CONSTRUCTION PROCUREMENT

BEST PRACTICE GUIDELINE #A8

Construction Industry Development Board Pretoria - Head Office Tel: 012 482 7200 Fraudline: 0800 11 24 32 Call Centre: 0860 103 353 E-mail: [email protected]

1.

Procurement Measures to Develop Registered Contractors Third Edition of CIDB document 1036 December 2008

Background

The Construction Industry Development Board (CIDB) has in terms of its legislative mandate established a Register of Contractors and a Register of Projects. The Register of Contracts is designed to manage risk in the tendering process, reduce the administrative burden associated with the award of contracts and reduce tendering costs to both clients and contractors. The Register of Projects, on the other hand, gathers information on the nature, value and distribution of projects. These registers pave the way for the introduction of a best practice contractor recognition scheme and a best practice project assessment scheme. The CIDB Construction Registers Service provides the framework necessary for enterprise development as it records information relating to the profile of contractors, but also the broad capabilities of contractors and information relating to the award of contracts. The Register of Contractors currently captures the footprint of an enterprise (i.e. name of enterprise, town within which business is located, ownership particulars, registrations with NHBRC and ECBSA, etc), its works and financial capability (contractor grading designation) and its emerging enterprise status, if any. In future an enterprise’s status in terms of the BBBEE score card and the CIDB Best Practice Contractor Recognition Scheme will be recorded on the Register of Contractors. The Register of Projects provides aggregated information on the nature, value and distribution of projects in respect of both the public and private sector. This information stored in the registers may be used to identify where gaps in contracting capacity exist within a geographic region or where an unsustainable supply of contractors within a segment of the market occurs. It also enables clients (employers) to match the supply of work with transformation and industry development imperatives. As such, the registers not only provide market intelligence, but also facilitate the appropriate targeting and integration of development initiatives involving training, mentoring and finance to specific categories of contractors.

2.

Contractor grading designations

Contractor grading designation is a point in time measure of a contractor’s financial and works capability to undertake a contract of a given tender value range for a particular class of works. Contractors are assigned an alpha-numeric number which represents their contractor grading designation as illustrated in Figure 1 based on the some or all of the following, depending upon their contractor grading designation and the period over which the enterprise has been operating: • • • •

employable capital (liquid cash resources available to a contractor or amount that a contractor is able to muster as working capital); annual average turnover; highest value of contract completed; requite number of persons suitably registered built environment professionals in a contractor’s employ; and

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•

enterprise registration with statutory bodies .

The Act prohibits unregistered contractors from executing construction works in the public sector and requires registered contactors to have an appropriate contractor grading designation in order to be awarded a competitively tendered construction works contract. Registered contractors may not tender for contracts above their contractor grading designation, but may do so below the limit of their tender value ranges. Registered contractors may combine their resources by forming joint ventures to improve their contractor grading designations. The JV calculator provided on the CIDB website (www.cidb.org.za) allows registered contractors to calculate their combined contractor grading designation. Single number representing a registered contractor’s capability to undertake a contract in a particular class of construction works within a specified tender value range, namely: Tender Value Tender value including Range designation VAT not to exceed: 1 R 200 000 2 R 650 000 3 R 2 000 000 4 R 4 000 000 5 R 6 500 000 6 R13 000 000 7 R40 000 000 8 R 130 000 000 9 No limit

5

C

E

Two letters depicting the class of construction in which the contractor is registered, namely: CE Civil engineering EB Electrical engineering (building) EP Electrical engineering (infrastructure) GB General building ME Mechanical engineering SB Asphalt works (supply and lay) SC Building excavations, shaft sinking and lateral earth support SD Corrosion protection (cathodic, anodic and electrolytic) SE Demolition and blasting SF Fire prevention and protection systems SG Glazing, curtain walls and shop fronts SH Landscaping, irrigation and horticultural works SI Lifts, escalators and travellators (installation, commissioning and maintenance) SJ Piling and specialized foundations for buildings and structures SK Road markings and signage SL Structural steelwork fabrication and erection SM Timber buildings and structures SN Waterproofing of basements, roofs and walls using specialist systems. SO Water supply and drainage for buildings (wet services, plumbing) SQ Precast concrete or steel fencing

Figure 1: Describing the contractor grading designation of a registered contractor

3.

