendar day DLP)

▪ The contractor must “… rectify all items on the list for completion at least ten (10) working days before the expiry of the DLP and give notice to the principal agent to inspect the works within five (5) working days of receipt of such notice”. The principal agent must, within reason, inspect the whole of the works for latent defects that may have become patent during the DLP and not just identified items on the list for completion

▪ The principal agent must forthwith issue to the contractor a list for final completion incorporating the list for completion and any latent defects that may have become patent to rectify to achieve final completion. The contractor must give the principal agent notice to inspect rectified items until all defects have been rectified to the satisfaction of the principal agent

▪ Note: Where the employer takes possession of the site/works before practical completion has been certified – the principal agent must issue the certificate of practical completion forthwith (specifying the date when possession of the site/works was relinquished by the contractor) and issue the list for completion of items to be rectified by the contractor within thirty (30) calendar days

• Where the principal agent does not issue the (updated) list for final completion or the certificate of final completion within five (5) working days of such inspection, the contractor may give notice to the principal agent to comply within a further five (5) working days - failing which final completion will be deemed to have occurred on expiry date of such notice

3.3 CONSEQUENCES

On achievement of final completion:

▪ The contractor’s obligations in terms of the agreement have been fulfilled ▪ The contractor’s public liability in relation to the works ceases

▪ The value of the Guarantee for Construction (variable) reduces to 2% of the contract sum until the final payment

▪ All subcontractor’s guarantees, warranties or indemnities are deemed to be ceded to the employer ▪ The balance of the contractor’s latent defects liability period is determined (see section 5.0) ▪ The final payment certificate can now be issued

▪ Should there be a disagreement about the final contract value further interim payment certificates must be issued for the undisputed amounts

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90 C – DAY 5 YEAR

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Note:

C’s DLP ends, then:



Value of security reduces



NSSA warranties ceded to E

DLP

LDLP

CONSTRUCTION

PERIOD

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C rectifies items on List for

Completion

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C submits notice to PA to inspect

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PA inspects, issues List for Final

Completion – if done – issues

Certificate of Final Completion

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Note: PA + C + SC resolve final

account

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Final account agreed then PA

issues Final Payment Certificate

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4.0 SECTIONAL COMPLETION

4.1 PURPOSE

Projects may have to be completed in sections - as separate buildings or by storey. Each section must be clearly defined with due consideration for common areas, provision of services, safe access by the employer and continued access by the contractor to complete the works. Sectional completions should be avoided where each section cannot be defined as a homogeneous unit and where there is no reasonable continuity of work for the contractor

Note: The contract works insurance must be effected by the employer to prevent conflict that may arise from multiple practical completions possibly insured by different insurers. Securities, guarantees, warranties and the like should only be provided for the works as a whole and not for individual sections

4.2 ACHIEVEMENT OF SECTIONAL FINAL COMPLETION

Where sectional completions are required - each section (other than the last section) must be treated as unique for completion purposes. Thus, each section requires:

▪ A certificate of interim completion for each subcontractor ▪ A certificate of practical completion

▪ A certificate of final completion (other than the last section) 4.3 CONSEQUENCES

Payment is always made for the works as a whole - never for a section - by issuing the following documents: ▪ A (monthly) interim payment certificate

▪ A (monthly) recovery statement

▪ A (monthly) payment notification to each subcontractor ▪ A final account

▪ A final payment certificate

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5.0 LATENT DEFECTS LIABILITY PERIOD

5.1 PURPOSE

In common law the liability of the contractor (and of agents described in the professional appointment agreement) to the employer for latent defects is open ended and will only expire with the demolition of the building - clearly an untenable situation. In all JBCC

®

agreements the latent defects liability period (LDLP) of the contractor is restricted to a period of five (5) years from the certified date of final completion or the date of termination by the contractor or where execution of the works has become impossible: -

▪ The definition of a “latent defect” relies on the definition of “defect”. Thus the latent defect definition becomes “... any aspect of the works which ... includes an imperfection that impairs the structure, composition or function of the works ... which a reasonable inspection ... would not have revealed before the issue of the list for final completion”, and “defects which may appear up to the date of final completion shall be addressed...."

