Guide to Completion

and Payment
 1

PART B: JBCC® GUIDE TO COMPLETION AND PAYMENT

JBCC® Principal Building Agreement (Edition 6.2 – May 2018)
JBCC® N/S Subcontract Agreement (Edition 6.2 – May 2018)
JBCC® Minor Works Agreement (Edition 5.2 – May 2018)
JBCC® Small and Simple Works Contract (Edition 1.0 – May 2020)

CONTENTS 1

EXPLANATORY NOTES AND INSTRUCTIONS 2

COMPLETION Waiver of Contractor’s Lien

Certificate of Site Possession
Contract validity period

1.0 INTERIM COMPLETION 7

Construction period
Certificate of Interim Completion

2.0 PRACTICAL COMPLETION 9

Construction period
Certificate of Practical Completion - PBA

3.0 FINAL COMPLETION 14

Contract validity period
Certificate of Final Completion – PBA

4.0 SECTIONAL COMPLETION 18

5.0 LATENT DEFECTS LIABILITY PERIOD 19

Latent defects liability period

PAYMENT 6.0 INTERIM and FINAL PAYMENTS 22

7.0 RECOVERY STATEMENT- PBA 25
8.0 PAYMENT CERTIFICATE - PBA 27
9.0 PAYMENT NOTIFICATION - PBA 30
10.0 RECOVERY STATEMENT - NSSA 32
11.0 PAYMENT ADVICE - NSSA 34
12.0 RECOVERY STATEMENT – MWA 36

13.0 PAYMENT CERTIFICATE – MWA 38

14.0 PAYMENT CERTIFICATE – SSWC 40

14.0 ADVANCED PAYMENT 42

Example calculation for Advance Payment –
PBA + NSSA

INTEREST 15.0 INTEREST CALCULATIONS 43

CPAP 18.0 CPAP – EXAMPLE CALCULATION 45

©JBCC® Guide to Completion and Payment – JBCC May 2018 and May 2020
 2

EXPLANATORY NOTES AND INSTRUCTIONS

DISCLAIME The purpose of this publication is to give guidance on the most effective application of
the provisions of the JBCC May 2018/2020 agreements/contracts. This guidance is given
in good faith. JBCC disclaims all liability for any loss, damage or expense that may be
incurred in using this gude
__________________________________________________________________________

Introduction
This selection from the composite and updated guide by the JBCC® serves as a desktop reference manual for
consultants and contractors alike. It seeks to simplify the tendering for and the administration of the JBCC® building
agreements/contracts and to avoid/minimise disagreements arising from poor contract administration - in the interests
of standardisation of documentation and good practice in the building industry. This selection from the guide has been
prepared to further promote the understanding of the abovementioned objectives and should prove to be an important
aid in:

 Contract educational and training courses

 Fostering good and consistent management by all concerned

 Clearly defining and identifying the responsibilities of the contracting parties

 Defining notice periods and time bars required to protect the parties against prejudice or error

 Setting standard methodology for dealing with contractual responsibilities and obligations

 Ensuring the maintenance of the independent duty of the principal agent to act fairly between the parties

The JBCC® agreements are recommended/suitable for building projects and the suite consists of types of agreements
for larger and smaller projects to suit different circumstances. These are the Principal Building Agreement (PBA), the
N/S Subcontract Agreement (NSSA), the Minor Works Agreement (MWA), the Small and Simple Works Contract
(SSWC) and the Direct Contractor’s Contract (DCC) and are available from the stockists listed on the website jbcc.co.za
or online from ‘Contracts on Demand’

How this guide is structured

Completed ‘waiver of the contractor’s lien’ and ‘certificate of site possession” forms
The ‘completion’ process is described in five stages with completed certificates of interim, practical and final
completion of the works as a whole or in sections. The concept of ‘latent liability’ of the contractor is explained in
detail
Aspects of the ‘payment’ process are described in notes and illustrated with completed payment and related certificates
supplemented by the calculation of interest and the cost fluctuation provisions (CPAP)

©JBCC® Guide to Completion and Payment – JBCC May 2018 and May 2020
 3

®
Waiver of the Contractor's Lien for use with the:
Principal Building Agreement Edition used: Ed 6.2 May 2018

Minor Works Agreement Edition used: N/A

Small and Simple Works Contract Edition used: N/A

Contractor Defect-proof Builders

Employer ABC Developments

Works Cosy Flats

Site 9 Drummer Street, Symphony Village…

The contractor waives in favour of the employer any lien or right of retention that is or may be held in respect
of the works to be executed on the site

This waiver shall only come into effect on provision by the employer of a security for payment in fulfilment of
obligations in terms of the identified agreement

This done and signed at Symphony Village Date 2019-02-01

Name of Signatory Peter World Capacity CEO

For and on behalf of the contractor who by Signature of Witness

signature hereto warrants such authorization

Contractor Defect-proof Builders

Street Address 22 Straus Avenue, Symphony Village…..
Code 0865
Postal Address Private Bag 12, Symphony Village Code 0222

E-mail DPBuilders@gmail.com Mobile +27765643333

Fax N/A Telephone +277778088

JBCC® PBA, MWA or SSWC Waiver of Lien © Oct 2020

©JBCC® Guide to Completion and Payment – JBCC May 2018 and May 2020
 4

® Certificate of Site Possession for use with the:

Yes Ed 6.2
Principal Building Agreement
Minor Works Agreement No
Small and Simple Works Contract No

PROJECT DETAILS

Works Cosy Flats

Site Erf 346 Symphony Village

Employer ABC Developments

Contractor
Defect-proof Builders

Principal Agent Design Services Unlimited

Agent
Star Surveys-Peter Straight
Note: A professional Land Surveyor may be appointed to perform this function

The following particulars of the site were pointed out to the contractor by the agent

Pegs NW corner GPS: S25 23.096' E30.395'

Benchmark Stormwater catchpit, Dvorak Street

Other features Fig tree ("F" on Site Plan) behind building to be preserved

Information attached hereto: Survey plan with GPS coordinates and levels above mean sea level

This certificate records the hand-over of the site to the contractor for the purpose of constructing the works in
terms of the agreement. A copy of this certificate shall be provided to the contractor

©JBCC® Guide to Completion and Payment – JBCC May 2018 and May 2020
 5

DATE – LDLP EXPIRY - - - - - - -- - - - - - - - - - - - - - - - -

DATE – INTERIM COMPLETION

 Interim Completion
 The period to rectify  The period for
applies only in the N/S
DATE – SITE POSSESSION

items on the List for making good

DATE – TENDER AWARD

Subcontract Agreement latent defects

Completion and to
attend to defects that that appear up
to the end of the
DATE – PRACTICAL

 The intended date for become apparent up

to the end of the latent defects
practical completion may
defects liability period liability period
be revised by the PA
COMPLETEION

COMPLETEION
(LDLP)
(DLP)

DATE – FINAL
 Where the (revised) date
for practical completion is
not met, the contractor
may be liable for penalties
to the employer

––––––––––––––––––––––––––––––––––––––
90 C-DAY 5 YEARS

CONSTRUCTION DLP LDLP

PERIOD (PRIVATE)

 After ‘practical completion’ the works can be used for

CONSTRUCTION the intended purpose by the employer, subject to the
PERIOD (PUBLIC) issue of “occupation certificate” by local authority

 After practical completion the contractor is not

obliged to execute any further contract instructions
except those relating to the completion of
outstanding work

©JBCC® Guide to Completion and Payment – JBCC May 2018 and May 2020
 6

DATE – LDLP EXPIRY - - - - - - -- - - - - - - - - - - - - - - - -

DATE – PRACTICAL COMPLETEION
 The period for
 The period to rectify items on
 The intended date for making good
the List for Completion and to latent defects
practical completion may be
DATE – SITE POSSESSION

attend to defects that become

DATE – TENDER AWARD

revised by the employer/ that appear up

apparent up to the end of the to the end of
agent
defects liability period (DLP) the latent
defects liability
 Where the (revised) date for period (LDLP)

COMPLETEION
practical completion is not

DATE – FINAL
met, the contractor may be
liable for penalties to the
employer

–––––––––––––––––––––––––––––––––––––––––
60 C-DAY

CONSTRUCTION PERIOD DLP To Be Agreed

(PRIVATE)

 After ‘practical completion’ the works can be used for the

CONSTRUCTION PERIOD intended purpose by the employer, subject to the issue of
(PUBLIC) “occupation certificate” by local authority

 After practical completion the contractor is not obliged to

execute any further contract instructions except those
relating to the completion of outstanding work