Emerging enterprises

The Act defines an emerging enterprise as “an enterprise which is owned, managed and controlled by previously disadvantaged persons and which is overcoming business impediments arising from the legacy of apartheid.” The CIDB registers those contractors which are owned, managed and controlled by previously disadvantaged persons and who apply for registration as potentially emerging enterprises. Those contractors who are registered as potentially emerging enterprises may, where employers have in place a targeted development programme, be awarded a contract in the tender value range corresponding to one contractor grading designation higher that the one in which they are registered.

4.

Challenges in implementing the register of contractors

SA Construction Industry Status Report – 2004 makes a number of pertinent observations:

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• • •

•

• •

Emerging contractors are entering the market at the lower end and in the general building contracting category, making this sector extremely competitive and unsustainable in many areas. Large numbers of emerging contractors are tendering for public sector works contracts in the range between R0,5 million to R3 million. This sector of the market is also becoming overly competitive. The general opinion is that national, provincial and local departments as well as state owned enterprises are providing opportunities through their preferential procurement practices. However, access appears to be too freely open, resulting in an unsustainable workflow to contractors who have begun to prove themselves. A further impact of the opening up of the contracting sector is the erosion of capacity in the established sector caused by experienced black skills leaving to set up their own enterprises to take advantage of public sector preferential procurement. While opportunity for black- and women-owned enterprises has been rapidly expanded in the general building contracting category, the specialist contracting sectors have largely remained unpenetrated, including, for example, electrical and mechanical engineering that require specialist skills and greater capital resources. Development of the emerging sector continues to grapple with a range of supply-side constraints, including access to finance, sureties and credit, entrepreneurial skills and cash flow management, which are critical success factors in the contracting sector. Late interim payments and the delayed settlement of final accounts by employers and the professions undermine contractors’ performance and sustainable empowerment.

The initial data obtained from the register indicates that the micro enterprises sector (annual turnover less than R 200 000) has been over stimulated in the building and civil engineering sectors to the extent that such enterprises are not sustainable in several regions within South Africa. Very few black enterprises have emerged from small enterprise status (annual turnover between R 3,0 and R 6,0 million) to medium enterprise status (annual turnover between R 6,0 and R 20,0 million) i.e. typically, from an enterprise with an owner management structure to an enterprise with an employed company management structure. The situation is further aggravated by the fact that many contractors have: • •

low annual average turnovers due to their reliance on cession agreements or free issue of materials in order to overcome difficulties in obtaining credit for construction materials; and sporadic track records due to fluctuating work opportunities and, in some regions, aggressive targeting of women businesses.

Thus if for example, if there are no contractors registered in contractor grading designation 7GB in a region, it simply means there are no contractors qualified to perform the work at prime contract level on their own. It does not mean that industry development and black economic empowerment imperatives are to be shelved or ignored. The challenge lies in developing such contractors.

5.

Principles for sustainable growth

The principles for sustainable growth that emerged from the National Workshop on Sustainable Enterprise Development 2005, around which interventions should be designed include: 1)

Enterprise development programmes, both public and private, must focus on business development and not on job creation. As such, a distinction needs to be made between job creation programmes, some of which may develop micro enterprises or labour-only contractors in order to implement employment intensive works, and enterprise development programmes. Furthermore, the focus must be on the development of enterprises as opposed to individuals who may become self employed.

2)

Public sector enterprise development programmes must target construction businesses that: a) b) c)

3)

are not labour-only contractors; have the potential and desire to improve their CIDB contractor grading designation; and fall within the CIDB classes of works or contractor grading designations where gaps exist either nationally or regionally.

Enterprise development programmes must be designed to:

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a) b) c)

enable targeted enterprises to grow to the extent that they can operate independently within their financial and works capabilities at prime or subcontract level; address key constraints to sustainability, especially access to finance and credit; and address size-specific constraints.

