THE CONSTRUCTION INDUSTRY DEVELOPMENT REGULATIONS, 2004:

Tuesday, July 05, 2005
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The recent implementation of the Construction Industry Development Regulations, 2004 ("the Regulations") promises to place a further administrative burden on the increasingly regulated South African construction industry.

The Construction Industry Development Board Act, No 38 of 2000 (the Act) established the Construction Industry Development Board (CIDB) to provide leadership to stakeholders in the industry and to implement an integrated strategy to stimulate sustainable growth, reform and improvement of the construction sector. The CIDB, which is responsible to the Minister of Public Works (the Minister), comprises private and public sector individuals appointed by the Minister on the basis of their individual knowledge and expertise.

In addition to establishing the CIDB, the Act provided for the future establishment of registers of construction contractors and construction projects. The Regulations, which were first published on 9 June 2004, take the first step towards the establishment of these registers and with effect from 16 May 2005 require all private sector construction projects with a value in excess of R3 Million to be registered with the CIDB. The registration fee is R750.00 per project.

The registration requirements also currently apply to certain public sector construction contracts with a project value in excess of R3 Million inasmuch as the Regulations came into effect, during various periods between October 2004 and May 2005, in relation to construction projects of the Limpopo Provincial Department of Public Works, the eThekwini Metropolitan Council, the National Department of Public Works and the Gauteng Department of Transport, Roads and Public Works. The current public sector registration requirements will extend to all construction projects of all other organs of state with effect from 15 August 2005 and then to all other local councils as from 14 November 2005, from which date the project value threshold for registration of public sector contracts with the CIDB decreases from R3 Million to R300,000.00.

The private sector should take note that the R3 Million project value threshold decreases with effect from 14 November 2007 from which date all private sector projects with a value in excess of R300,000.00 will have to be registered with the CIDB against payment of the required R750.00 registration fee. In what will no doubt come as a relief to many private individuals the registration requirements do not apply to construction works in respect of the construction of homes as contemplated in the Housing Consumer Protection Measures Act, 1998.

Registration of Construction Projects:

The Regulations require an employer to apply to the CIDB for the registration of a construction project within 2 working days from the date that the contractor’s offer to perform the construction work is accepted by the employer.

The application will have to include details of the following:

1. whether the project being registered relates to a project that consists of a series of contracts; or

2. the project being registered relates to a series of projects aimed at a predefined outcome;

3. whether the project relates to a public-private partnership; and

4. whether the employer is acting on behalf of a client.

The registration fee will have to be paid by the client that initiated the project on the date of registration of the project or in advance if the registration relates to a number of projects that are to be registered by that client for a period agreed on with the CIDB.

Once the project is registered the Regulations require an employer to submit various project related status reports to the CIDB and to notify the CIDB of any arbitration or litigation initiated in relation to the construction works in question.

Any person or organ of state who fails to register a construction project in terms of the Regulations is guilty of an offence and is liable to pay a fine not exceeding R100,000.00.

Registration of contractors:

The Regulations further provide that contractors must register with a national register of contractors which categorises contractors in a manner that facilitates public sector procurement and promotes contractor development. A contractor may be registered in more than one class of works. Annual fees payable for such registration range from R200.00 to R40,000.00.

The Regulations specifically exclude the need for a contractor who is registered as a homebuilder in terms of the Housing Consumer Protection Measures Act, 1998 to register in terms of the Regulations, but only in relation to the construction of homes as referred to above.

The categories of registration are determined by:

1) a contractor grading designation contemplated in the Regulations which is determined by evaluating the financial and works capability of the contractor by means of formulas set out in the Regulations;

2) the status of a contractor as a potentially emerging enterprise;

3) from a date determined by the Minister, recognition in terms of a best practice recognition scheme; and

4) from a date determined by the Minister, the status of recognition of the progress of a contractor in terms of any black economic empowerment programme.

The aim of the register of contractors is to:

1) indicate the size and distribution of contractors operating within the construction industry;

2) indicate the volume, nature and performance of contractors and target groups; and

3) enable access by the private sector and thus facilitate private sector procurement.

 
What happens if Contractors do not register with the CIDB?

It is vital that contractors register in terms of the Regulations as every organ of state must, subject to the policy on procurement, apply the register of contractors to its procurement process.

The Act provides that no contractor may undertake, carry out or complete any construction works for public sector contracts, awarded in terms of competitive tender or quotation, unless he or she is registered with the CIDB and holds a valid registration certificate issued by the CIDB. Should a contractor do so he or she will be guilty of an offence and liable to pay a fine of up to ten per cent of the value of the contract in question.

It should also be noted that a failure to comply with the Regulations is an offence which carries the possibility of a fine of up R100,000.00.

Best Practice Assessment Scheme:

Both the Act and Regulations make provision, at a later stage for the implementation of a Best Practice Assessment Scheme which is aimed at enabling organs of state to manage risk on complex contracting strategies and promote contractor development in relation to best practice standards and guidelines developed by the CIDB.

Conclusion:

In keeping with the stated intention of the Act, the creation of the project and contractor registers is aimed at stimulating sustainable growth, reform and improvement of the construction sector. The additional administrative burden and the payment of registration fees has, and will no doubt continue to be met with apprehension by the private sector in particular. The key to the successful implementation of the Regulations lies not in its policing but rather in the CIDB’s ability to thereby demonstrably increase value and service delivery to the benefit of employers, contractors and all other stakeholders.