A Basic Guide To The General Conditions Of Contract For .

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Basic GuideGeneral Conditions of Contract forConstruction Works (GCC 2004)February 2008

PrefaceThe Construction Industry Development Board (CIDB) is a national body established by anAct of Parliament (Act 38 of 2000).The CIDB develops the industry for the improved delivery of infrastructure to the SouthAfrican public. It works with all stakeholders for the sustainable growth of constructionenterprises and the best practice of employers, contractors and the professions.The CIDB identifies best practice and sets national standards. It promotes common andethical standards for construction delivery and contracts.To implement these objectives, the CIDB is mandated to establish: a Code of Conduct for all role players in the construction process;a Standard for Uniformity in Construction Procurementa national Register of Projects; anda national Register of Contractors.The CIDB Standard for Uniformity in Construction Procurement requires that Employerscontract for construction works using one of the standard forms of contract that are listed inthis standard, namely: General Conditions of Contract for Construction Works;Conditions of Contract for Construction, Conditions of Contract for Plant and DesignBuild, Conditions of Contract for FIDIC EPC/Turnkey Projects or Short Form ofContract;JBCC series 2000 Principal Building Agreement or Minor Works Agreement; orNEC3 Engineering and Construction Short Contract or NEC3 Engineering andConstruction Contract.The CIDB has published the booklet The 3Rs Basic Guide for SME’s “Know your Rights,Responsibilities and Risks!” to enable SMMEs to: to gain some understanding of and insights into a number of basic contractual issuesand contracting process;be aware of all the stages of the process; andhighlights some of the most common problems which can confront contractors who donot understand how a contract works.This publication did not go into the detail of any of the standard forms of contract referred to inthe CIDB Standard for Uniformity in Construction Procurement.This Basic Guide, which forms part of a series of guides, outlines the key provisions of theGeneral Conditions of Contract for Construction Works published by the South AfricanInstitution of Civil Engineering, which is commonly referred to as GCC 2004. It also providessome insights into the administrative procedures and processes associated with this standardform of contract.

Contents1An overview of GCC 2004 . and content. 1The Engineer . 2Construction process and procedures. 2Payment provisions. 3Disputes. 42Execution of the works . 63Completion . 164Cancellation of contract . 19Appendix A:Examples of Engineer’s Certificates . 20Appendix B:Notices and claims submitted by the Contractor. 21B.1B.2B.3B.4Introduction . 21Notifications . 21Requests. 22Assertions . 22

1An overview of GCC 20041.1Structure and contentThe General Conditions of Contract for Construction Works, which is commonly referred to asGCC 2004, contains 58 clauses that establish the general risks, liabilities and obligations ofthe contracting parties and the administrative procedures for the administration of the contracti.e. the general conditions of contract. These clauses deal with the following topics: Definitions, interpretations and general provisionsClause(s)1 Engineer and engineers representative2 Basis of contract3 to 9 Commencement of the work10 to 13 Contractor’s general obligations14 to 22 Materials, workmanship and construction equipment23 to 30 Care of works, damage, injury and insurance31 to 35 Variations36 to 37 Progress and time for completion38 to 43 Claims, certificates and payment44 to 50 Completionliabilities Cancellation, disagreements and disputesandapprovalcertificatesCONTRACT DATAThe General Conditions of Contract for ConstructionWorks (2004) published by the South AfricanInstitution of Civil Engineering, are applicable to thiscontract.Copies of these conditions of contract may beobtained from the South African Institution of CivilEngineering (tel 011-805 5947)Part 1: Contract Data provided by the Employer .Part 2: Contract Data provided by the Contractors . anddefects51 to 5354 to 58The terminology used in GCC 2004is consistent with that of the CIDB’sStandardforUniformityinConstruction Procurement.The general conditions of contractcontained in GCC 2004 need to bemade contract specific through thecontract data.It should be noted that: the Form of Offer loyer’s acceptance andany agreed amendments orcharges to the tender document upon which the Contractor based his tender;the Pricing Data contains the agreed prices which will be used in assessing paymentsdue for work completed;the Scope of Work (which may include the specifications and drawings) establisheswhat the Contractor is to construct, what quality is required and how the Contractor isto manage and construct the works;the Site Information describes the site as at the time of tender and should the actualconditions on site turn out to be different to those described, then the Contractor wouldhave a claim for compensation or extension of time.1