4)

Cession agreements must not be a means by which emerging enterprises are supported.

5)

Training interventions must be designed and structured to either allow enterprises to consolidate and become more sustainable or facilitate their growth through improved capabilities to source and independently execute contracts.

6)

The public procurement system must reward those enterprises that perform well.

Employers need to develop the market for medium sized enterprises by providing contracts in the range R7 to R30 million in order to increase the capacity of the industry and to extend transformation beyond small enterprise status. By creating a demand for contractors in this range, and simultaneously providing appropriate support, more contractors will move into these sectors.

6.

6.1

Strategies for promoting the participation and development of contractors

registered

General

The CIDB Standard for Uniformity in Construction Procurement requires that employers, wherever appropriate, in support of industry development, shall in the application of the register of contractors, promote the participation and development of registered contractors by means of one or more of the following: a) b) c) d)

unbundling projects into smaller contracts; implementing targeted development programmes to support potentially emerging contractors in accordance with the provisions of the Construction Industry Development Regulations; offering preferences to contractors who undertake to enter into joint ventures with or subcontract portions of the works to such contractors; and requiring a prime contractor to subcontract defined portions of the works to such contractors in accordance with the provisions of the Standard set out in Annex I.

In addition, employers can offer preferences in terms of a preferential procurement policy to a contractor registered in particular contractor grading designations Accordingly, there are a number of contracting and targeting strategies that employers can use to promote the development of registered contractors1. These strategies enable registered contractors to qualify for registration in a higher contracting grading designation by providing them with work opportunities so that they can improve upon their track record. They strategies can be linked to can be linked to broad-based black economic empowerment imperatives. For example, in high value contracts, prime contractors can be rewarded for their HDI equity in terms of the current Preferential Procurement Policy Framework regulations (or score in terms of a BEE balanced scorecard when DTI publish their codes of good practice on Broad-Based Black Economic 1 It should be noted that the contractors who undertake construction works contracts on a substantially labour-only basis are exempt from registration. Accordingly contractors who are provided with the bulk of construction material by the client or third parties in terms of specific development programmes need not be registered. Several community or development programmes engage “entry level” labour contractors to execute construction works. Alternatively, the client or third party management support (see SANS 1921-4: Third party management support in works contracts) provide contractors with the “free issue” of the bulk of the materials for incorporation into the works and contractors are only required, in some instances, to obtain a small quantity of minor materials. The regulations exempt such contractors from registration.

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Empowerment) and either be offered further preference points should they elect to enter into joint venture or subcontract work to registered contractors or be required to subcontract portions of work to such contractors in terms of prescribed procedures. In lower value contracts, tender evaluation points can be offered on the basis of HDI equity and to those registered in a particular contractor grading designation) or elect to form joint ventures. 6.2

Practical considerations

6.2.1.1

Option 1: Unbundling of contracts

Employers can unbundle (break down) projects into smaller contracts to ensure the participation of smaller registered contractors than would have been required had one single large contract been awarded. Strengths:

Provides more opportunities to contractors, registered in relatively low contractor grading designations, to perform contracts as prime contractors.

Weaknesses:

Reduces work opportunities for those registered in higher contractor grading designations Places additional administrative burden on employers to administer increased number of contracts. May result in an inappropriate division of responsibilities, increased contractual risk, duplication of establishment charges and under-utilization of resources. Project may lack overall co-ordination and management. Small contractors may not have adequate management skills to deal with the complexities associated with the nature of the works..

This approach works best in contracts which have no requirements for sophisticated management techniques or where there is little or no management requirements at the interfaces between contracts within a particular project. Where sophisticated management techniques or management is required at the interfaces, it is advisable to adopt a management contracting strategy (i.e. appoint a management contractor to contract with and manage a number of contractors to carry out construction on the basis of designs issued by the Employer) or a construction management strategy (i.e. a strategy similar to a management contract, the main difference being that the contracts are between the Employer and the various contractors.). (The NEC Engineering and Construction Contracts provide standard options for these contracting strategies.) . 6.2.2.2 Option 2: Implement a targeted development programme for potentially emerging enterprises The Register of Contractors records the potentially emerging enterprise status of registered contractors. In terms of the regulations, contracts may be awarded to potentially emerging enterprises in the tender value range corresponding to one contractor grading designation higher than the designation in which they are currently registered, provided that it is within a framework of targeted development i.e. the employer is: i) ii)

satisfied that such a contractor has the potential to develop and qualify to be registered in a higher grade; and ensures that financial, management or other support is provided to that contractor to enable the contractor to successfully execute that contract.