▪ This definition does not specify how a defect that becomes apparent after final completion is to be dealt with. Where this occurs, the employer must give notice to the contractor to remedy the defect within the LDLP. Failure by the contractor to do so entitles the employer to employ another contractor to remedy the defect(s) and to claim such expense from the contractor. The obligation to remedy a defect is clear in common law and in the Consumer Protection Act

▪ The “period“ is defined: “The latent defects liability period shall commence at the start of the construction period and end five years from the date of final completion”. The time period is clear where the works reaches final completion

▪ If final completion is not achieved - where the agreement is terminated prior to the achievement of final completion the termination clauses apply. The final account must be prepared, and on acceptance by the parties, the final payment certificate must be issued by the principal agent. Final completion will be deemed to have occurred on the date of acceptance of the final account but no certificate of final completion is issued in terms of the agreement. The five-year period applies (contractor default) or no period is applicable (employer default)

▪ The “liability” aspect - The contractor shall make good all defects that appear up to the date of expiry of the LDLP. Where termination of this agreement occurs before the date of final completion, the LDLP shall end five (5) years from the date of termination [29.10] for the completed portion of the works only,

or

▪ Where termination of this agreement occurs before the date of final completion on the date of termination where execution of the works has become impossible due to circumstances beyond the control of either party, or on the date of termination by the contractor due to default by the employer

▪ The liability of the principal and other agents is determined by the terms of their conditions of appointment and not those of the building contract

5.2 PRESCRIPTION PERIOD

All defects as defined in terms of the agreement are subject to a prescription period determined by law. In South Africa this period is three (3) years. The prescription period commences from the date on which the employer (principal agent) becomes aware of a defect and notifies the contractor forthwith

The LDLP is not extended by the prescription period – but the obligation on the contractor to remedy an identified and notified defect only remains – and this may extend beyond the five (5) year LDLP

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CONSTRUCTION PERIOD

Prescription expiry:

In common law prescription runs for 3 years from the date that a defect

was noted and reported to C – may extend beyond LDLP period

3 YEARS

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PAYMENT

INTRODUCTION

All JBCC

®

agreements follow the same payment procedures that must be applied strictly to minimise disagreements later. “Payment” is the most ‘sensitive’ aspect of the agreement and therefore no “short cuts” should be taken in certifying amounts due to the contractor or a subcontractor, and occasionally due to the employer! The procedures and time bars applying to valuation and certification as well as to payment must be applied by the principal agent and be observed by the parties

6.0 INTERIM and FINAL PAYMENTS

6.1 PREPARATION

The following contract data clauses have a direct bearing on the preparation for valuation, certification and payment: - Pre-Tender Information

▪ Employer details

▪ Principal Agent details (Only the principal agent is authorised to certify payment) ▪ Works description

▪ Law of the agreement

▪ Criteria for practical completion ▪ Site description

▪ Payment (or not!) for materials and goods (unfixed on site, off site or in transit) ▪ Completion - per section or the works as a whole

▪ Penalty - per section or the works as a whole ▪ Contract Price Adjustments – method used

▪ Changes, if any, to the provisions of the JBCC®agreement Post Tender Information

▪ Contractor details

▪ The accepted contract sum that becomes the base amount of the contract value in terms of the agreement

▪ The latest day of the month for the issue of an interim payment certificate

▪ The preliminaries payment option selected in terms of the tender ▪ The preliminaries adjustment option selected in terms of the tender ▪ The security option selected in terms of the tender

6.2 THE INTERIM PAYMENT CYCLE (See diagram opposite) Setting the Cycle

▪ The principal agent records the date of issue of the interim payment certificate in the contract data

▪ The contractor and subcontractors must cooperate with the principal agent to submit payment claims in terms of the defined payment cycle

▪ The employer must pay the contractor within fourteen (14) calendar days of the date of issue of a payment certificate ▪ The contractor must pay each subcontractor within twenty-one (21) calendar days of the date of issue of a payment

certificate

▪ The contractor must pay the employer within twenty-one (21) calendar days of the date of issue of a payment certificate Valuation and certification