©JBCC® Guide to Completion and Payment – JBCC May 2018 and May 2020
 7

COMPLETION

INTRODUCTION

All JBCC® agreements follow the same procedures to achieve Interim, Practical and Final Completion. The procedures described
in the JBCC® agreements to achieve each of the three degrees of completion must be applied strictly to minimise disagreements
later. Other than payment, completion is the most important aspect of the agreement and therefore no “short cuts” should be taken
in certifying any of the degrees of completion. The procedures and time bars applying to completion and to payment must be strictly
adhered to by the principal agent and be observed by the parties

1.0 INTERIM COMPLETION (in terms of the JBCC® NSSA only)

1.1 PURPOSE

The contractor generally requires the work of all subcontractors to be completed before the date of practical completion to permit
the timeous commissioning of services and general cleaning of the site before relinquishing possession of the site/works to the
employer

Note: Stage completion: The contractor and the subcontractor may agree which aspects of the subcontract works must be
completed before interim completion can be achieved in a particular project (only applies in the NSSA)

1.2 SUBCONTRACT CONSTRUCTION PERIOD AND PROGRAMME

▪ The subcontract construction period set by the principal agent in the pre-tender information and stated in the subcontract
data
▪ Where the contractor has been appointed at the time of calling for the subcontract tender, the principal agent must consult
the contractor in setting the date for interim completion. The contractor and the subcontractor must agree the subcontract
programme in harmony with the works as a whole
▪ The parties may agree to vary the start of the subcontract programme and the intended date of interim completion

1.3 ACHIEVEMENT OF STAGE COMPLETIONS AND INTERIM COMPLETION

▪ Criteria for stage completions must be set at the start of the subcontract construction period to avoid possible disputes later
▪ The contractor must inform the principal agent if the assistance of an appointed specialist agent will be required for the
inspection for achievement of interim completion
▪ On achievement of interim completion, the responsibility for the subcontract works passes to the contractor. This does not
relieve the subcontractor of his responsibility in respect of defective or incomplete work

1.4 DAMAGES

▪ The subcontractor may be liable for damages to the contractor for the late achievement of interim completion. The
subcontractor must be allowed enough time to achieve stage and/or interim completion set by the contractor
▪ Where the subcontractor is prevented from fulfilling obligations due to default of the contractor, other subcontractors or a
direct contractor, the subcontractor shall be entitled to damages. Adjustments to the subcontractor’s completion dates are
not dependent on the contractor obtaining similar adjustments in terms of the agreement with the employer
▪ The calculation of damages must be shown in the subcontract recovery statement - see page 32

1.5 OPERATING AND INSTRUCTION MANUALS

▪ On achievement of interim completion, the subcontractor shall hand over to the contractor all operating and instruction
manuals, guarantees etc. as well as the applicable statutory/regulatory approval certificates (compliance certificates)

©JBCC® Guide to Completion and Payment – JBCC May 2018 and May 2020
 8
DATE – TENDER AWARDED - - - - - - - - - - - - - - - - - - - - - - - - - -

DATE – LDLP EXPIRY- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

DATE – INTERIM COMPLETION N/S WORKS
DATE – ACCESS TO N/S WORKS

DATE – FINAL COMPLETEION

 C and S/C agree programme
 S/C gives notice to C for assistance/
DATE – SITE POSSESSION

inspection by PA/ agent

 PA/ agents direct standard of work and
quality of finish DATE – PRACTICAL
 C inspects S/C’s works, issue list for
interim completion and certificate of
COMPLETEION
interim completion
 C revises date of interim completion
 S/C complete late = damages

––––––––––––––––––––––––––––––––––––––––––
90 C-DAY 5 YEARS

SUBCONTRACT PERIOD DLP LDLP

 Where S/C is delayed by C and/ or

C’s CONSTRUCTION PERIOD other S/C’s = may claim damages

from C
 C assesses time claims from S/C;
PA assesses monetary claims
 S/C – product warranties commence
on date of PC

©JBCC® Guide to Completion and Payment – JBCC May 2018 and May 2020
 9

2.0 PRACTICAL COMPLETION

2.1 PURPOSE

The principal agent must specify in appropriate detail in the contract data at tender stage what quality of work and degree of
completion the contractor must produce to achieve practical completion to limit subjective interpretation thereof. This will vary
from one project to another depending on the nature and purpose of the building
The professional consultants and the team of contractors have been appointed to provide the employer with a building that “... can
effectively be used for the intended purpose…” Achievement of practical completion is the most important of the various stages of
completion required in terms of the agreement

2.2 CONSTRUCTION PERIOD

▪ The principal agent at the tender stage determines and specifies in the contract data the intended date when possession of
the site is to be given to the contractor, and the intended date for practical completion of the whole works, or the intended
dates for practical completion where the works is to be completed in sections - but not both!
▪ Where JBCC Agreements are used for public sector works, the construction period is defined in months
• During the construction period the principal agent must “inspect the works, or a section thereof, at appropriate intervals to
give the contractor interpretations and direction on the standard of work and the state of completion of the works required of
the contractor to achieve practical completion”… and likewise for work by subcontractors
• Any such interpretations and direction given to the contractor may not be construed as approval of any work or component
inspected by the principal agent

2.3 ACHIEVEMENT OF PRACTICAL COMPLETION

• “The contractor shall inspect the works to satisfy himself that the specified degree of completion of the works has been
achieved” and give timeous notice to the principal agent to inspect the works on or before the anticipated date of practical
completion
• The contractor must make provision in his programme (possibly as a sub-programme for the 3-4 weeks before the date for
practical completion) for the inspection period required by the principal agent. The principal agent may require reasonable
notice of the date(s) when the contractor intends such inspection to take place
• The principal agent and other specialist agents must decide during such inspections if the works is “... substantially complete
and can effectively be used for the purpose intended ...”
• Where the degree of completion of the works does not comply with the specifications, the principal agent must forthwith issue
a single “comprehensive and conclusive list for practical completion recording the defects and/or outstanding work to be
completed to achieve practical completion. The principal agent may not add to this list for practical completion once it has
been issued but he can issue a contract instruction at any time where, for example, a water pipe bursts that must be repaired
without delay
• The principal agent can issue an ‘updated’ list for practical completion that excludes remedied defects
• Where the degree of completion of the works complies with the specifications, the principal agent must issue the certificate
of practical completion and a list for completion
• Whilst other appointed agents may assist in such inspections the issue of the certificate of practical completion is solely the
responsibility of the principal agent
• Where the principal agent does not issue the (updated) list for practical completion or the certificate of practical completion
within five (5) working days of such inspection, the contractor may give notice to the principal agent to comply within a further
five (5) working days - failing which practical completion will be deemed to have occurred on expiry date of such notice
• After certification of practical completion, the employer may impose the penalties stated in the contract data (from the
intended or revised date for practical completion until the actual date of practical completion when possession of the site is
relinquished to the employer by the contractor). Similarly, the contractor may be entitled to recover damages from a
subcontractor or vice versa
• The issue of the certificate of practical completion may not occur before the intended/revised date for practical completion,
unless agreed by the parties, as the contractor’s obligation is to hand over the works on the date for practical completion
and not earlier
• The principal agent must issue a certificate of practical completion (and later a certificate of final completion) to the
contractor for each defined section. The certificate for the last section is for the whole works. Thus, multiple completion dates
are applicable to product warranties, the defects liability period and the latent defects liability period

2.4 CONSEQUENCES (On achievement of practical completion):

▪ The (legal) responsibility for the works passes to the employer

▪ The employer is entitled to possession of the works and the site but must apply for an occupation certificate from the local
authority before the building may be put use
▪ The Contract Works Insurance reduces until final completion, the employer’s building insurance applies
▪ The contractor is not obliged to carry out any contract instruction for additional works
▪ The principal agent must issue within the period a list for completion
▪ The contractor is no longer liable for penalties (that may apply before the date of practical completion)

©JBCC® Guide to Completion and Payment – JBCC May 2018 and May 2020
 10

▪ The principal agent must prepare the final account within sixty (60) working days
▪ The value of the Guarantee for Payment remains valid until the final payment has been made by the employer
▪ The Guarantee for Construction (variable) reduces to 4% of the contract sum
▪ The Guarantee for Construction (fixed) expires and the payment reduction reduces to 2,5% of the contract sum
▪ The contractor becomes entitled to compensatory interest (PBA only)

2.5 PRACTICAL COMPLETION CRITERIA (source: Stanley H Segal - Segal Architects)

The principal agent must specify at tender stage in the [CD] or in the preliminaries document any aspects of the works that
do not have to be ready for practical completion to be certified. Such items must be noted on the list for completion
issued concurrently with the certificate of practical completion. Other buildings to be described by the principal agent in
the [CD] when preparing the tender enquiry document if not listed hereunder

