Thursday, July 19, 2007

By Guy Potter
In an industry which is currently booming with the build up to 2010 and the general expansion and upgrading / refurbishment projects across the country, fuelled by a relatively stable local economy, it is important for participants in the construction industry to have cognizance of the legislative framework in which they are conducting business and more specifically the obligations which are imposed on them by legislation. The Code of Conduct in the Construction Industry Development Board Act, 38 of 2000 (“the Act”) is one such piece of legislation.
In accordance with the Act, the Construction Industry Development Board (“CIDB”), a board established by Parliament as a statutory body to provide leadership to stakeholders and to stimulate sustainable growth, reform and improvement of the construction industry, published a Code of Conduct (“the Code”), in terms of Board Notice 127 in Government Gazette 25656 of 31 October 2003, for all parties involved in construction procurement. 
The Code is aimed at fostering good corporate governance (i.e. discipline, transparency, independence, accountability, responsibility, fairness and social responsibility) in the construction industry and provides that the development of the construction industry will be promoted by participant and stakeholder organisations that:

have clearly stated and enacted corporate values;
ensure that they perform efficiently, responsibly, accountably, transparently, and with probity;
recognise the legitimacy of interest of defined stakeholders;
engage in long-term relationships;
adopt agreed codes to tackle corruption and persist in the enforcement thereof;
give due recognition to the respect for human rights;
respect the well-being of employees, treating them fairly and with cultural sensitivity;
practice and encourage greater environmental and social responsibility;
avoid the use of harmful products and processes;
promote collaborative partnerships with communities;
work to build capacity;
recognise the need for profitability in the private sector to ensure a vibrant and sustainable industry;
guard against abuse of power by the stronger party in contractual relationships;
recognise the inherently dangerous nature of the industry and give priority to occupational health and the safety of all employees and the public; and
engage with and share best practice.                      
The Code applies to the various parties involved in public and private procurement in relation to the development, extension, installation, repair, maintenance, renewal, removal, renovation, alteration, dismantling or demolition of a fixed asset, including building and engineering infrastructure. This includes work associated with the provision of supplies, services and engineering and construction works and disposals. Accordingly, the Code applies to agents, contractors, employers, employees, representatives, subcontractors and tenderers in the construction industry.
The Code provides that the parties in any private or public construction-related procurement, in their dealings with each other, are required to:

behave equitably, honestly and transparently;
discharge duties and obligations timeously and with integrity;
comply with all applicable legislation and associated regulations;
satisfy all requirements established in procurement documents;
avoid all conflicts of interest; and
not maliciously or recklessly injure or attempt to injure the reputation of another party.                            
The Code also serves to establish the broad framework within which an action, or default, by any party to the procurement process may be judged by way of examples to each of the 6 provisions highlighted above and set outs suggested acceptable and non-acceptable conduct for participants in the construction industry. To that end, any action or default which conflicts with the Code is deemed to be unacceptable.
Section 29 of the Act makes provision for the enforcement of the Code.  According to the Act, the CIDB, may convene and conduct an inquiry into any breach of the Code and must conduct the inquiry in the prescribed manner.  The CIDB may subpoena any party to appear personally at an inquiry, subpoena any person to produce any documentation relevant to such an inquiry and seize and make copies of the documentation produced.
Section 4 of the Code provides for additional and more extensive measures into the enforcement of the Code.  The Code provides that the CIDB may sanction those who breach the Code by issuing a warning or a fine; refer the matter to the South African Police Services; refer the matter, where a breach is in respect of an official, to the accounting officer for action in terms of the Public Service Act, 103 of1994; deregister contractors for a period of time or refer the matter to a statutory body that has jurisdiction over the matter.
There is no apparent conflict between section 29 of the Act and section 4 of the Code, however, the Code is more extensive in its reach regarding its enforcement.  This is arguably acceptable as the Code was published as a result of a mandate to the CIDB in terms of section 5(4)(a) of the Act. Further, section 4 of the Code provides that regulations are being prepared to provide for the extensive powers of enforcement provided in the Code.
Only contractors that comply with the Code are eligible for registration with the CIDB and accordingly the risk of not being able to carry out public sector work is in itself an enforcement mechanism for the Code as the Act provides that public clients may only appoint contractors who are registered with the CIDB. The adverse consequences for contractors not complying with the Code are not mirrored for employers and perhaps Parliament needs to look at amending this so that a sense of equity is brought to the construction industry and in turn the Code may be embraced more willingly.