The principal agent must issue a payment certificate by the defined date [CD] in the agreed payment cycle - based on the valuation of completed work provided by the contractor or, where not provided, assessed by the principal agent

The principal agent mustissue a payment certificate in every payment cycle comprising a fair estimate of work executed and of materials and goods to the contractor with a copy to the employer, and

To the contractor A summary of amounts due to each subcontractor A Recovery Statement to the contractor

To each n/s subcontractor A Subcontract Payment Notification showing the amount included in the contractor‘s payment certificate

And the contractor mustissue to each subcontractor

A SubcontractRecovery Statement

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Interim payment cycle

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7.0 RECOVERY STATEMENT (PBA

)

7.1 PURPOSE

The recovery statement deals with financial transactions between the employer and the contractor that do not affect the contract value and are therefore not part of the valuation of work in progress or the final account. Such transactions can occur at any time during the construction period. The amounts due to either party are determined by the principal agent on a monthly basis and are included in the payment certificate issued at that time. Documentation substantiating the amounts due must accompany the recovery statement. By dealing with these transactions as they occur and not at the end of the contract considerable administrative frustration is avoided

7.2 THE STATEMENT

Column A Total Amount to be recovered

All amounts as determined by the principal agent are accounted for on an accumulative basis Column B Less Previously recovered

Previously determined accumulative amounts are accounted for Column C Recovered this Period

The difference between the column A and B subtotal amounts are carried to the referenced item in the payment certificate

7.3 AMOUNTS DUE TO THE EMPLOYER

There are twelve conditions not related to the contract value that the employer may recover from the contractor. These are: ▪ The first nine (1.1.1-9) are grouped together as they impact on the tax on the certified contract value

▪ Advance payment recoupment (1.10) is accounted for after tax

▪ Penalties due (1.11) are accounted for before tax but are separated for clarity purposes ▪ Default interest (1.12) is tax neutral and is accounted for after tax

7.4 AMOUNTS DUE TO THE CONTRACTOR

There are six conditions that the contractor may recover from the employer. These are:

▪ Compensatory (2.2) and default interest (2.1) amounts, which are both tax neutral, and accounted for after tax ▪ Damages (2.3) are accounted for before tax

▪ E&L caused by a direct contractor (2.4)

▪ Advance payment received (2.5) is accounted for after tax

▪ Termination of a n/s subcontract agreement (2.6) 7.5 IMPORTANT NOTES

A recovery statement must be issued simultaneously with each payment certificate

▪ All recovery amounts are dealt with on a “before tax” basis - where applicable tax is added in the payment certificate

▪ Each amount to be recovered is identified by a payment certificate reference line - only the amount in column C is transferred to that location

7.6 ADVANCE PAYMENT ADMINISTRATION

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8.0 PAYMENT CERTIFICATE (PBA

)

8.1 PURPOSE

An amount of money that is due and payable by the employer to the contractor or vice versa is ‘certified’ in a payment certificate issued by the principal agent.Liquidity is conferred where the employer (the debtor), by the signature of the principal agent, acknowledges his indebtedness to the contractor for a determined sum of money. The wording must be correct – specifying the employer, principal agent and the contractor and the payment amount that is due to the contractor. Payment due to the employer is provided for in the agreement and the payment certificate form but isnot a liquid document!

8.2 THE PAYMENT CERTIFICATE

Column A Contract Sum The contract sum i.t.o. the agreement remains fixed for the duration of the contract

Column B Current Contract Value The totals of Columns A and B give an immediate comparison between the contract sum and contract value at the time of issue of the payment certificate. The quantity surveyor, where appointed, determines the adjustments to the contract value for approval by the principal agent Column C Current Valuation The principal agent (or the quantity surveyor) determines the valuation

Column D Current Certification The principal agent certifies the current valuation amounts and items of expense and/or loss detailed in the recovery statement as well as tax on the applicable items