2.5.1 RESIDENTIAL - PRIVATE DWELLING

The state of completion where the works may be occupied by the owner/tenant with minor disruption to carry out
remedial work to items on the list for completion during the defects liability period to achieve final completion

2.5.2 RESIDENTIAL - BLOCK OF FLATS/CLUSTER HOME/TOWNHOUSE/HOSTELS

The state of completion where the works may be occupied by the owner/tenant with minor disruption to carry out
remedial work to items on the list for completion during the defects liability period to achieve final completion

2.5.3 RESIDENTIAL - HOTEL AND/OR RETIREMENT HOME

The state of completion where the works may be occupied by the owner/tenant to install built in furniture, fittings
and equipment with minor disruption to carry out remedial work to items on the list for completion during the
defects liability period to achieve final completion

2.5.4 INDUSTRIAL BUILDINGS - WAREHOUSE/FACTORY/DISTRIBUTION CENTRES

The state of completion where the works may be occupied by the owner/tenant to install fixtures, fittings, plant and
equipment and where loading bays and parking areas are available for the owner/tenant use and disruption to carry out
remedial work to items on the list for completion during the defects liability period to achieve final completion

2.5.5 COMMERCIAL - OFFICE BUILDINGS

The state of completion where the works may be occupied by the owner/tenant with minor disruption to carry out
remedial work to items on the list for completion during the defects liability period to achieve final completion

2.5.6 COMMERCIAL - SHOPPING CENTRES

The state of completion where the works may be occupied by the owner/tenant to install fixtures, fittings, plant and
equipment and where loading bays and parking areas are available for the owner/tenant use and disruption to carry out
remedial work to items on the list for completion during the defects liability period to achieve final completion

2.5.7 HEAD OFFICE BUILDINGS FOR SPECIFIC BUILDING OWNER/TENANT

The state of completion where the works may be occupied by the owner/tenant with minor disruption to carry out
remedial work to items on the list for completion during the defects liability period to achieve final completion

2.5.8 BUILDINGS FOR EDUCATION - SCHOOLS/UNIVERSITIES/COLLEGES

The state of completion where the works may be occupied by the owner/tenant to install fixtures, fittings, plant and
equipment and where loading bays and parking areas are available for the owner/tenant use and disruption to carry out
remedial work to items on the list for completion during the defects liability period to achieve final completion

2.5.9 CORRECTIONAL SERVICES - PRISONS

The state of completion where the works may be occupied by the owner/tenant to install fixtures, fittings,plant and
equipment and where loading bays and parking areas are available for the owner/tenant use and disruption to carry out
remedial work to items on the list for completion during the defects liability period to achieve final completion

2.5.10 HEALTH CARE BUILDINGS - HOSPITALS/CLINICS

The state of completion where the works may be occupied by the owner/tenant to install fixtures, fittings,plant and
equipment and where loading bays and parking areas are available for the owner/tenant use and disruption to carry out
remedial work to items on the list for completion during the defects liability period to achieve final completion

2.5.11 PUBLIC BUILDINGS - THEATRES/MUSEUMS/LIBRARIES/FIRE STATIONS

The state of completion where the works may be occupied by the owner/tenant to install fixtures, fittings,plant and
equipment and where loading bays and parking areas are available for the owner/tenant use and disruption to carry out
remedial work to items on the list for completion during the defects liability period to achieve final completion

©JBCC® Guide to Completion and Payment – JBCC May 2018 and May 2020
 11

DATE – LDLP EXPIRY - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

DATE – INTERIM COMPLETION

DATE – FINAL COMPLETEION

 PA in tender documents specifies start +
duration of construction period +
DATE – SITE POSSESSION

completion criteria

- - - - - -- - - - - - - - - - - - - - - - -
 PA/agents direct standard of work +
DATE – PRACTICAL
quality of finish required
 C notice to PA to inspect for PC

COMPLETEION

PA inspects works, issues List for

Practical Completion, and if ready,
issues Certificate of Practical
Completion and List for Completion
 C claim revision of date of PC
 PA assesses EOT claims and certifies
penalties if PC not achieved by intended
or extended date

–––––––––––––––––––––––––––––––––––––––––
90 C – DAY 5 YEARS

CONSTRUCTION PERIOD DLP LDLP

▪ Note: Issue Certificate of Practical Completion – employer

occupies works, penalty liability ends, contract works
insurance > building insurance, value of security reduces
▪ Note: PA + C +SC resolves final account

©JBCC® Guide to Completion and Payment – JBCC May 2018 and May 2020
 12

DATE – LDLP EXPIRY - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

DATE – FINAL COMPLETEION
 E/agent in tender documents specifies
start + duration of construction period
DATE – SITE POSSESSION

 E/agent direct standard of work +

- - - - - -- - - - - - - - - - - - - - - - -
quality of finish required

DATE – PRACTICAL
C notice to E/agents to inspect for PC
 E/agents inspects works, issues List
COMPLETEION

for Practical Completion, and if ready,

issues Certificate of Practical
Completion and List for Completion
 C claim revision of date of PC
 E/agents assesses EOT claims and
certifies penalties if PC not achieved
by intended or extended date

–––––––––––––––––––––––––––––––––––––––––
60 C – Day

CONSTRUCTION PERIOD DLP To Be Agreed

▪ Note: Issue Certificate of Practical Completion –

employer occupies works, penalty liability ends, contract
works insurance > building insurance
▪ Note: E/agent + C resolve final account

©JBCC® Guide to Completion and Payment – JBCC May 2018 and May 2020
 13

©JBCC® Guide to Completion and Payment – JBCC May 2018 and May 2020
 14

3.0 FINAL COMPLETION

3.1 PURPOSE

The definition of final completion requires the principal agent to certify “... the stage of completion of the works to be free
of defects…” The issued certificate of final completion is “…conclusive as to the sufficiency of the works and that the
contractor’s obligations have been fulfilled other than for latent defects”

3.2 ACHIEVEMENT OF FINAL COMPLETION

▪ The defects liability period (DLP) automatically comes into force on the calendar day following the date of practical
completion and ends at midnight ninety (90) calendar days from that date … or when defects on the list for final completion
have been satisfactorily completed (but not before expiry of the ninety (90) calendar day DLP)
▪ The contractor must “… rectify all items on the list for completion at least ten (10) working days before the expiry of the
DLP and give notice to the principal agent to inspect the works within five (5) working days of receipt of such notice”.
The principal agent must, within reason, inspect the whole of the works for latent defects that may have become patent
during the DLP and not just identified items on the list for completion
▪ The principal agent must forthwith issue to the contractor a list for final completion incorporating the list for completion
and any latent defects that may have become patent to rectify to achieve final completion. The contractor must give the
principal agent notice to inspect rectified items until all defects have been rectified to the satisfaction of the principal agent
▪ Note: Where the employer takes possession of the site/works before practical completion has been certified – the
principal agent must issue the certificate of practical completion forthwith (specifying the date when possession of the
site/works was relinquished by the contractor) and issue the list for completion of items to be rectified by the contractor
within thirty (30) calendar days
▪ Where the principal agent does not issue the (updated) list for final completion or the certificate of final completion
within five (5) working days of such inspection, the contractor may give notice to the principal agent to comply within a
further five (5) working days - failing which final completion will be deemed to have occurred on expiry date of such notice

3.3 CONSEQUENCES

On achievement of final completion:

▪ The contractor’s obligations in terms of the agreement have been fulfilled

▪ The contractor’s public liability in relation to the works ceases
▪ The value of the Guarantee for Construction (variable) reduces to 2% of the contract sum until the final payment
▪ All subcontractor’s guarantees, warranties or indemnities are deemed to be ceded to the employer
▪ The balance of the contractor’s latent defects liability period is determined (see section 5.0)
▪ The final payment certificate can now be issued
▪ Should there be a disagreement about the final contract value further interim payment certificates must be issued for the
undisputed amounts

©JBCC® Guide to Completion and Payment – JBCC May 2018 and May 2020
 15

DATE – LDLP EXPIRY - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

DATE – INTERIM COMPLETION

 C rectifies items on List for

DATE – FINAL COMPLETEION

Completion
 C submits notice to PA to inspect
DATE – SITE POSSESSION

 PA inspects, issues List for Final

Completion – if done – issues
Certificate of Final Completion
DATE – PRACTICAL

 Note: PA + C + SC resolve final

account
COMPLETEION

---------------
Final account agreed then PA
issues Final Payment Certificate

–––––––––––––––––––––––––––––––––––––––––
90 C – DAY 5 YEAR

CONSTRUCTION PERIOD DLP LDLP

Note:
C’s DLP ends, then:
 Value of security reduces
 NSSA warranties ceded to E

©JBCC® Guide to Completion and Payment – JBCC May 2018 and May 2020
 16

DATE – LDLP EXPIRY - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

DATE – PRACTICAL COMPLETEION

 C rectifies items on List for

Completion

DATE – FINAL COMPLETEION

 C submits notice to E/agent to
DATE – SITE POSSESSION

inspect
 E/agent inspects, issues List for
Final Completion – if done – issues
Certificate of Final Completion
 Note: E/agent + C resolve final
account
 Final account agreed then E/agent
issues Final Payment Certificate