1.2The EngineerGCC 2004 requires the Employer to appoint an “Engineer” to administer the contract as anagent of the Employer in accordance with the provisions of the contract. The Contract Dataindicates the areas where specific Employer approvals are required. Whenever the engineerexercises any discretion or makes or issues any ruling, contract interpretation or pricedetermination, he is required to first consult with the Contractor and the Employer in anattempt to reach agreement. Failing agreement, the engineer is required to make a fairdecision in accordance with the contract taking into account all relevant facts andcircumstances.1.3Construction process and proceduresGCC 2004 is framed around the processes and procedures which commence with the signingof the Form of Offer and Acceptance and conclude with the Employer making a final paymentto the Contractor as illustrated below:No of days thatpenalties applyEmployer signsacceptance portionof Form of Offerand AcceptanceContractorreceivescompletedcopy of Formof Offer andAcceptanceandpossession ofthe commencesthe worksContractorachievescompletionNo of days asstated incontract data(Clause 53.1)No of days asstated incontract data(Clause 10)Start up phaseCommencementDate(Clause 1.1.4)ContractorachievesfinalapprovalConstruction phaseNo of days asstated incontract data(Clause 1.13)plus anypermittedextension oftimeDefects liabilityphaseDue completiondate(Clause 1.1.13)WorkscompleteStart ofcontractClose outphaseExpiry ofdefects liabilityperiodDefectsrectifiedFinalpaymentmadeThe Contractor must achieve Practical Completion by not later than the Due Completion Date,otherwise he will be liable to pay penalties to the Employer. The amount of penalties to bepaid by the Contractor for each day that he is late is stated in the Contract Data. The numberof days the Contractor is late is the difference between the date that the Certificate ofPractical Completion is issued and the Due Completion Date. This number of days multipliedby the penalty per day gives the total amount for which the Contractor is liable.2

Penalties are like a fine payable tothe Employer in the event that theconstruction works are notcompleted on time.Penalties are governed by thePenalties Act of 1962 whichrequires that the penalties mustbe proportionate to the prejudicesuffered by the employer. A Courtof Law may reduce any penaltywhich is considered excessive.1.4Even where penalties are applied against theContractor, he has a duty to finish the work and tocarry out all his other duties under the Contract.Penalties are reduced by the Engineer where,although the whole of the Works is not practicallycomplete: a Certificate of Practical Completion has beenissued for part of the Works; or wherethe Employer has taken occupation or usedpart of the Works.Payment provisionsGCC makes provision for monthly payment to Contractors based on an estimate of the valueof the works (both permanent and temporary) that have been completed, a percentage of thematerials on site, any additional payments that are due and any price escalation that may beprovided in the contract.The processes associated with the monthly payment, the valuation of the variations to thecontract ordered by the Engineer and the claims made by the Contractor for additionalpayment are as set out below:Contractor delivers to Engineer monthly statement for payment (49(1))with supporting documentation (49(2))Monthly paymentEngineer certifies amount due within 7days of receipt of Contractor’s monthlystatement (49(1)&(4)Employer pays Contractor within 28days of receipt from Engineer ofcertified monthly statement (49(4))Engineer includes amountin certification (37(1))Engineer determinesvalue of variations (37(1))Engineer orders variationto works (37(1))Engineer rules onclaim andincludes anyamounts incertification (48(5)AdditionalpaymentsContractor claims additionalcompensation (48(1)Note: Contractor is not entitled to claimsmade more than 28 days after becomingaware, or should have been aware, of theevent or circumstance. (48(4))VariationsPenalties are usually deducted in interim payment certificates, from money due to theContractor.3

