Construction contracts evolve over the passing of time into hopefully more structured, efficient and accurate tools for commercial trade. With that they are better facilitate the conduct of such trade and address risks more comprehensively and provide for more effective dispute resolution. Potentially the most important change to the standard form contract landscape in South Africa in recent times is the introduction of the long awaited GCC2010 which was finally released at the end of May 2010. The GCC2004 is widely used by public sector for the execution of civil engineering projects which is in line with the directive issued by the CIDB. It is therefore envisaged that the GCC2010 will soon replace the GCC2004 in practice.
A number of interested parties have contributed to the drafting of the contract (contractors, employers, engineers and a language expert) however, there is no acknowledged contribution from any legal practitioners. Even the NEC suite of contracts, which is a clear attempt to break the shackles of legalistic conditions of contract, involved legally qualified experts in its drafting. That said however the drafters of the GCC2010 did not shy away from an attempt to draft the contract in the same legalistic style and language as its predecessor. The GCC2010 has roughly 20 deeming provisions and approximately 10 indemnifications.
What is also clear is that, upon a reading of the GCC2010, it appears (much like the attempt found in the GCC2004) that the drafters have tried to blend the FIDIC style of drafting and have included a selection of certain of the mechanisms found in the NEC form of contract. This point will be elaborated upon below.
The GCC2004 and the JBCC2000 share the same attempt to deal with different ways of calculating time periods. This has lead to a number of problems in areas such as the calculation of penalties . This creates confusion. A “Day” is clearly defined as a calendar day (see clause 220.127.116.11) but in clause 5.1 the contract states that non working days and the day when the time span commences fall outside of the specific time spans stipulated in the contract. The time periods used in the contract are based on a 7 day week. Most contracts will specify Sundays and public holidays and non-working days. Also most contractors work on Saturday mornings (this is typically reserved for catching-up where necessary). If the contractor’s programme is included in the contract, this could lead to the interpretation that Saturdays are a working day. This could well lead to different interpretations between the engineer and contractor with regards to the calculation of time periods and could be especially problematic in light of the number of time barring provisions now found in the GCC2010.
Moreover, there are a number of clauses which deal with other time periods not defined. Clause 6.5.3 refers to one working day, clause 8.5.1 refers to 48 hours – this will give rise to questioning the way in which calculation these periods are calculated
The GCC2010 contains a number of clauses where one party may put the other on notice to perform within a “stated time” . Nowhere is there any requirement for this “stated time” period to be reasonable. So, for example, in clauses 7.6.1 and 7.6.3 the engineer could actually order the rectification of works within 1 day and, if the contractor failed to rectify such works, the employer would be entitled to employ other persons to carry out such rectification works at the expense of the contractor.
Claims, programme and time bars
The claims provision has introduced the concept of “proven additional cost”. Claims for additional payment occasioned by an extension of time under the GCC2004 were typically determined on basis of “extra cost” and the effect of the extension on the contractor’s tendered P&G. Now the GCC2010 requires that the contractor prove the additional cost.
Clause 5.6 requires that the contractor submit and the engineer approve a programme for the works. The clause does not provide any objective grounds upon which the engineer may reject a programme, which could be problematic. The approved programme is then referred to (rather inconsistently) in some clauses which entitle the contractor to claim an extension of time. By doing this the drafters have attempted to adopt the NEC mechanism of evaluating entitlements to an extension of time against an approved programme. An example of a sub-clause where the GCC2010 does not refer to the approved programme is sub-clause 5.9.2 (further drawings and instructions). This requires that the engineer deliver drawings and instructions to the contractor during the ‘...progress of the Works...’ The contractor’s entitlement to claim an extension of time for completion and additional payment where these drawings and instructions are not so delivered is found in sub-clause 5.9.6. However, this does not specifically link this delay against the approved programme. The contractor’s right to claim is not reliant on the programme as it is under the NEC. This is a fundamental difference between the FIDIC and GCC suite of contracts and the NEC. Reference to the programme just confuses the process. Therefore the contractor is warned in this instance that the inclusion of a date by which something has to be done as shown on the programme, is not enough to secure the right to claim in the event that the obligation is not met by the engineer.
A new addition to the GCC2010 is clause 5.12.4 which grants the engineer the right to request the contractor to accelerate as opposed to granting an extension of time. It is widely recommended that where a contract is in delay the parties deal with and, agree or determine the extension of time, prior to agreeing or instructing acceleration.
The contract has maintained the time barring provisions on claims found in clause 48 of the GCC2004. It has gone one step further and has incorporated further time bar clauses into matters which need to be referred to dispute resolution which follows the NEC3 provisions in this regard (refer to Option W1 in the NEC3).
Confirming variations and time bars
All instructions which the contractor believes should constitute a variation order need to be confirmed by the contractor in writing within 7 days of the issuing of such instruction as stated in sub-clause 18.104.22.168. If the contractor fails to confirm such variation order, the contractor shall not be entitled to additional payment. The contractor should be very vigilant during the execution of the contract as the onus here lies with the contractor to confirm variations or lose their entitlement if they fail to do so. This differs from the old GCC 2004 which had a time bar (in clause 48) on all extension of time claims but only a time bar on any payment clause that made reference to clause 48. The variations clause in the GCC 2004 made no reference to clause 48. This additional provision has very serious consequences to contractors and should be carefully considered prior to entering into contracts under the GCC2010.
It appears that the drafters of the adjudication rules do not understand the difference between adjudication and a dispute review board. The contract makes provision for a standing adjudication board and ad-hoc adjudication. The decision of the standing adjudication board is binding by express provision of the contract until it is overturned by arbitration or by the court whereas the enforcement of the decision of the ad hoc adjudicator is not dealt with. Perhaps this issue will be clarified through practice and use of the GCC2010.
Only through the actual application and use of a contract will all the real problems be identified and some expected problem perhaps proved to be less problematic than first thought. There are however reasons to be cautious when embarking on any contract where the GCC 2010 has been used and the initial conclusion must be that the risk allocation in the GCC 2010 is more onerous on the contractor.
Written by Niel Coertse, Associate at MDA Consulting