––––––––––––––––––––––––––––––––––––––––––
60 C-DAYS
CONSTRUCTION PERIOD DLP To Be Agreed

Note:
C’s DLP ends, then
 C hands over statutory/ regulatory
approval certificates to E

©JBCC® Guide to Completion and Payment – JBCC May 2018 and May 2020
 17

©JBCC® Guide to Completion and Payment – JBCC May 2018 and May 2020
 18

4.0 SECTIONAL COMPLETION

4.1 PURPOSE

Projects may have to be completed in sections - as separate buildings or by storey. Each section must be clearly defined with due
consideration for common areas, provision of services, safe access by the employer and continued access by the contractor to
complete the works. Sectional completions should be avoided where each section cannot be defined as a homogeneous unit and
where there is no reasonable continuity of work for the contractor

Note: The contract works insurance must be effected by the employer to prevent conflict that may arise from multiple practical
completions possibly insured by different insurers. Securities, guarantees, warranties and the like should only be provided
for the works as a whole and not for individual sections

4.2 ACHIEVEMENT OF SECTIONAL FINAL COMPLETION

Where sectional completions are required - each section (other than the last section) must be treated as unique for completion
purposes. Thus, each section requires:

▪ A certificate of interim completion for each subcontractor

▪ A certificate of practical completion
▪ A certificate of final completion (other than the last section)

4.3 CONSEQUENCES

Payment is always made for the works as a whole - never for a section - by issuing the following documents:

▪ A (monthly) interim payment certificate

▪ A (monthly) recovery statement
▪ A (monthly) payment notification to each subcontractor
▪ A final account
▪ A final payment certificate
▪ A certificate of final completion for the works as a whole incorporating the last section

©JBCC® Guide to Completion and Payment – JBCC May 2018 and May 2020
 19

5.0 LATENT DEFECTS LIABILITY PERIOD

5.1 PURPOSE

In common law the liability of the contractor (and of agents described in the professional appointment agreement) to the employer
for latent defects is open ended and will only expire with the demolition of the building - clearly an untenable situation. In all JBCC®
agreements *the latent defects liability period (LDLP) of the contractor is restricted to a period of five (5) years from the certified
date of final completion or the date of termination by the contractor or where execution of the works has become impossible: -

▪ The definition of a “latent defect” relies on the definition of “defect”. Thus the latent defect definition becomes “... any aspect of
the works which ... includes an imperfection that impairs the structure, composition or function of the works ... which a reasonable
inspection ... would not have revealed before the issue of the list for final completion”, and “defects which may appear up to
the date of final completion shall be addressed...."

▪ This definition does not specify how a defect that becomes apparent after final completion is to be dealt with. Where this
occurs, the employer must give notice to the contractor to remedy the defect within the LDLP. Failure by the contractor to
do so entitles the employer to employ another contractor to remedy the defect(s) and to claim such expense from the
contractor. The obligation to remedy a defect is clear in common law and in the Consumer Protection Act

▪ The “period“ is defined: “The latent defects liability period shall commence at the start of the construction period and end five
years from the date of final completion”. The time period is clear where the works reaches final completion

▪ If final completion is not achieved - where the agreement is terminated prior to the achievement of final completion the
termination clauses apply. The final account must be prepared, and on acceptance by the parties, the final payment certificate
must be issued by the principal agent. Final completion will be deemed to have occurred on the date of acceptance of the
final account but no certificate of final completion is issued in terms of the agreement. The five-year period applies
(contractor default) or no period is applicable (employer default)

▪ The “liability” aspect - The contractor shall make good all defects that appear up to the date of expiry of the LDLP. Where
termination of this agreement occurs before the date of final completion, the LDLP shall end five (5) years from the date of
termination [29.10] for the completed portion of the works only,

or

▪ Where termination of this agreement occurs before the date of final completion on the date of termination where execution of
the works has become impossible due to circumstances beyond the control of either party, or on the date of termination by the
contractor due to default by the employer

▪ The liability of the principal and other agents is determined by the terms of their conditions of appointment and not those of the
building contract

5.2 PRESCRIPTION PERIOD

All defects as defined in terms of the agreement are subject to a prescription period determined by law. In South Africa this
period is three (3) years. The prescription period commences from the date on which the employer (principal agent) becomes
aware of a defect and notifies the contractor forthwith

The LDLP is not extended by the prescription period – but the obligation on the contractor to remedy an identified and notified
defect only remains – and this may extend beyond the five (5) year LDLP

*There is no restriction on the LDLP in the SSWC and the parties therefore need to agree on what they regard as a ‘reasonable’
period and insert that period as addition to the contract on page 15 of clause 12.0 Contract Data

©JBCC® Guide to Completion and Payment – JBCC May 2018 and May 2020
 20
DATE – SITE POSSESSION - - - - - - - - - - - - - - - - - - - - - - - -

DATE – LDLP EXPIRY - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

DATE – FINAL COMPLETEION

---------------------
DATE – PRACTICAL
DATE – INTERIM

COMPLETEION
COMPLETION

–––––––––––––––––––––––––––––––––––––––
90 C – DAYS 5 YEARS

CONSTRUCTION PERIOD DLP LDLP

3 YEARS

Prescription expiry:
In common law prescription runs for 3 years from the date
that a defect was noted and reported to C – may extend
beyond LDLP period
©JBCC® Guide to Completion and Payment – JBCC May 2018 and May 2020
 21
DATE – SITE POSSESSION - - - - - - - - - - - - - - - - - - - - - - - - - - - -

DATE – LDLP EXPIRY - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

DATE – PRACTICAL COMPLETEION

DATE – FINAL COMPLETEION

----------------

–––––––––––––––––––––––––––––––––––––––
60 C – DAYS

CONSTRUCTION PERIOD DLP To Be Agreed 3 YEARS

Prescription expiry:
In common law prescription runs for 3 years from the date that a defect
was noted and reported to C – may extend beyond LDLP period
©JBCC® Guide to Completion and Payment – JBCC May 2018 and May 2020
 22

PAYMENT: PBA, NSSA and MWA

INTRODUCTION

The JBCC® agreements mentioned above follow the same payment procedures that must be applied strictly to minimise
disagreements later. “Payment” is the most ‘sensitive’ aspect of the agreement and therefore no “short cuts” should be taken in
certifying amounts due to the contractor or a subcontractor, and occasionally due to the employer! The procedures and time bars
applying to valuation and certification as well as to payment must be applied by the principal agent and be observed by the parties

6.0 INTERIM and FINAL PAYMENTS

6.1 PREPARATION

The following contract data clauses have a direct bearing on the preparation for valuation, certification and payment: -

Pre-Tender Information
▪ Employer details
▪ Principal Agent details (Only the principal agent is authorised to certify payment)
▪ Works description Law of the agreement
▪ Criteria for practical completion
▪ Site description
▪ Payment (or not!) for materials and goods (unfixed on site, off site or in transit)
▪ Completion - per section or the works as a whole
▪ Penalty - per section or the works as a whole
▪ Contract Price Adjustments – method used
▪ Changes, if any, to the provisions of the JBCC® agreement

Post Tender Information

▪ Contractor details
▪ The accepted contract sum that becomes the base amount of the contract value in terms of the agreement
▪ The latest day of the month for the issue of an interim payment certificate
▪ The preliminaries payment option selected in terms of the tender
▪ The preliminaries adjustment option selected in terms of the tender
▪ The security option selected in terms of the tender

6.2 THE INTERIM PAYMENT CYCLE (See diagram opposite)

Setting the Cycle

▪ The principal agent records the date of issue of the interim payment certificate in the contract data
▪ The contractor and subcontractors must cooperate with the principal agent to submit payment claims in terms of the defined
payment cycle
▪ The employer must pay the contractor within fourteen (14) calendar days of the date of issue of a payment certificate
▪ The contractor must pay each subcontractor within twenty-one (21) calendar days of the date of issue of a payment
certificate
▪ The contractor must pay the employer within twenty-one (21) calendar days of the date of issue of a payment certificate

Valuation and certification

The principal agent must issue a payment certificate by the defined date [CD] in the agreed payment cycle - based on the valuation
of completed work provided by the contractor or, where not provided, assessed by the principal agent