Development support may include the provision of technical training, management training, mentorship, third party management support, shorter payment cycles, sponsorships or reduced guarantees and facilitation of bridging finance. Contracts may also have to be unbundled to provide the necessary work opportunities to such contractors.

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Strengths:

Accelerates the development of registered contractors from one contractor grading designation to another.

Weaknesses:

Employers need to put in place the resources required to implement and manage development programmes. Contractors can become dependent on the support measures that are put in place and as a result not progress to the next contractor grading designation.

The Standard for Uniformity in Construction Procurement requires that the following be inserted in the procurement documents to activate this option: Notice and invitation to tender Tenders should have a CIDB contractor grading designation of . . . or higher. Potentially emerging enterprises who satisfy criteria stated in the Tender Data may submit tender offers.

Tender Data Clause number (refer to Annex F) F.2.1

The following tenderers who are registered with the CIDB, or are capable of being so registered prior to the evaluation of submissions, are eligible to have their tenders evaluated: a)

contractors who have a contractor grading designation equal to or higher than a contractor grading designation determined in accordance with the sum tendered, or a value determined in accordance with Regulation 25 (1B) of 25(7A) of the Construction Industry Development Regulations, for a ….. or ….. class of construction work; and

b)

contractors registered as potentially emerging enterprises with the CIDB who are registered in one contractor grading designation lower than that required in terms of a) above and who satisfy the following criteria**: ....................

** The compiler is required to state the criteria that will apply. It is suggested that the following be inserted: 1) the employer is satisfied that such a contractor has the potential to develop and qualify to be registered in that higher grade as determined in accordance with the provisions of the CIDB Specification for Social and Economic Deliverables in Construction Works Contracts; and 2) the employer agrees to provide the financial, management or other support that is considered appropriate to enable the contractor to successfully execute that contract.

The employer’s acceptance criteria needs to be stated in the Tender Data so that only those who have the potential to develop are given the opportunity to tender in one contractor grading designation above their current designation e.g. 6.2.2.3

Option 3: Offering preferences to tenderers who undertake to enter into joint ventures with or subcontract work to registered contractors

Employers can in terms of the Preferential Procurement Policy Framework Act offer preferences to target groups. These may include joint ventures between registered contractors or to those tenderers that undertake to subcontract portions of the works to registered contractors, particularly those that have lower contractor grading designations and are registered as potentially emerging contractors. Strengths:

Promotes the cost effective participation and development of registered contractors in larger valued contracts at low risk to the employer. Facilitates the formation of joint ventures between contractors with significantly different contractor grading designations or between smaller contractors who

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otherwise would not have been able to participate in the contract as prime contractors due to their contractor grading designations. Weaknesses:

Employers need to monitor the contract participation goals to ensure that the goals for which preferences are granted are attained in the performance of the contract. The offering of preference points promotes joint venture formation and undertakings to subcontract work, but does not guarantee that it takes place. Registered contractors may lack the knowledge and skills to form joint ventures or find working as a subcontractor unattractive. May dilute and erode the effectiveness of the use of the preferencing system to attain other policy objectives.

There are a number of ways in which such preferences can be structured, including the offering of: i) ii)

a fixed number of tender evaluation points to those tenderers who undertake to enter into joint ventures with and / or subcontract works to registered contractors; a variable number of tender evaluation points in proportion to the quantum of participation a tenderer undertakes to provide registered contractors as joint venture partners and subcontractors.