1.0 Value of work executed The valuation must be “a reasonable estimate of the work executed” without it being “work satisfactorily completed”. The principal agent must act impartiality to verify (or modify) the quantity surveyor’s valuation before certifying such amount

2.1-2 Materials on and off site Materials and goods on and off site may be included in the valuation

Note: Projects financed by a financial institution generally exclude payment of unfixed materials leaving the employer short of money to make payment of an issued payment certificate.The principal agent must record in the contract data if unfixed materials (on or off site) will be paid, or not, where included in a payment certificate

A Guarantee for Advance Payment may cover some such materials and will reduce the employer’s additional risk (see Recovery Statement) Transfer of ownership of materials off site may be difficult to prove in law

3.0 SUBTOTAL

4.0 Security adjustment Applies where the contractor has chosen the security (fixed) to which a 5% payment reduction provision applies, or is in default by not providing such security and the employer elects to apply the payment reduction option

5.0 Net contract sum The amount reflected in Column B is the same as the amount in Column A

6.0 Authorised adjustments … Authorised adjustments to date are included [B 6.0], excluding anticipated adjustments 7.0 Cost fluctuations Included in [A 7.0], updated in [B7.0], if included in a valuation [C+D 7.0]

8.0 GROSS AMOUNT CERTIFIED … in [D 8.0]

9.0 Less: Amount certified in the previous payment certificate… [D 9.0]

10.0 NET AMOUNT CERTIFIED The net resultant portion of the contract value certified in this payment certificate 11.1-3 Recovery Statement Adjustment of amounts due to/by the contractor that attract tax

12.0 SUBTOTAL The summed total of the previous items

13.0 Tax The subtotal 12.0 is pre-tax. The tax percentage must be filled in and calculated If this subtotal is negative, tax will apply where the employer issues a VAT invoice to

recover the amount due from the contractor

14.1-9 Recovery Statement Amounts that do not attract tax = interest and advance payment amounts (loans) 15.0 TOTAL The total of the contract sum and the comparative variable current contract value 16.0 AMOUNT DUE Identify the currency / receiving party / amount due

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9.0 SUBCONTRACTOR

’

S PAYMENT NOTIFICATION

9.1 PURPOSE

The payment notification informs the subcontractor of a subcontract amount included in the total amount certified to the contractor (or employer) in the current payment certificate. Any adjustment made to such amount due to the security provided by the contractor is not applicable to the payment due to the subcontractor. The contractor must certify the full amount due to the subcontractor and make any adjustment in terms of the security provided by the subcontractor. The 2nd_{NOTE on the}_payment notification form details this condition

9.2 THE PAYMENT CERTIFICATE NOTIFICATION

Column A Subcontract Sum The subcontract sum i.t.o the agreement remains fixed for the duration of the subcontract Column B Current SC Value The totals of Columns A and B give an immediate comparison between the subcontract sum

and the subcontract value at the date of issue of the payment certificate. The quantity surveyor, where appointed, determines the adjustments to the subcontract value for approval by the principal agent

Column C Current Valuation The principal agent or quantity surveyor, where appointed, determines the valuation

Column D Current Certification The principal agent notifies the subcontractor of the current subcontract valuation amounts certified to the contractor together with any adjustment i.t.o. the security provided by the contractor; the previous gross subcontract amount certified as well as tax on the net subcontract amount certified

1.0 Value of work executed The principal agent inserts the value of work executed in the payment certificate

2.1-2 Materials on and off site The principal agent inserts the value of items included in the payment certificate 3.0 SUBTOTAL

4.0 Security adjustment The principal agent notifies the subcontractor of adjustments made to the valuation of items included in the current payment certificate (if applicable)to comply with the contractor’s security provision in terms of the principal agreement

5.0 Net contract sum The amount reflected in Column B is the same as the amount in Column A

6.0 Authorised adjustments … Authorised adjustments to date are included [B 6.0], excluding anticipated adjustments 7.0 Cost fluctuations Included in [A 7.0], updated in [B7.0], if included in a valuation [C+D 7.0]