The principal agent must issue a payment certificate in every payment cycle comprising a fair estimate of work executed and of
materials and goods to the contractor with a copy to the employer, and

To the contractor: A summary of amounts due to each subcontractor

A Recovery Statement to the contractor

To each n/s subcontractor: A Subcontract Payment Notification showing the amount included in the contractor‘s
payment certificate

And the contractor must issue to each subcontractor:

A Subcontract Recovery Statement

A Subcontract Payment Advice

©JBCC® Guide to Completion and Payment – JBCC May 2018 and May 2020
 23

Interim Payment Cycle

applicable to PBA, NSSA and MWA

©JBCC® Guide to Completion and Payment – JBCC May 2018 and May 2020
 24

PAYMENT: SSWC
INTRODUCTION

The JBCC® SSWC payment procedure differs from the other JBCC® agreements with regard to the following:

▪ Payment period : seven (7) calendar days

▪ Payment certificate : issued by employer/ agent
▪ Payment claim : submitted by contractor
▪ Payment method : two options are provided:
o Work duly executed
o Work executed in stages
▪ Retention : up to 10% maximum on each payment. Half to be released at practical completion and
remaining half at final payment
▪ CPAP : no provision

Interim Payment Cycle (see diagram below)

▪ The date of issue of payment certificate or claim by contractor must be recorded in the contract data
▪ The employer must pay the contractor within seven (7) calendar days.

Interim Payment Cycle

SSWC

7TH 14TH 21ST 28TH

Claim & Valuation 7 C-day E Claim & Valuation 7 C-day E

C submit claim to C submit claim to

E/agent and E/agent and
E/agent agree E/agent agree
valuation and valuation and
issue payment issue payment
certificate certificate

©JBCC® Guide to Completion and Payment – JBCC May 2018 and May 2020
 25

7.0 RECOVERY STATEMENT (PBA)

7.1 PURPOSE

The recovery statement deals with financial transactions between the employer and the contractor that do not affect the contract
value and are therefore not part of the valuation of work in progress or the final account. Such transactions can occur at any time
during the construction period. The amounts due to either party are determined by the principal agent on a monthly basis and
are included in the payment certificate issued at that time. Documentation substantiating the amounts due must accompany the
recovery statement. By dealing with these transactions as they occur and not at the end of the contract considerable administrative
frustration is avoided

7.2 THE STATEMENT

Column A Total Amount to be recovered

All amounts as determined by the principal agent are accounted for on an accumulative basis

Column B Less Previously recovered

Previously determined accumulative amounts are accounted for

Column C Recovered this Period

The difference between the column A and B subtotal amounts are carried to the referenced item in the payment
certificate

7.3 AMOUNTS DUE TO THE EMPLOYER

There are twelve conditions not related to the contract value that the employer may recover from the contractor. These are:
▪ The first nine (1.1.1-9) are grouped together as they impact on the tax on the certified contract value
▪ Advance payment recoupment (1.10) is accounted for after tax
▪ Penalties due (1.11) are accounted for before tax but are separated for clarity purposes
▪ Default interest (1.12) is tax neutral and is accounted for after tax

7.4 AMOUNTS DUE TO THE CONTRACTOR

There are six conditions that the contractor may recover from the employer. These are:
▪ Compensatory (2.2) and default interest (2.1) amounts, which are both tax neutral, and accounted for after tax
▪ Damages (2.3) are accounted for before tax
▪ E&L caused by a direct contractor (2.4)
▪ Advance payment received (2.5) is accounted for after tax
▪ Termination of a n/s subcontract agreement (2.6)

7.5 IMPORTANT NOTES

A recovery statement must be issued simultaneously with each payment certificate

▪ All recovery amounts are dealt with on a “before tax” basis - where applicable tax is added in the payment certificate
▪ Each amount to be recovered is identified by a payment certificate reference line - only the amount in column C is transferred
to that location

7.6 ADVANCE PAYMENT ADMINISTRATION

See page 42

©JBCC® Guide to Completion and Payment – JBCC May 2018 and May 2020
 26

©JBCC® Guide to Completion and Payment – JBCC May 2018 and May 2020
 27

8.0 PAYMENT CERTIFICATE (PBA)

8.1 PURPOSE

An amount of money that is due and payable by the employer to the contractor or vice versa is ‘certified’ in a payment certificate
issued by the principal agent. Liquidity is conferred where the employer (the debtor), by the signature of the principal agent,
acknowledges his indebtedness to the contractor for a determined sum of money. The wording must be correct – specifying the
employer, principal agent and the contractor and the payment amount that is due to the contractor. Payment due to the employer
is provided for in the agreement and the payment certificate form but is not a liquid document!

8.2 THE PAYMENT CERTIFICATE

Column A Contract Sum The contract sum i.t.o. the agreement remains fixed for the duration of the contract

Column B Current Contract Value The totals of Columns A and B give an immediate comparison between the contract sum and
contract value at the time of issue of the payment certificate. The quantity surveyor, where
appointed, determines the adjustments to the contract value for approval by the principal agent

Column C Current Valuation The principal agent (or the quantity surveyor) determines the valuation

Column D Current Certification The principal agent certifies the current valuation amounts and items of expense and/or
loss detailed in the recovery statement as well as tax on the applicable items

1.0 Value of work executed The valuation must be “a reasonable estimate of the work executed” without it being
“work satisfactorily completed”. The principal agent must act impartiality to verify (or
modify) the quantity surveyor’s valuation before certifying such amount

2.1-2 Materials on and off site Materials and goods on and off site may be included in the valuation
Note: Projects financed by a financial institution generally exclude payment of unfixed materials
leaving the employer short of money to make payment of an issued payment certificate. The
principal agent must record in the contract data if unfixed materials (on or off site) will be paid,
or not, where included in a payment certificate
A Guarantee for Advance Payment may cover some such materials and will reduce the
employer’s additional risk (see Recovery Statement)
Transfer of ownership of materials off site may be difficult to prove in law
3.0 SUBTOTAL

4.0 Security adjustment Applies where the contractor has chosen the security (fixed) to which a 5% payment
reduction provision applies, or is in default by not providing such security and the employer
elects to apply the payment reduction option

5.0 Net contract sum The amount reflected in Column B is the same as the amount in Column A

6.0 Authorised adjustments … Authorised adjustments to date are included [B 6.0], excluding anticipated adjustments

7.0 Cost fluctuations Included in [A 7.0], updated in [B7.0], if included in a valuation [C+D 7.0]

8.0 GROSS AMOUNT CERTIFIED … in [D 8.0]

9.0 Less: Amount certified in the previous payment certificate … [D 9.0]

10.0 NET AMOUNT CERTIFIED The net resultant portion of the contract value certified in this payment certificate

11.1-3 Recovery Statement Adjustment of amounts due to/by the contractor that attract tax

12.0 SUBTOTAL The summed total of the previous items

13.0 Tax The subtotal 12.0 is pre-tax. The tax percentage must be filled in and calculated
If this subtotal is negative, tax will apply where the employer issues a VAT invoice to
recover the amount due from the contractor

14.1-9 Recovery Statement Amounts that do not attract tax = interest and advance payment amounts (loans)

15.0 TOTAL The total of the contract sum and the comparative variable current contract value

16.0 AMOUNT DUE Identify the currency / receiving party / amount due

17.0 Contract sum execution The completion status must be indicated as it affects all the security options

©JBCC® Guide to Completion and Payment – JBCC May 2018 and May 2020
 28

©JBCC® Guide to Completion and Payment – JBCC May 2018 and May 2020
 29

©JBCC® Guide to Completion and Payment – JBCC May 2018 and May 2020
 30

9.0 SUBCONTRACTOR’S PAYMENT NOTIFICATION

9.1 PURPOSE

The payment notification informs the subcontractor of a subcontract amount included in the total amount certified to the contractor
(or employer) in the current payment certificate. Any adjustment made to such amount due to the security provided by the
contractor is not applicable to the payment due to the subcontractor. The contractor must certify the full amount due to the
subcontractor and make any adjustment in terms of the security provided by the subcontractor. The 2nd NOTE on the payment
notification form details this condition

9.2 THE PAYMENT CERTIFICATE NOTIFICATION

Column A Subcontract Sum The subcontract sum i.t.o the agreement remains fixed for the duration of the subcontract

Column B Current SC Value The totals of Columns A and B give an immediate comparison between the subcontract sum
and the subcontract value at the date of issue of the payment certificate. The quantity
surveyor, where appointed, determines the adjustments to the subcontract value for approval
by the principal agent

Column C Current Valuation The principal agent or quantity surveyor, where appointed, determines the valuation