Where employers offer preferences to secure participation, the Tender Notice and Invitation to Tender should alert registered contractors to such work opportunities. The SANS 1914 family of standards for targeted construction procurement should be used to establish and monitor contract participation goals (i.e. the percentage of the value of the contract which represents the participation of targeted enterprises in the performance of the contract) and to regulate the manner in which the participation takes place. (See Annexure 1 for sample preferencing schedules and SANS 10396: Implementing preferential construction procurement policies using targeted procurement procedures.) In this approach, a tenderer may either be required to form a joint venture in order to submit a tender or may be awarded a contract with an obligation to form a joint venture upon award of the contract. (The example contained in Annexure 1 presupposes that a joint venture will be formed after the award of the contract.) 6.2.2.4

Option 4: Require prime contractors to subcontract specified portions of the works to subcontractors selected jointly by the contractor and the employer

It is possible for employers to require that specified portions of the works are subcontracted in terms of an agreed procedure. In this approach, the employer specifies in the scope of works which portion(s) of the works are to be subcontracted out and the procedure that is to be followed to jointly appoint the subcontractor. (See Annex I of the CIDB Standard for Uniformity in Construction Procurement which is reproduced as Annexure 2). The prime contractor is required to invite tenders from appropriately registered contractors using the CIDB Standard Conditions of Tender with or without the offering of preferences. The tenders received are evaluated by both the employer and the contractor and the contractor enters into a subcontract with the successful tenderer as an obligation of contract in terms of fair conditions of subcontract, whereupon the subcontractor becomes a domestic subcontractor. Strengths:

Promotes the cost effective participation and development of smaller registered contractors in larger valued contracts without losing single point accountability for projects. Allows registered contractors to tender for work in a fair, transparent and equitable manner rather than having to negotiate such contracts with the prime contractor. Guarantees the participation of contractors registered in lower contractor grading designations.

Weaknesses:

Employers interfere in the workings of the contractor and are required to participate in the selection of subcontractors.

An alternative to this approach is to adopt the nominated subcontracting procedures provided in some forms of contract eg JBCC 2000 Principal Building Agreement.

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6.2.2.5

Option 5: Offering a preference to contractor registered in particular contractor grading designations

Contractors are not prevented from tendering for contracts having a lower contractor grading designation than the one in which they are registered. As a result, they may compete for contracts with registered contractors who have lower contractor grading designations. In some instances, it may be desirable to offer a preference to contractors that are registered in the lowest contractor grading designation that is eligible to have their tender offers evaluated. This will shield them to some extent from competition from contractors that are registered in higher contractor grading designations. Strengths:

Provides more sustainable work opportunities to contractors within the targeted contractor grading designation and accelerates their progress and growth.

Weaknesses:

May dilute and erode the effectiveness of the use of the preferencing system to attain other policy objectives.

Annexure 3 contains a sample preferencing schedule. It is relatively simple to combine this type of preference with other preferences that the employer may grant in the same preferencing schedule in respect of direct preferences. A preference can also be given to potentially emerging enterprises should this be desirable.

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Annexure 1:

Sample preferencing schedules for subcontracting work to or forming joint ventures with registered contractors

PREFERENCING SCHEDULE (Direct preference in respect of work subcontracted to CIDB registered contractors) 1 DEFINITIONS The following definitions shall apply to this schedule: Targeted enterprise: a contractor who is registered with the Construction Industry Development Board. 2 CONDITIONS ASSOCIATED WITH THE GRANTING OF PREFERENCES 1) The tenderer shall not subcontract less than the value of the work for which a preference is claimed to Targeted Enterprises. 2) The tenderer accepts the sanctions set out in Section 3 below should conditions 1 be breached. 3 SANCTIONS RELATING TO BREACHES OF PREFERENCING CONDITIONS The sanctions for breaching the preferencing conditions are: i) termination of the Contract; or ii) a financial penalty payable to the Employer equal to 1,25 times the number of tender evaluation points awarded in respect of the preference claimed, multiplied by the Contract Price exclusive of VAT, divided by 100. 4

