OUT-LAW ANALYSIS 5 min. read
09 Mar 2021, 1:55 pm
This is all the more urgent because of the need to cater for Africa’s young, growing and increasingly urbanising population, with Covid-19 heightening the challenge still further.
In June 2020 a report produced by Pinsent Masons, the law firm by Out-Law, together with the African Centre for Cities said: "Cities, as dense agglomerations of people and economic activities have become the contemporary test grounds for all manner of controls. This is despite the fact that for many parts of African cities, the underlying assumption that staying at home is the safest option, is reaching its limits when faced with questions of overcrowding, lack of essential services, gender-based violence, starvation and unemployment."
However, the delivery of infrastructure has its own challenges. Infrastructure projects are long term, highly complex and costly, and often come with poor productivity, cost overruns and delays. The return on investment is seen to be high-risk and long-term and infrastructure is therefore not an attractive proposition for many investors.
Combine this with the perceived or actual complexities of working in Africa – complex stakeholder networks, corruption and undeveloped or non-existent regulation – and Africa's problems are, indeed, acute.
It is time that a different model for the delivery of infrastructure was considered, one which moves away from the costly adversarial approach and which encourages collaboration and the sharing of ideas with the joint aim of delivering a quality project. To do this would require a fresh approach to the procurement of infrastructure contracts.
There are some encouraging indications from other markets around the world, where collaborative contracting has been around for a little longer, that it works
The traditional binary approach that all too often pits employer and contractor at loggerheads with each other and is characterised by complex claims management provisions and final account processes, has not suited the African market, which lends itself to a collaborative approach where parties identify issues early and work together to resolve them. This enables a project to keep moving, as opposed to it stalling or for relationships to sour as claims are fought over or worse still, stored up to the end.
This would mean, first and foremost, looking to some different forms of contract – those which have elements of collaboration built into them. These forms exist already in the South African market – for example, the JBCC Principal Building Agreement, the GCC 3rd Edition, and the 2017 version of FIDIC. All are approved for use in South Africa and contain strong collaborative elements along with traditional contract terms.
However, when these are used, there has been a tendency in the past for these collaborative provisions to be ignored, diluted or misunderstood. The result has been a model that functions as neither a collaborative nor a traditional model. The most well-known of all collaborative models is the NEC contract, but that is rarely used in South Africa; when it is, its concepts are all too commonly not understood or are amended. This is a pity given that South Africa was one of the early pioneers of the NEC through the leadership of Martin Barnes in the mid-1990s.
But there are some good signs out there, such as an increasing body of case law indicating that South African courts recognise terms that seek to embody a spirit of collaboration, good faith or good will. Indeed, there is case law suggesting the African concept of "ubuntu" – "I am because we are" – is alive and kicking and has found favour with the courts.
The challenge the courts have is to balance these broad but essential concepts with the need for contractual certainty, as they connote a standard of behaviour or an acceptable way of doing thing which may not always lend itself to a binary and legalistic interpretation. It seems clear that if collaborative contracting is to succeed in South Africa or indeed in any African market, the words of the contract are not enough and there is going to need to be a shift in mindset from employers, contractors, architects, engineers, lawyers and other advisers.
There are some encouraging indications from other markets around the world, where collaborative contracting has been around for a little longer, that it works. In the UK, for example, NEC contracts have become the public sector contracts of choice and are now used for nearly all projects procured by national and local government bodies and agencies. The successful delivery of the London 2012 Olympic Games was delivered using the NEC, for example. It is right to say that in the early days of NEC usage, there were a number of highly publicised and high-profile disputes, but as parties have become more familiar with the form and its concepts, these have reduced in number. If anything, the more commonplace amendments these days are designed to make the form more collaborative, not less so.
Collaborative contracts require a different approach, a different mindset and a different level of resource
It is significant that the UK benefitted from clear government direction on pushing NEC as its preferred contracting vehicle. As the procurer of the UK’s largest infrastructure projects, including Crossrail and HS2, that was bound to have a positive impact on the take-up and growth in understanding of the form. The tone from the top is essential and all governments, including those in Africa, have enormous influence when it comes to influencing contractual behaviour as they often hold the purse strings when it comes to the delivery of projects or the awarding of contracts. However, in South Africa, while the South African Construction Industry Development Board recommends the use of NEC, there is not the equivalent mandatory statement from government as there is from the UK government, for example.
In the African context there are also additional challenges that need to be overcome, primarily economic and social challenges that can create difficulties in readily adapting to the more flexible and fluid collaborative forms of contract. The need to have time and cost certainty in projects within the African economy cannot be understated, given the urgency with which infrastructure is needed as well as the financial constraints in which it must be provided. In that context an approach that jumps from one extreme to another is likely to create more problems than it solves. A softer and more gradual approach would more likely gain traction and momentum, in each case striking the right balance between fostering collaborative behaviour and preserving commercial safeguards.
Collaborative contracts require a different approach, a different mindset and a different level of resource; collaboration by its nature implies an increase in dialogue and communication. That brings with it a need to empower people to make decisions in the best interests of the project and not with the interests of one or the other party in mind. Communication also requires administration, so that there is visibility and events can be tracked and addressed as and when they arise. This is an essential component of collaborative contracting – but it brings with it a cost in resource allocation.
If parties are to get full value out of collaboration, they need to do some initial work to prepare, and they would need to be comfortable that they have available the necessary level of resource to properly administer their relationship. Not to do this is asking for trouble and some of the most costly disputes arising out of collaborative models have arisen because the parties were unwilling or not ready to commit to the consequences of the collaborative model.
This should not be taken to mean that "collaboration" should be regarded as a one size fits all model. Different degrees of collaborative conduct might be tailored for different projects, just as traditional contractual terms are tailored for specific risks. What is clear is that collaborative mechanisms warrant equal consideration in the process.
There is now an overwhelming bank of data which shows the benefits of collaboration and plenty of support and experience available to help parties "get fit" for collaboration. The infrastructure sector needs to change to deliver the infrastructure Africa needs. Collaboration is part of the solution.
Collaborative contracting was discussed during the recent Pinsent Masons global infrastructure law review of the year series. The events explored both sector-wide pivotal issues of global impact and local construction law issues affecting the infrastructure industry.