Retention is money which has been earnedby the Contractor for work done, butwhich is not paid out at the time theInterim Payment Certificate is issued.Retention money is held by the Employerto ensure that the Contractor does hiswork properly. Sometimes, an Employerwill accept a “Retention Guarantee”instead of deducting retention money. Ifthis is the case, it will be stated in theContract Data.Retention monies are deducted from paymentcertificates up to a limit stated in the ContractData. The amount of retention to be deductedin each Interim Payment Certificate up to thelimit is stated in the Contract Data.Half of the retention money is paid to theContractor when the Engineer issues theCertificate of Completion when the contractorhas completed the works. The other half is paidwithin 14 days after the end of the DefectsLiability Period.GCC requires the Contractor to submit a completion statement when he has completed theworks and a final statement at the end of the defects liability period, as set out below:Engineer issues Certificateof Completion (51(4))Engineer issues FinalApproval Certificate (52.1)Contractor deliverswithin 14 days finalstatement. Engineercertifies within 14 daysof receipt of finalstatement andEmployer pays within 28days date of certificate.(49(10))Contractor delivers within 14 dayscompletion statement, failingwhich he looses the right to claimfor any matter not included.Engineer certifies within 14 daysof receipt of completion statementand Employer pays within 28days of receipt of certifiedpayment from engineer. (49(9))Defects liability periodWorkscompleteDefectsrectifiedPayments due to a contractor in terms of GCC 2004 are as follows:PeriodFrom commencement dateto up to the issue of thePractical CompletionCertificateAfter issue of theCompletion CertificateAfter issue of FinalCompletion Certificate1.5Payment where no retention guarantee is providedValue of work certified each month plus a percentage ofmaterials on site less the applicable retention monies and anypenaltiesValue of work certified less previous payments less 50 % of theapplicable retention moniesPayment of any amounts outstanding and remaining 50% ofapplicable retention monies.DisputesThere are 3 types of dispute which may arise:1)Events or matters stipulated in the contract that the Contractor must claim underClause 48.4

2)Disagreements between the Contractor and the Engineer which do not arise from aclaim by the Contractor under clause 48 [Clause 57]In both these cases the Engineer must first consult with the Contractor and Employer in an attempt toreach agreement. Failing agreement between the parties, the Engineer gives his ruling in accordancewith the contract taking into account the relevant facts and circumstances. (Clauses 48.5 or 57.2)Within 28 days of the Engineer giving his ruling the Contractor or the Employer may dispute the ruling inwhich case the dispute will be subjected to either mediation or adjudication depending on what is statedin the Contract Data. If the dispute is still not resolved after mediation or adjudication, either arbitrationor court proceedings, depending what is stated in the Contract Data, will bring finality to the dispute.(Clause 58)3)Disputes between the Contractor and the Employer which have nothing to do with anydecision of the Engineer, or which arise after the Contract is complete [Clause 58.7]This type of dispute is dealt with in Clause 58.7, either by arbitration proceedings (Clause 58.4) or bycourt proceedings , depending on what is stated in the Contract Data.5