TENDER PREFERENCE CLAIM IN RESPECT OF ENTERPRISE STATUS OR STRUCTURE OF THE TENDERING ENTITY

I/we apply on behalf of my/our firm for the following preference: Quantum of work subcontracted to Percentage of maximum registered contractors tender evaluation points provided for in the Preferential Procurement Policy Framework Act (Act 5 of 2000) 40% of the Contract Price 100% 30% of the Contract Price 75% 20% of the contract Price 50%

Preference claimed for subcontracting work to CIDB registered contractors (Y=yes)

The undersigned, who warrants that he / she is duly authorised to do so on behalf of the firm or sole proprieter confirms that he / she understands the conditions under which such preferences are granted and confirms that the tenderer satisfies the conditions pertaining to the granting of tender preferences. Signature : ...............................................................................................................................………. Name : .......................................................................................................................................……… Duly authorised to sign on behalf of : ............................................................................................……… Telephone : ...................................................................... Fax : ................................................................................ Date : ...............................................................................

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PREFERENCING SCHEDULE (Direct participation in respect of forming joint ventures with CIDB registered contractors upon the award of the Contract ) 1

DEFINITIONS

The following definitions shall apply to this schedule: Targeted partner: a contractor who is registered with the Construction Industry Development Board in at least two contractor grading designations lower than that of the contractor. 2

CONDITIONS ASSOCIATED WITH THE GRANTING OF PREFERENCES

The Tenderer, undertakes to: 1) engage one or more Targeted Partners in accordance with the provisions of the SANS 1914-2: Participation of Targeted Partners in Joint Ventures) as varied in Section 3 hereunder; 2) accept the sanctions set out in Section 4 below should such conditions be breached; 3) complete the Tender Preference Claim Form contained in Section 5 below; and 4) complete the Supporting Contract Participation Goal Calculation contained in this schedule. 3 VARIATIONS TO THE TARGETED CONSTRUCTION PROCUREMENT SPECIFICATION SANS 1914-2 The variations to SANS 1914-2 are set out below. Should any requirements of the variations conflict with requirements of SANS 1914-2, the requirements of the variations shall prevail. There are no variations. 4 SANCTIONS In the event that the Tenderer fails to substantiate that any failure to achieve the Contract Participation Goal relating to the granting of a preference was due to quantitative under runs, the elimination of items, or any other reason beyond the Contractor’s control which may be acceptable to the Employer, it shall be liable to pay to the Employer a financial penalty calculated in the following manner:

where

5

P

=

D Do

= =

NA P

= =

0,15 x (D – Do) x NA (100) tendered Contract Participation Goal percentage. the Contract Participation Goal which the Employer’s representative based on the credits passed, certifies as being achieved upon completion of the Contract. Net Amount Rand value of penalty payable

TENDER PREFERENCE CLAIM IN RESPECT OF ENTERPRISE STATUS OR STRUCTURE OF THE TENDERING ENTITY

I / we hereby tender a Contract Participation Goal of ……….% in order to claim a preference.

The undersigned, who warrants that he / she is duly authorised to do so on behalf of the firm or sole proprieter confirms that he / she understands the conditions under which such preferences are granted and confirms that the tenderer satisfies the conditions pertaining to the granting of tender preferences. Signature : ...............................................................................................................................………. Name : .......................................................................................................................................……… Duly authorised to sign on behalf of : ............................................................................................……… Telephone : ...................................................................... Fax : .........................................................................

Date : .......................................................................

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SUPPORTING CONTRACT PARTICIPATION GOAL CALCULATION A.1 Tender parameters Sum tendered (exclusive of any value added tax) Less all allowances Net amount

.................... .................... ....................

NOTE The joint venture contract participation goal is based on the net amount.

A.2 Joint venture proposal Name of targeted partner#

Participation parameter (1)

Percentage participation to be claimed towards CPG (1) (1) × 100 % % %

CPG NOTE The participation parameter is equated to the lesser of: a) the financial value of the contract for which the targeted partner is responsible; and b) twice the financial value of the contract which the targeted partner performs using his own resources or resources hired by him independently of his non-targeted partners; expressed as a fraction of the net amount. # Insert A/B/C etc. as appropriate, if unknown or not finalized.