Column D Current Certification The principal agent notifies the subcontractor of the current subcontract valuation amounts
certified to the contractor together with any adjustment i.t.o. the security provided by the
contractor; the previous gross subcontract amount certified as well as tax on the net subcontract
amount certified

1.0 Value of work executed The principal agent inserts the value of work executed in the payment certificate

2.1-2 Materials on and off site The principal agent inserts the value of items included in the payment certificate

3.0 SUBTOTAL

4.0 Security adjustment The principal agent notifies the subcontractor of adjustments made to the valuation of
items included in the current payment certificate (if applicable) to comply with the
contractor’s security provision in terms of the principal agreement

5.0 Net contract sum The amount reflected in Column B is the same as the amount in Column A

6.0 Authorised adjustments … Authorised adjustments to date are included [B 6.0], excluding anticipated adjustments

7.0 Cost fluctuations Included in [A 7.0], updated in [B7.0], if included in a valuation [C+D 7.0]

8.0 GROSS AMOUNT CERTIFIED … in [D 8.0]

9.0 Less: Amount certified in the previous payment certificate … [D 9.0]

10.0 NET AMOUNT CERTIFIED The amount of the subcontract value that has been certified in the current payment
certificate. This amount may differ in the contractor’s payment advice due to adjustments the
contractor may be entitled to make in terms of the subcontractor’s security or the subcontract
recovery statement

11.0 Tax The subtotal 10.0 is pre-tax. The tax percentage must be filled in and calculated
If this subtotal is negative, tax will apply where the contractor issues a VAT invoice to
recover the amount due from the subcontractor

12.1-2 SC Recovery Statement Amounts that affect the subcontractor’s income or expenditure that are tax neutral

13.0 TOTAL The total of the subcontract sum and the comparative variable current subcontract
value

14.0 AMOUNT DUE Identify the currency / receiving party / amount due

15.0 Subcontract sum execution Where the subcontractor has provided a Guarantee for Construction (variable) the
percentage of the subcontract sum that has been executed must be determine. The completion
status must be indicated as it affects all the security options for the works as a whole in terms of
practical completion and final completion

Note: The principal agent is not responsible for and is not involved in determining any of the recovery amounts nor for determining
whether the security provided by the subcontractor varies the amount due

©JBCC® Guide to Completion and Payment – JBCC May 2018 and May 2020
 31

©JBCC® Guide to Completion and Payment – JBCC May 2018 and May 2020
 32

10.0 SUBCONTRACTOR’S RECOVERY STATEMENT

10.1 PURPOSE

The subcontract recovery statement deals with expenses and losses suffered by the contractor or the subcontractor that do not
affect the subcontract value and that are not part of the valuation of the work in progress nor the subcontract final account. Such
expenses and losses can occur at any time during the subcontract construction period. The amounts as are determined by the
contractor on a monthly basis and are included in the interim or the final subcontractor’s payment advice issued at that time

Documentation substantiating the amounts due must accompany the subcontract recovery statement

By dealing with such expenses and losses as they occur and not at the end of the contract considerable administrative frustration is
avoided and the parties are correctly compensated for such expenses and losses incurred

10.2 THE STATEMENT

Column A Total Amount to be recovered

All amounts as determined by the contractor are accounted for on an accumulative basis

Column B Less Previously recovered

Previously determined amounts are accounted for

Column C Recovered this Period

The difference between the column A and B subtotal amounts are carried to the referenced item in the subcontractor’s
payment advice

10.3 AMOUNTS DUE TO THE CONTRACTOR

There are ten conditions for which the contractor is entitled to recovery from the subcontractor. These are:
▪ The first eight (1.1-1.8) are grouped together as they all impact on the tax calculated on the certified subcontract value
▪ The remaining two items, default interest (1.9) and advance payment recoupment (1.10), are accounted for after tax

10.4 AMOUNTS DUE TO THE SUBCONTRACTOR

There are eight conditions for which the subcontractor is entitled to recovery from the contractor. These are:
▪ Default interest (2.1), compensatory interest (2.2) and advance payments made (2.5)
These amounts are tax neutral and are accounted for after tax
▪ Damages (2.3) and non-contract variations (2.4 – 2.8) are accounted for before tax

10.5 IMPORTANT NOTES

▪ The subcontract recovery statement must be issued simultaneously with each subcontractor’s payment advice
▪ All recovery amounts exclude tax as this is dealt with in the subcontractor’s payment advice
▪ Each item to be recovered is identified by a subcontractor’s payment advice location reference with only the amount in column
C being transferred to that location

10.6 ADVANCE PAYMENT ADMINISTRATION

See page 42

©JBCC® Guide to Completion and Payment – JBCC May 2018 and May 2020
 33

©JBCC® Guide to Completion and Payment – JBCC May 2018 and May 2020
 34

11.0 SUBCONTRACT PAYMENT ADVICE

11.1 PURPOSE

The amount of money that is due and payable by the contractor to the subcontractor or vice versa is ‘certified’ in a subcontract
payment advice issued by the contractor. Liquidity is conferred where the contractor (the debtor) acknowledges his indebtedness
to the subcontractor for a determined sum of money. The wording must be correct – specifying the contractor and the
subcontractor and the payment amount that is due to the subcontractor

11.2 THE PAYMENT ADVICE STATEMENT

Column A Contract Sum The subcontract sum in terms of the agreement remains fixed for the duration of
the subcontract

Column B Current Contract Value The totals of Columns A and B give an immediate comparison between the subcontract sum
and the subcontract value at the date of issue of the subcontract payment advice.

Column C Current Valuation The contractor incorporates the valuation provided by the principal agent in the statement
issued in terms of the PBA

Column D Current Certification The contractor certifies the current valuation amounts and items of expense and/or loss
detailed in the subcontract recovery statement as well as tax on applicable items

1.0 Value of work executed The contractor incorporates the valuation provided by the principal agent in the statement
issued in terms of the PBA. The contractor has no authority to reduce or vary such valuation

2.1-2 Materials on and off site The subcontractor’s materials on and off site are to be included where they are
certified in the payment certificate

3.0 SUBTOTAL

4.0 Security adjustment Applies only where the subcontractor has chosen the security (fixed) to which
payment reduction provisions apply, or is in default by not providing such security and
the contractor elects to apply the payment reduction option

5.0 Net subcontract sum The amount reflected in Column B is the same as the amount in Column A

6.0 Authorised adjustments … Authorised adjustments determined by the principal agent to date are included [B 6.0],
excluding anticipated adjustments

7.0 Cost fluctuations Included in [A 7.0], updated in [B7.0], if included in a valuation [C+D 7.0]

8.0 GROSS AMOUNT CERTIFIED … in [D 8.0]

9.0 Less: Amount certified in the previous payment advice statement … [D 9.0]

10.0 NET AMOUNT CERTIFIED The net resultant portion of the subcontract value certified in this
subcontract payment advice

11.1-2 Recovery Statement Amounts that affect the subcontractor’s income or expenditure, that attract tax

12.0 SUBTOTAL The summed total of the previous items

13.0 Tax The subtotal 12.0 is pre-tax. The tax percentage must be filled in and calculated
If this subtotal is negative, tax will apply where the contractor issues a VAT invoice to
recover the amount due from the subcontractor

14.1-3 Recovery Statement Amounts that do not attract tax = interest and advance payment amounts.

15.0 TOTAL The total of the subcontract sum and the comparative variable current
subcontract value

16.0 AMOUNT DUE Identify the currency / receiving party / amount due

17.0 Contract sum execution Where the subcontractor has provided a Guarantee for Construction (variable) the
percentage of the subcontract sum that has been executed must be determined. The
completion status must be indicated as it affects all the security options

©JBCC® Guide to Completion and Payment – JBCC May 2018 and May 2020
 35

©JBCC® Guide to Completion and Payment – JBCC May 2018 and May 2020
 36

12.0 RECOVERY STATEMENT (MWA)

12.1 PURPOSE

The recovery statement deals with financial transactions between the employer and the contractor that do not affect the contract
value and are therefore not part of the valuation of work in progress or the final account. Such transactions can occur at any time
during the construction period. The amounts due to either party are determined by the principal agent on a monthly basis and
are included in the payment certificate issued at that time. Documentation substantiating the amounts due must accompany the
recovery statement. By dealing with these transactions as they occur and not at the end of the contract considerable administrative
frustration is avoided

12.2 THE STATEMENT

Column A Total Amount to be recovered

All amounts as determined by the principal agent are accounted for on an accumulative basis

Column B Less Previously recovered

Previously determined accumulative amounts are accounted for

Column C Recovered this Period

The difference between the column A and B subtotal amounts are carried to the referenced item in the payment
certificate

