Project Management and the Law – Practical guidelines for management of engineering and building contracts

PREFACE vii
ACKNOWLEDGEMENTS ix
CHAPTER 1: GENERAL 1
1.1 Introduction 1
1.2 The Concept of Project Management 3
1.3 Creation of a Contract 3
1.4 The Tendering System: Basic Principles 5
1.5 Invitation to tender: Basic Principles 8

CHAPTER 2: TENDERING SYSTEMS 11
2.1 General 11
2.2 The tender/bid committee 11
2.3 Tender rules and instructions 12
2.4 Resource for tenderers 13
2.5 Standards for tenders: organs of the State 13
2.6 Characteristics of a good tendering system 14

CHAPTER 3: LEGAL CAPACITY TO ENTER
INTO A CONTRACT 15
3.1 General principles 15
3.2 Contracts with natural persons 15
3.3 Contracts with partnerships and trusts 16
3.4 Contracts with the State 16
3.5 Contract with juristic persons 18
3.6 The Business and Object of a company 18
3.7 The manner by which a company pursues its business objects 19
3.8 The authority to act for, and on behalf of, a company 20
3.9 Delegated authorities 22
3.10 Delegated powers and signing authorities 25
3.11 Exceeding of delegated powers 28
3.12 Delegated authorities to be observed 30
3.13 Delegated powers pertaining to organs of the State 31
3.14 Delegated powers and parcelling 32
CHAPTER 4: CONTRACTS AND TYPES OF CONTRACTS 33
4.1 The definition of a contract 33
4.2 The requirements of a valid contract 33
4.3 The consequences of an invalid contract 35
4.4 More about the creation of a contract 36
4.5 Interpretation of contracts 37
4.6 The consequences of contracts 39
4.7 Breach of contract 40
4.8 Types of contracts 40
4.9 Contracts for letting and hiring of work;
engineering and building contracts 41
4.10 Characteristics and application of various categories of
engineering/building contracts 42
4.11 Contracts for letting or hiring of services 46
4.12 New innovations and modern trends in contract formats 48
4.13 Selecting the appropriate contract format 49
CHAPTER 5: TENDER PROCEDURES FOR
MAJOR CONTRACTS 55
5.1 Definition 55
5.2 Scope of application 55
5.3 Tender documents 55
5.4 Notice to tenderers/press notice 57
5.5 General Conditions of Contract 57
5.6 Preparation of tender documents 58
5.7 Special Conditions of Contract or project specification 59
5.8 The specifications 60
5.9 Items of a contingency nature: provisional work 62
5.10 Prime cost sums and provisional sums 64
5.11 Vetting of draft tender documents 65
5.12 Financial implications 67
5.13 Advertising of tenders 67
5.14 Tender period 67
5.15 Validity period 68
5.16 Site inspection 68
5.17 Receipt and opening of tenders, recording and procedures 69
5.18 Adjudication of tenders 69
5.19 The recommendation to the tender committee 72
5.20 Conflict of interests 72
5.21 Acceptance of a tender 73
CHAPTER 6: MANAGEMENT AND ADMINISTRATION
(EXECUTION) OF MAJOR CONTRACTS 75
6.1 General 75
6.2 Mandating 76
6.3 Contract formalities 77
6.4 Binding and signing of contract documents 78
6.5 Division of a contract among several contractors 80
6.6 Validity of instructions 80
6.7 Failure to start the contract 80
6.8 Control of securities and guarantees 81
6.9 Administration of contracts; breach & default of contract 81
6.10 Contract measurements and interim payments 82
6.11 Day work 83
6.12 Weekly return of labour 83
6.13 Labour legislation 83
6.14 Subcontractors and removal of plant, equipment or materials 84
6.15 Nominated Contractors 85
6.16 Additional time 85
6.17 Penalties 86
6.18 Variations and variation orders 87
6.19 Securities 90
6.20 Cession and assignment of the contract 90
6.21 Release of retention money/deed of suretyship 91
6.22 Certificate of completion 92
6.23 Defects liability and maintenance 92
6.24 Final payment certificate 92
6.25 Supplementary payments 94
CHAPTER 7: INSURANCE 97
7.1 General 97
7.2 General insurance provisions 99
7.3 Insurance taken out by the contractor 100
7.4 The case for PCI 102
7.5 Public liability insurance 105
7.6 Cross-liability insurance 106
7.7 Hired plant and motor vehicles 107
7.8 Claims 107
7.9 Communication is better than mistake 110
CHAPTER 8: BREACH OF CONTRACT 111
8.1 Introduction 111
8.2 Prevention is better than cure 112
8.3 Cancellation and the law 113
8.4 Cancellation and consequences 116
8.5 Cancellation and insolvency 117
8.6 Cancellation procedures and corrective actions 120
8.7 Possible difficulties and obstacles 124
8.8 Alternatives to cancellation 126
CHAPTER 9: THE FUNCTIONS AND OBLIGATIONS OF
THE PARTIES TO A CONTRACT 129
9.1 General 129
9.2 The obligations of the contractor 130
9.3 The obligations of the employer 132
9.4 The functions, duties and obligations of the site agent 132
9.5 The duties and functions of the technical officer 134
9.6 The duties, functions and obligations of the project manager 139
9.7 The duties, functions and obligations of the executive officer 142
9.8 The legal status of the contract office bearers 144
CHAPTER 10: RESOLUTION OF DISPUTES 147
10.1 General 147
10.2 The Transnet E5 and dispute resolution 147
10.3 The contractor’s right to claim 147
10.4 The submission of a dispute to the project manager 151
10.5 The project manager decides all claims 152
10.6 The executive officer deciding disputes 157
10.7 Settlement of disputes by negotiation 157
10.8 Decisions on behalf of the employer 161
10.9 Dispute resolution by adjudication 162
10.10 Dispute resolution by arbitration 164
10.11 Conclusion 167
CHAPTER 11: OCCUPATIONAL HEALTH AND SAFETY 169
11.1 Introduction 169
11.2 Duties, obligations and liabilities in terms of OHSACT 170
11.3 Scope of the OHSACT 171
11.4 Documentary provision 172
11.5 The employer and the contractor 172
11.6 The duties and obligations of the client and contract office bearers173
11.7 The contractual impact of Regulation 4 174
11.8 The principal contractor and the contractor 177
11.9 The position of SMME and BEE contractors 177
11.10 Responsibility for design of temporary works and tunnel support 178
CHAPTER 12: PRACTICAL APPLICATION 181
12.1 General 181
12.2 Site inspection 181
12.3 Unforeseeable adverse subsurface conditions 185
12.4 Variation orders and procedures 196
12.5 Contract programme and late completion 201
12.6 Claims for delays/extension of time 207
12.7 Determination of the amount of penalties 211
12.8 Qualified tenders 215
12.9 The concept of a nominated contractor 220
12.10 Payment for materials on site 225
12.11 The status and legal consequences of payment certificates 228
12.12 Delegation of authority 231
CHAPTER 13: THE HEXRIVER TUNNEL DISPUTE-
A CASE STUDY 233
13.1 Introduction 233
13.2 Background 233
13.3 The geological investigation 234
13.4 The tunnel design 235
13.5 The crossing loop 236
13.6 Adjudication and award of tenders 236
13.7 Construction of the tunnel 237
13.8 The claim submission 238
13.9 The first arbitration 238
13.10 The new claim 239
13.11 Litigation 239
13.12 The second arbitration 240
13.13 The settlement negotiations 241
13.14 The real cause of the dispute 243
13.15 Lessons learnt 244
13.16 Conclusion 245