Contract participation goal which is likely to be achieved in the performance of the contract . . . . . . . . . . . % (< 100 %) NOTE This value should equal or exceed the tendered contract participation goal.

Briefly describe the portions of the contract which each targeted partner is likely to manage in the performance of the contract: .............................................................................. .............................................................................. .............................................................................. .............................................................................. .............................................................................. .............................................................................. .............................................................................. .............................................................................. .............................................................................. Briefly describe the resources which are to be employed/provided by each targeted partner: .............................................................................. .............................................................................. .............................................................................. .............................................................................. .............................................................................. .............................................................................. .............................................................................. .............................................................................. .............................................................................. Briefly describe the role of the targeted partners in the joint venture: .............................................................................. .............................................................................. .............................................................................. .............................................................................. .............................................................................. .............................................................................. .............................................................................. .............................................................................. ..............................................................................

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Annexure 2: Selection of subcontractors by employers and contractors Insert the following in the Scope of Work: Scope of mandatory subcontract works The following portions of the works shall be subcontracted to CIDB registered contractors in accordance with the subcontracting procedures described in this scope of work: ………….. ………….. Subcontracting procedures The Contractor shall advertise and call for competitive tenders in respect of each portion of the works that are required to be subcontracted in terms of the contract in accordance with the relevant provisions of the latest edition of the CIDB Standard for Uniformity in Construction Procurement. The Contract Data in the associated procurement documents shall be based on the ………………(insert title of standard form of subcontract that is to be used), with minimal project specific variations and amendments that do not change their intended usage. The Employer together with the Contractor shall evaluate the tenders received in accordance with the provisions of the Standard Conditions of Tender contained in Annex F of Standard for Uniformity in Construction Procurement.. The evaluation panel shall comprise equal representatives from the Employer and from the Contractor. The Contractor shall without delay enter into contract with the successful tendering subcontractor based on their accepted tender submission The Contractor shall remain responsible for providing the subcontracted portion of the works as if the work had not been subcontracted. Note: 1 2

The CIDB Best Practice Guideline D1, Subcontracting Arrangements, provides guidance on the selection of a suitable form of subcontracts. Provision in the Pricing Data should be made for provisional sums for portions of the works that are to be subcontracted in this manner.

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Annexure 3:

Sample preferencing schedules for granting preferences to contractors having specific CIDB contractor grading designations

PREFERENCING SCHEDULE (Direct preference in respect of tenderer registered in a specific contractor grading designation) 1 DEFINITIONS The following definitions shall apply to this schedule: Targeted enterprise: a contractor who is registered with the Construction Industry Development Board in a nominated contractor grading designation. 2 CONDITIONS ASSOCIATED WITH THE GRANTING OF PREFERENCES Targeted Enterprise may not tender more than 20% of the value of their subcontract to others. 3 SANCTIONS RELATING TO BREACHES OF PREFERENCING CONDITIONS The sanctions for breaching the preferencing conditions are: i) termination of the Contract; or ii) a financial penalty payable to the Employer equal to 1,25 times the number of tender evaluation points awarded in respect of the preference claimed, multiplied by the Contract Price exclusive of VAT, divided by 100. 4

TENDER PREFERENCE CLAIM IN RESPECT OF ENTERPRISE STATUS OR STRUCTURE OF THE TENDERING ENTITY

I/we apply on behalf of my/our firm for the following preference: Category of targeted enterprise Percentage of maximum tender evaluation points provided for in the Preferential Procurement Policy Framework Act (Act 5 of 2000) Tenderer having a CIDB contractor grading 50% designation of 4

Preference claimed for subcontracting work to CIDB registered contractors (Y=yes)

The undersigned, who warrants that he / she is duly authorised to do so on behalf of the firm or sole proprieter confirms that he / she understands the conditions under which such preferences are granted and confirms that the tenderer satisfies the conditions pertaining to the granting of tender preferences. Signature : ...............................................................................................................................………. Name : .......................................................................................................................................……… Duly authorised to sign on behalf of : ............................................................................................……… Telephone : ...................................................................... Fax : ................................................................................ Date : ...............................................................................

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