12.3 AMOUNTS DUE TO THE EMPLOYER

There are seven conditions not related to the contract value that the employer may recover from the contractor. These are:
▪ The first four (1.1.1-4) are grouped together as they impact on the tax on the certified contract value
▪ Advance payment recoupment (1.7) is accounted for after tax
▪ Penalties due (1.5) are accounted for before tax but are separated for clarity purposes
▪ Default interest (1.6) is tax neutral and is accounted for after tax

12.4 AMOUNTS DUE TO THE CONTRACTOR

There are three conditions that the contractor may recover from the employer. These are:
▪ Default interest (2.1) which is tax neutral, and accounted for after tax
▪ Damages (2.3) are accounted for before tax
▪ Advance payment received (2.2) is accounted for after tax

12.5 IMPORTANT NOTES

A recovery statement must be issued simultaneously with each payment certificate

▪ All recovery amounts are dealt with on a “before tax” basis - where applicable tax is added in the payment certificate
▪ Each amount to be recovered is identified by a payment certificate reference line - only the amount in column C is transferred
to that location

12.6 ADVANCE PAYMENT ADMINISTRATION

See page 42

©JBCC® Guide to Completion and Payment – JBCC May 2018 and May 2020
 37

©JBCC® Guide to Completion and Payment – JBCC May 2018 and May 2020
 38

13.0 PAYMENT CERTIFICATE (MWA)

13.1 PURPOSE

An amount of money that is due and payable by the employer to the contractor or vice versa is ‘certified’ in a payment certificate
issued by the principal agent. Liquidity is conferred where the employer (the debtor), by the signature of the principal agent,
acknowledges his indebtedness to the contractor for a determined sum of money. The wording must be correct – specifying the
employer, principal agent and the contractor and the payment amount that is due to the contractor

Payment due to the employer is provided for in the agreement and the payment certificate form but is not a liquid document!

13.2 THE PAYMENT CERTIFICATE

Column A Contract Sum The contract sum i.t.o. the agreement remains fixed for the duration of the contract

Column B Current Contract Value The totals of Columns A and B give an immediate comparison between the contract sum and
contract value at the time of issue of the payment

Column C Current Valuation The principal agent determines the valuation of the works

Column D Current Certification The principal agent certifies the current valuation amounts and items of expense
and/or loss {detailed in the recovery statement} as well as tax on the applicable items

1.0 Value of work executed The valuation must be “a reasonable estimate of the work executed” without it being
“work satisfactorily completed”. The principal agent must act impartiality {to verify (or
modify) the quantity surveyor’s valuation before certifying such amount}

2.1-2 Materials on and off site Materials and goods on and off site may be included in the valuation
Note: Projects financed by a financial institution generally exclude payment of unfixed materials
leaving the employer short of money to make payment of an issued payment certificate. The
principal agent must record in the contract data if unfixed materials (on or off site) will be paid,
or not, where included in a payment certificate
A Guarantee for Advance Payment may cover some such materials and will reduce the
employer’s additional risk {see Recovery Statement}
Transfer of ownership of materials off site may be difficult to prove in law

3.0 SUBTOTAL The total of the previous items

4.0 Security adjustment Applies where the contractor is in default by not providing a specified security and the
employer elects to apply the payment reduction option

5.0 Net contract sum The amount reflected in Column B is the same as the amount in Column A

6.0 Authorised adjustments … Authorised adjustments to date are included [B 6.0], excluding anticipated adjustments

7.0 GROSS AMOUNT CERTIFIED … in [D 7.0]

8.0 Less Amount certified in the previous payment certificate … [D 8.0]

9.0 NET AMOUNT CERTIFIED The net resultant portion of the contract value certified in this payment certificate

10.1-3 Recovery Statement Amounts that affect the contractor’s income or expenditure that are tax neutral

11.0 SUBTOTAL The summed total of the previous items

12.0 Tax The subtotal 11.0 is pre-tax. The tax percentage must be filled in and calculated
If this subtotal is negative, tax will apply where the employer issues a VAT invoice to
recover the amount due from the contractor

13.1-5 Recovery Statement Amounts that do not attract tax = interest and advance payment amounts.
Any deposit paid by the employer for the purchase of materials must also be included

14.0 TOTAL The total of the contract sum and the comparative variable current contract value

15.0 AMOUNT DUE Identify the currency / receiving party / amount due

16.0 Contract sum execution Where the contractor has provided a Guarantee for Construction (variable) the
percentage of the contract sum that has been executed must be determined. The completion
status must be indicated as it affects all the security options

©JBCC® Guide to Completion and Payment – JBCC May 2018 and May 2020
 39

©JBCC® Guide to Completion and Payment – JBCC May 2018 and May 2020
 40

13.0 PAYMENT CERTIFICATE (SSWC)

13.1 PURPOSE

An amount of money that is due and payable by the employer to the contractor or vice versa is ‘certified’ in a payment certificate
issued by the employer/agent. Liquidity is conferred where the employer (the debtor), by his/his agent signature, acknowledges his
indebtedness to the contractor for a determined sum of money. The wording must be correct – specifying the employer, agent
(where appointed) and the contractor and the payment amount that is due to the contractor

Payment due to the employer is not provided for in this contract.

13.2 THE PAYMENT CERTIFICATE

Column A Contract Sum The contract sum i.t.o. the contract remains fixed for the duration of the contract

Column B Current Contract Value The totals of Columns A and B give an immediate comparison between the contract sum and
contract value at the time of issue of the payment

Column C Current Valuation The employer determines the valuation of the works

Column D Current Certification The employer certifies the current valuation amounts and items of expense and/or loss {detailed
in the recovery statement} as well as tax on the applicable items

1.0 Value of work executed The valuation must be “a reasonable estimate of the work duly executed” as certified by the
employer/agent or claimed by the contractor

2.1-2 Materials on and off site Materials and goods on site may be included in the valuation only where:
 Not prematurely delivered
 Properly stored

3.0 SUBTOTAL The total of the previous items

4.0 Retention The applicable percentage must be stated and protected

5.0 Net contract sum The amount reflected in Column B is the same as the amount in Column A

6.0 Authorised adjustments … Authorised adjustments to date are included [B 6.0], excluding anticipated adjustments

7.0 GROSS AMOUNT CERTIFIED … in [D 7.0]

8.0 Less Amount certified in the previous payment certificate … [D 8.0]

9.0 NET AMOUNT CERTIFIED The net resultant portion of the contract value certified in this payment certificate

10.0 Less Penalties levied by employer

11.0 SUBTOTAL The summed total of the previous items

12.0 Tax The subtotal 11.0 is pre-tax. The tax percentage must be filled in and calculated

13.0 Interest Default interest due compounded for previous late payments

14.0 TOTAL The total of the contract sum and the comparative variable current contract value

15.0 AMOUNT DUE Identify the currency / receiving party / amount due

16.0 Retention status The completion status must be indicated as it affects all the retention withheld

©JBCC® Guide to Completion and Payment – JBCC May 2018 and May 2020
 41

©JBCC® Guide to Completion and Payment – JBCC May 2018 and May 2020
 42

15.0 ADVANCE PAYMENT

15.1 PURPOSE

The Guarantee for Advance Payment is a financial instrument to enable the employer to make an advance payment (a loan) to
the contractor or the subcontractor for materials or equipment to be ordered in advance of their requirement on site. Such goods
cannot be included in a payment certificate as “value of work executed”

Some form of collateral will be required by the institution providing such a security

A “transfer of ownership” may be a legally unenforceable substitute (legal maxim of constitutum possessorium – this is never
presumed – the party alleging it must, inter alia, prove that the transferor is the owner of the thing at the moment of transfer)

15.2 ADMINISTRATION

15.2.1 All advance payment transactions are dealt with in the applicable recovery statement

15.2.2 No “direct payments” or recoupment of an advance payment may bypass the payment certificate to ensure that all
financial transactions pertaining to the agreement are accounted for in the various payment forms

15.2.3 Interest or other charges related to the Guarantee for Advance Payment must be agreed directly between the parties -
-- They are not part of the contract sum nor the contract value!

