Frequently Asked Questions – Covid-19 Lockdown

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Introduction

This document has been prepared to further assist in providing guidance in the form of Frequently Asked Questions relating to the consequences of the Covid-19 Lockdown that we have encountered from various interested parties and which have been raised in correspondence up to this point.

Question : What are the contractual implications in terms of GCC 2015, of forced work stoppages/force majeure on construction sites and how does one claim compensation?

Answer :

  • Although the answer relates to the GCC 2015 it is similar to most other construction contracts such as FIDIC & JBCC, which encompass similar principles, for instance, Clause 8 of the GCC 2015 deals with “excepted risks”, which is a parallel similar process in principle to the way FIDIC deals with “force majeure”.
  • Kindly refer to the section in Clause 8 headed “unforeseen circumstances Including lockdowns” and note that two types of claim can be submitted, namely, (1) Extension of time and (2) P&G’s (but only time-related costs)
  • Also note that there are two legs to the concept, namely, (1) If contractor forced by statute (just attach President’s declaration of Lockdown) and (2) Contractor’s physical loss, for example, the loss of workers due to the virus in terms of sickness or death
  • It is also possible to claim for circumstances separate from the statute, for example if the contractor’s workforce is affected but not as a result of statues, which can be before the statute was issued and/or after the statute was issued
  • There are two very important matters/rules that must be observed as follows, (1) Keep each claim as a separate document, do not combine the claims and (2) Submit the claims separately/ keep them apart
  • For example, can have the following claims:
  • Claim 1: costs
  • Claim 2 time
  • Claim 3: P&G’s
  • Claim 4: extension of time before statute
  • Claim 5: events after the statute
  • Claim 6: extension of time because of loss of resources
  • The basis for the process are ground rules applied throughout modern contracts including FIDIC, NEC & GCC as follows (1) Rule 3: “foreseeable risks” shall be apportioned to the Party best able to manage them and (2) Rule 4: “unforeseeable risks” shall be apportioned to the Employer.

Question: What has National Treasury said regarding the impact of Covid-19 on procurement dates applicable to State Entities?

Answer :

  • National Treasury has requested the accounting authorities of all government organisations/state entities to observe the extension of procurement dates as follows:
  • Submission of Procurement Plans extended from 31 March to 31 May 2020.
  • Tenders closing during or 14 days after Lockdown to be extended by 21 days after Lockdown ends.
  • Tender validity periods to be extended to allow state entities time to evaluate tenders.
  • State entities to refrain from issuing new tenders during Lockdown.
  • CESA has escalated this as a concern with Business for SA (B4SA) as there should be little reason for tenders that have been processed not to be awarded so that Professional Service providers may have such opportunities to derive an income and so that staff employability is not compromised during this lockdown period as many already have a work from home arrangement with employees.

Question: Has CESA engaged with Government to facilitate UIF payouts to retrenched staff, according to the FAQ page posted by Government ?

Answer:

No, we have not. Despite the fact that we are a member based Organisation, we are neither a Bargaining Council and nor have we ever been involved directly in employee matters as a Sectoral Association, on behalf of our members, the aforementioned being a specific requirement for eligibility to an MoU undertaking with the Department before being authorised to assist in processing claims. Unfortunately too, as the scope would be very broad and we lack the resource base to do so, we are not able to liaise specifically on behalf of members as the needs of each may differ as well.

Question: Does CESA have a position or information on the CIDB Professional Services Contract?

Answer:

With respect to the CIDB Professional Services Contract, the following clauses address the issue of force majeure:

  • Clause 8.3 entitled “Force majeure” has three sub-clauses (8.3.1, 8.3.2 & 8.3.3) dealing with the contractual obligations of the both the Employer and the Service Provider in the event of force majeure, paraphrased as follows:
    • The failure of parties to fulfil  their contractual obligations not considered a breach
    • Affected party to take reasonable precautions to meet contractual obligations
    • Affected party to inform the other Party as soon as possible about the occurrence of force majeure.
    • If the performance of the Services is suspended the Period of Performance shall be extended
    • The Service Provider shall be entitled to any payment due in terms of the Contract and to be reimbursed for additional costs
  • Clause 8.4 entitled “Termination” has two sub-clauses (8.4.1 (e) & 8.4.3 (b)) dealing with the right of both parties to cancel the contract in the event of force majeure if the Service Provider is unable to perform a material portion of the Services for a period of not less than sixty days.