8.0 GROSS AMOUNT CERTIFIED … in [D 8.0]

9.0 Less: Amount certified in the previous payment certificate… [D 9.0]

10.0 NET AMOUNT CERTIFIED The amount of the subcontract value that has been certified in the current payment

certificate. This amount may differ in the contractor’s payment advice due to adjustments the contractor may be entitled to make in terms of the subcontractor’s security or the subcontract recovery statement

11.0 Tax The subtotal 10.0 is pre-tax. The tax percentage must be filled in and calculated

If this subtotal is negative, tax will apply where the contractor issues a VAT invoice to recover the amount due from the subcontractor

12.1-2 SC Recovery Statement Amounts that affect the subcontractor’s income or expenditure that are tax neutral 13.0 TOTAL The total of the subcontract sum and the comparative variable current subcontract

value

14.0 AMOUNT DUE Identify the currency / receiving party / amount due

15.0 Subcontract sum execution Where the subcontractor has provided a Guarantee for Construction (variable) the

percentage of the subcontract sum that has been executed must be determine. The completion status must be indicated as it affects all the security options for the works as a whole in terms of practical completion and final completion

Note: The principal agent is not responsible for and is not involved in determining any of the recovery amounts nor for determining

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10.0 SUBCONTRACTOR

’

S RECOVERY STATEMENT

10.1 PURPOSE

The subcontract recovery statement deals with expenses and losses suffered by the contractor or the subcontractor that do not affect the subcontract value and that are not part of the valuation of the work in progress nor the subcontract final account. Such expenses and losses can occur at any time during the subcontract construction period. The amounts as are determined by the contractor on a monthly basis and are included in the interim or the final subcontractor’s payment advice issued at that time Documentation substantiating the amounts due must accompany the subcontract recovery statement

By dealing with such expenses and losses as they occur and not at the end of the contract considerable administrative frustration is avoided and the parties are correctly compensated for such expenses and losses incurred

10.2 THE STATEMENT

All amounts as determined by the contractor are accounted for on an accumulative basis Column B Less Previously recovered

Previously determined amounts are accounted for Column C Recovered this Period

The difference between the column A and B subtotal amounts are carried to the referenced item in the subcontractor’s payment advice

10.3 AMOUNTS DUE TO THE CONTRACTOR

There are ten conditions for which the contractor is entitled to recovery from the subcontractor. These are:

▪ The first eight (1.1-1.8) are grouped together as they all impact on the tax calculated on the certified subcontract value

▪ The remaining two items, default interest (1.9) and advance payment recoupment (1.10), are accounted for after tax 10.4 AMOUNTS DUE TO THE SUBCONTRACTOR

There are eight conditions for which the subcontractor is entitled to recovery from the contractor. These are: ▪ Default interest (2.1), compensatory interest (2.2) and advance payments made (2.5)

These amounts are tax neutral and are accounted for after tax

▪ Damages (2.3) and non-contract variations (2.4 – 2.8) are accounted for before tax 10.5 IMPORTANT NOTES

▪ The subcontract recovery statement must be issued simultaneously with each subcontractor’s payment advice ▪ All recovery amounts exclude tax as this is dealt with in the subcontractor’s payment advice

▪ Each item to be recovered is identified by a subcontractor’s payment advice location reference with only the amount in column C being transferred to that location

10.6 ADVANCE PAYMENT ADMINISTRATION

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11.0 SUBCONTRACT PAYMENT ADVICE

11.1 PURPOSE

The amount of money that is due and payable by the contractor to the subcontractor or vice versa is ‘certified’ in a subcontract payment advice issued by the contractor.Liquidity is conferred where the contractor (the debtor) acknowledges his indebtedness to the subcontractor for a determined sum of money. The wording must be correct – specifying the contractor and the subcontractor and the payment amount that is due to the subcontractor

11.2 THE PAYMENT ADVICE STATEMENT

Column A Contract Sum The subcontract sum in terms of the agreement remains fixed for the duration of

the subcontract

Column B Current Contract Value The totals of Columns A and B give an immediate comparison between the subcontract sum and the subcontract value at the date of issue of the subcontract payment advice.