15.2.4 A Guarantee for Advance Payment should not be demanded for materials off site that adequately fall within the
provisions of a Guarantee for Construction provided by the contractor or subcontractor

15.2.5 ‘Advance payments’ are a form of loan and therefore do not attract tax

15.2.6 Note: The end Current Certification balances with the end Total Net Payment

15.2.7 The employer is entitled to call up the Guarantee for Advance Payment should the contractor or a subcontractor
default in the repayment of such ‘loan’ at any stage

The following tables set out the typical cash flow of an advance payment to either or both the contractor and a subcontractor

Security information Contractor Subcontractor

Recipient’s Net Contract Value (excl Tax) 2 00 000 600 000

Advance payment required 200 000 150 000

Recoupment period (months) 5 3

Recoupment start month M3 M5

Recoupment monthly payment 40 000 50 000

Payment Certificate M1 M2 M3 M4 M5 M6 M7 M8 Total

Contract
Valuation: Contractor 40 000 120 000 280 000 500 000 800 000 1 200 000 1 700 000 2 000 000 Value

N/S 0 0 20 000 70 000 240 000 480 000 570 000 600 000

Certified: Contractor 0 -40 000 -120 000 -280 000 -500 000 -800 000 -1 200 000 -1 700 000

N/S 0 0 0 -20 000 -70 000 -240 000 -480 000 -570 000

Current certification 40 000 80 000 180 000 270 000 470 000 640 000 590 000 330 000 2 600 000

Add Tax at 14% 5 600 11 200 25 200 37 800 65 800 89 600 82 600 46 200 364 000

Gross certification 45 600 91 200 205 200 307 800 535 800 729 600 672 600 376 200 2 964 000

Advance/ recoupment C 200 000 0 -40 000 -40 000 -40 000 -40 000 -40 000 0

Advance/recoupment N/S 0 0 150 000 0 -50 000 -50 000 -50 000 0

Total net payments 245 600 91 200 315 200 267 800 445 800 639 600 582 600 376 200 2 964 000

©JBCC® Guide to Completion and Payment – JBCC May 2018 and May 2020
 43

18.0 INTEREST CALCULATIONS (compensatory and default interest)

18.1 PRACTICAL COMPLETION
▪ Compensatory interest only applies to payment certificates issued 31 calendar days after practical completion
▪ Default interest applies to late payment of any payment certificate - applicable to the PBA, NSSA and MWA

18.2. FINAL COMPLETION

▪ At least 3 interim payment certificates must be issued before the issue of the final payment certificate

18.3 PAYMENT CERTIFICATE 11

▪ The first payment certificate after practical completion (say 15 calendar days) attracts no compensatory interest
▪ The employer makes payment of the certified amount

18.4 PAYMENT CERTIFICATE 12

▪ Compensatory interest over 15+30 = 45 calendar days included in payment certificate shown in the recovery statement
▪ The employer makes payment of the certified amount

18.5 PAYMENT CERTIFICATE 13

▪ Compensatory interest for 75 calendar days included
▪ The employer pays certificate number 13 twenty-one (21) calendar days after issue date. The first fourteen (14) calendar days
is the employer’s “payment window”. The further seven (7) calendar days attracts default interest
▪ Should the employer pay the certified amount + the default interest i.e. the “debt due” no further default interest applies
▪ Should the employer pay only the certified amount further default interest of 2 calendar days would apply to the “unpaid balance”
and must be included in the next recovery statement
▪ With the employer’s concurrence, the default interest on the “unpaid balance” should be calculated up to the next expected
payment date viz 9+7 = 16 calendar days thereby extinguishing the default

18.6 PAYMENT CERTIFICATE 14

▪ The employer meets payment requirements without 11.5 inclusion
▪ Should 9.5 not have been applied the “unpaid balance” default interest as per 11.5 would again apply

18.7 PAYMENT CERTIFICATE 15

▪ Should final completion and acceptance of the final account not be achieved in ninety (90) calendar days further interim
payment certificates must be issued to maintain the “payment cycle”
▪ The final payment certificate also attracts compensatory interest (PBA only). Should the final payment certificate be paid late
default interest is due and is recoverable by the contractor as a debt

18.8 COMPENSATORY INTEREST CALCULATION

Assumptions:
• Interest rate (Repo/Bank rate- July 2019) = 6.5% (see interest definition)
• Net amount certified = 20 000.00
• Certificate No 12 issued after Practical Completion = 45 calendar days
Calculation: 20 000 x 6.5% x 45 / 365 = 160.27

18.9 DEFAULT INTEREST CALCULATION

Assumptions:
• Interest rate (Repo + 6.0%) = 6.5% + 6.0% (see interest definition)
• Certificate No 3-payment due = 91 200.00
• Payment made after Certificate issue date = 21 calendar days
• Employer (21-14) calendar day default pay period = 7 calendar days (see 11.5.2 above)
• Balance of payment cycle = 9 calendar days
• Next Employer payment (expected) = 14 calendar days
Calculation: 91 200 x 12.5% x 7 / 365 = 218.63
* Assuming the employer makes payment of the certificate amount only:
Add: 218.63 x 12.5% x 9 / 365 = 0.67 (see 10.5.4 above)
Total default interest due at end of payment cycle = 219.30
* Additional interest to expected employer payment date
Add: 219.30 x 12.5% x 14 / 365 = 1.05 (see 10.5.5 above)
Total default interest paid = 220.35

18.10 COMPENSATORY AND DEFAULT INTEREST – ASSUMPTIONS

1 Each payment certificate issued reflects an amount in favour of the contractor

2 The contractor's “payment cycle'' is a constant 30 calendar days = same day(date) every month stated [CD]
3 Default periods given are for demonstration purposes only

©JBCC® Guide to Completion and Payment – JBCC May 2018 and May 2020
 44

©JBCC® Guide to Completion and Payment – JBCC May 2018 and May 2020
 45

19.0 CPAP - CALCULATION

The calculation and payment of fluctuations is an integral part of interim valuations. Fluctuations are referred to as Contract Price
Adjustment Provisions (CPAP) in the built environment. The most commonly applied formula for calculating CPAP for building
contracts in South Africa was (originally known as) the Haylett Formula. Please refer to the CPAP indices application Manual and the
Work Groups Composition and weighting of sub-indices

The indices are calculated and compiled by Statistics SA and are available from their webpage free of charge: -

www.statssa.gov.za/publications/mystats.asp?myfavpubl=1&myfavpubln=P0151

The weighting of the indices is also useful when analysing unit rates

The formula: A = 0.85 V (Ie/Io-1)

Where: A = the amount of adjustment

0.85 = a constant which provides for a 15% non-adjustable element
V = the work value for adjustment in such work group and the valuation period
Ie = the value of the index applicable to such work group and the valuation period which shall be
the value for the month
Io = the value of the index applicable to such work group for the base month

The formula is applied to the net amount certified for every workgroup. The net amount is determined by deducting the amount
previously certified from the accumulative amount for the current month for each workgroup. The base month index (Io) remains
constant throughout the contract for each workgroup. The only time where this would not be the case is when work is undertaken at
a different time than that of the initial tender. An example would be an item that was included in the tender as a provisional sum and
that is tendered at a later stage than the main contract. The current month index (Ie) moves along month by month according to the
date of the certificate

The format according to which the escalation is calculated resembles that of the detail of the certificate and also starts off with the
cumulative total for each workgroup less the amount previously certified to obtain the amount that needs to be adjusted. It is important
to realise that the result arrived at is no longer a cumulative amount and therefore the adjustments of all the certificates need to be
added together to obtain a cumulative amount for inclusion in the valuation

The indices are obtained from the P0151 publication and the monthly indices and inserted into the sheet as illustrated below;

Assume the following:- Tender date: April 2019 Date of Certificate no 1: June 2019

If an adjustment value is negative, it indicates that the cost of the workgroup has decreased since the date of tender.

©JBCC® Guide to Completion and Payment – JBCC May 2018 and May 2020
 46

The next certificate would be as follows

Figure 1: Calculating fluctuations (escalation)

There may be instances where the value of work is based on information that does not stem from the same time as the tender - for
instance items that were included in the tender documentation as cost price items and that are adjusted to the correct cost according
to invoices that are to be submitted as soon as the work they pertain to is executed. Such an event can be handled in two ways -
either these values can be grouped together in a total that is not subject to escalation, or the rates may be de-escalated back to the
same base month as the tender and then included with the other work and escalated together with the other work. To de-escalate a
value the inverse of the formula must be applied

Assume the value of the tiling at current value is R 10 000

Current index (Ie) for June 2019 for tiling is 109.6; Base index (Io) for April 2019 for tiling is 109.3

1 .
Adjusted (de-escalated) amount = V x [1+ 0.85 (Ie/Io -1)]
= R 10 000 x 1 / [1+0.85(109.6 /109.3 -1)]
= R 10 000 x 1 / [1+0.0023]
= R 10 000 x 0.9977
= R 9 977

It is important during the final account stage to double check that the indices used to calculate the fluctuations are correct in all the
certificates. The indices prepared by Statistics SA are issued on a monthly basis. When the CPAP is calculated and the indices for
the current month are not available the latest available indices are used. Should any of the indices be incorrect the specific month’s
calculations must be redone as well as all subsequent calculations to correct the cumulative value for the CPAP

©JBCC® Guide to Completion and Payment – JBCC May 2018 and May 2020