2Execution of the worksAccess to siteProgrammeGuaranteeInstruction and drawingsImproper workRisk and insurancesMeasurementInterim paymentsVariationsDelaysClaimsExtension of timeDisagreementsDisputesSubcontractingDuring this phase, theContractor does thework in accordancewith the requirementsof the Scope of Work,EXECUTION OF THE WORKSand the Employerpays the Contractorfor work which isCOMPLETIONproperly done. TheEngineer provides allthe information whichis necessary for theContractor to do thework. If the Engineer is satisfied with the work done, he issues an Interim Payment Certificate,usually every month, for that work, and the Employer pays the amount certified by theEngineer.FORMATION OF THE CONTRACTAccess to site(Clause 11)The Contractor cannot do the work he has to do if he is not given access tosite.Also, if access is given late, there is a danger that the Contractor will notfinish by the Due Completion Date, and he will then be liable for penalties.The Employer must give the Contractor sufficient access to the site by theCommencement Date stated in the Contract.If the Employer does not give sufficient access by the Commencement Date,and the Contractor will be delayed or will suffer additional costs, he may claimin terms of Clause 48Programme(Clause 12)The Contractor must prepare a programme which shows when each part ofwork is to be done, so that all the work will be finished by the Due CompletionDate.This programme has to be given to the Engineer soon after theCommencement Date, not later than the number of days stated in theContract Data.The Engineer uses this programme to check that the Contractor is finishingeach part of the work when he planned to do so.If the Contractor does not keep up with the programme, the Engineer mayinstruct him to work overtime, or employ more labour or equipment, to makesure that all the work is completed by the Due Completion Date. TheContractor will not be paid extra for this, as he is falling behind his ownprogramme.However, if there are delays which are not his fault, the Contractor can claiman extension of time, in terms of Clause 42, which will make the DueCompletion Date later and protect the Contractor from penalties for thosedelays.Guarantee(Clause 7)The Contractor must give a Guarantee to the Employer that the Contract willbe properly executed by the Contractor. Clause 7 provides for this.The Guarantee must be from a Bank or Insurance Company which isapproved by the Employer.The value of the Guarantee as well as when it must be given to the Employeris stated in the Contract Data.6

The Engineer may refuse to issue a Payment Certificate for work done by theContractor until the Contractor has provided the Guarantee.7

Instructions anddrawings(Clause 13)These are specifications, drawings, instructions and other items ofinformation that are issued by the Engineer to inform the Contractor whatwork he has to do.Without this, the Contractor cannot do the work he has undertaken to do.The Contractor does not always receive all the instructions and drawings heneeds for the whole Contract at the Commencement Date. This is usually nota problem, as long as he has enough information to start and continue withhis work. However, if information is provided so late that the Contractorcannot keep to his programme, he will be delayed. If this happens, theContractor may claim for additional costs and for an extension of time, as thedelay is not his fault, provided he warns the Engineer that he will be delayedif the information is not received by a certain date. Clause 13 provides forthis.NB Oral instructions must be confirmed in writing within 14 days (see Clause 36.2)Improper work(Clauses 25 and26)The Engineer can order the Contractor to remove and redo any work whichhas not been properly done according to the specifications, drawings andinstructions. Clause 26 provides for this.If this happens, the Contractor must obey the order, and will receive nopayment for doing so.If the Contractor does not obey the order, the Employer may employsomeone else to do as the Engineer has ordered, and the Contractor will beresponsible to pay the costs of that other person.Where any work is to be covered up, for example, foundations which are tobe backfilled, the Contractor must notify the Engineer to inspect the workbefore it is covered up. Clause 25 provides for this.If the Contractor does not notify the Engineer before covering up work, theEngineer may order the Contractor to open it up again to check that it hasbeen properly done, and the Contractor will not be paid for doing so.Risk andinsurances(Clauses 32 to35)Risk and insurance are different. When the Contractor takes over the site, he must take care of it and isresponsible for any loss or damage on the site, including materialsbrought onto site for the work to be done. This is a risk. The only exceptions to this risk are events listed in Clause 32, which areat the risk of the Employer. Insurance is taken out to compensate for any loss or damage. Unless it is stated in the Contract Data that the Employer will take out theinsurance, the Contractor must take out the insurance. It does not matter who takes out insurance, the Contractor is stillresponsible for any loss or damage to the site and the materials on site. This means that, if the insurance is not enough to compensate for the lossor damage, the Contractor will have to pay for the loss or damage notcovered. It is therefore important the Contractor takes out enough insurance, if it ishis duty to do so, or to c

contract for construction works using one of the standard forms of contract that are listed in this standard, namely: General Conditions of Contract for Construction Works; Conditions of Contract for Construction, Conditions of Contract for Plant and Design-Build, Conditions of Contract for FIDIC

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