Column C Current Valuation The contractor incorporates the valuation provided by the principal agent in the statement issued in terms of the PBA

Column D Current Certification The contractor certifies the current valuation amounts and items of expense and/or loss detailed in the subcontract recovery statement as well as tax on applicable items

1.0 Value of work executed The contractor incorporates the valuation provided by the principal agent in the statement issued in terms of the PBA. The contractor has no authority to reduce or vary such valuation 2.1-2 Materials on and off site The subcontractor’s materials on and off site are to be included where they are

certified in the payment certificate 3.0 SUBTOTAL

4.0 Security adjustment Applies only where the subcontractor has chosen the security (fixed) to which payment reduction provisions apply, or is in default by not providing such security and the contractor elects to apply the payment reduction option

5.0 Net subcontract sum The amount reflected in Column B is the same as the amount in Column A

6.0 Authorised adjustments … Authorised adjustments determined by the principal agent to date are included [B 6.0], excluding anticipated adjustments

7.0 Cost fluctuations Included in [A 7.0], updated in [B7.0], if included in a valuation [C+D 7.0] 8.0 GROSS AMOUNT CERTIFIED …in [D 8.0]

9.0 Less: Amount certified in the previous payment advice statement… [D 9.0] 10.0 NET AMOUNT CERTIFIED The net resultant portion of the subcontract value certified in this

subcontract payment advice

11.1-2 Recovery Statement Amounts that affect the subcontractor’s income or expenditure, that attract tax 12.0 SUBTOTAL The summed total of the previous items

13.0 Tax The subtotal 12.0 is pre-tax. The tax percentage must be filled in and calculated

If this subtotal is negative, tax will apply where the contractor issues a VAT invoice to recover the amount due from the subcontractor

14.1-3 Recovery Statement Amounts that do not attract tax = interest and advance payment amounts. 15.0 TOTAL The total of the subcontract sum and the comparative variable current

subcontract value

16.0 AMOUNT DUE Identify the currency / receiving party / amount due

17.0 Contract sum execution Where the subcontractor has provided a Guarantee for Construction (variable) the

percentage of the subcontract sum that has been executed must be determined.The completion status must be indicated as it affects all the security options

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12.0 RECOVERY STATEMENT (MWA

)

12.1 PURPOSE

The recovery statement deals with financial transactions between the employer and the contractor that do not affect the contract value and are therefore not part of the valuation of work in progress or the final account. Such transactions can occur at any time during the construction period. The amounts due to either party are determined by the principal agent on a monthly basis and are included in the payment certificate issued at that time. Documentation substantiating the amounts due must accompany the recovery statement. By dealing with these transactions as they occur and not at the end of the contract considerable administrative frustration is avoided

12.2 THE STATEMENT

All amounts as determined by the principal agent are accounted for on an accumulative basis Column B Less Previously recovered

Previously determined accumulative amounts are accounted for Column C Recovered this Period

The difference between the column A and B subtotal amounts are carried to the referenced item in the payment certificate

12.3 AMOUNTS DUE TO THE EMPLOYER

There are seven conditions not related to the contract value that the employer may recover from the contractor. These are: ▪ The first four (1.1.1-4) are grouped together as they impact on the tax on the certified contract value

▪ Advance payment recoupment (1.7) is accounted for after tax

▪ Penalties due (1.5) are accounted for before tax but are separated for clarity purposes ▪ Default interest (1.6) is tax neutral and is accounted for after tax

12.4 AMOUNTS DUE TO THE CONTRACTOR

There are three conditions that the contractor may recover from the employer. These are: ▪ Default interest (2.1) which is tax neutral, and accounted for after tax

▪ Damages (2.3) are accounted for before tax

▪ Advance payment received (2.2) is accounted for after tax 12.5 IMPORTANT NOTES

A recovery statement must be issued simultaneously with each payment certificate

▪ All recovery amounts are dealt with on a “before tax” basis - where applicable tax is added in the payment certificate

▪ Each amount to be recovered is identified by a payment certificate reference line - only the amount in column C is transferred to that location

12.6 ADVANCE PAYMENT ADMINISTRATION

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