project escalation · sanral / safcec and the like, can agree baskets to suit differi ng project...

SOUTH AFRICAN FORUM OF CIVIL ENGINEERING CONTRACTORS | LR 2/6/3/138

PROJECT ESCALATION

NORMAN MILNE

CONTINUITY ADVISOR SAFCEC

South African Forum of Civil Engineering Contractors | LR 2/6/3/138

WHY DO WE NEED CONTRACT PRICE ADJUSTMENT (CPA)? IT IS ABOUT MANAGING RISK; WHICH PARTY IS BEST EQUIPPED TO DEAL WITH RISING COSTS?

IN THE SOUTH AFRICAN CONTEXT, THE EMPLOYER BEST SUITED TO DEAL WITH PRICE INCREASES

THUS, CONTRACTUAL MECHANISM IS IN PLACE TO “REIMBURSE” THE CONTRACTOR

METHODOLOGY – THE FORMULAE (GCC / SAICE)

2

BACKGROUND


A BRIEF LOOK AT THE FORMULAE (GCC / SAICE) THE NON-ADJUSTABLE ELEMENT (TYPICALLY 10% OR 15%) IS: X

THE MAIN COMPONENTS OF CONSTRUCTION COST ARE: L, P, M & F BEING THE LABOUR + PLANT + MATERIALS + FUEL ELEMENTS OF CONSTRUCTION

THE COEFFICIENTS ARE REFLECTED BY: A, B, C & D BEING THE APPORTIONMENT OF EACH COMPONENT IN THE TOTAL COST(TOTAL IS TO BE 1)

THE INDICES APPLIED ARE: T AND O BEING THE BASE MONTH (O) AND THE MONTH OF PAYMENT STATEMENT (T)

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BACKGROUND


THE DISCUSSION TODAY, IS ABOUT THE INDICES LABOUR TAKEN FROM STATS-SA P0141 - CPI PER PROVINCE

RECENT CHANGE, AS “REGIONAL CPI INDICES” WERE DISCONTINUED

PLANT TAKEN FROM STATS-SA P0151 – TABLE 4

MATERIALS TAKEN FROM STATS-SA P0151 – TABLE 3

FUEL TAKEN FROM STATS-SA P0151 – TABLE 4

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BACKGROUND


TABLES 3 & 4 WILL BE DISCONTINUED (DECEMBER 2017)STATS-SA EXPLAINED THIS BY CITING QUALITY CONCERNS

NOT SATISFIED WITH THE DATA THAT IS COLLECTED

ELEMENTS OF THESE INDICES CAN NO LONGER BE SUSTAINED

HOWEVER, CONSENSUS IS THAT REPLACEMENT INDICES ARE NECESSARY

ORGANS OF STATE, EMPLOYERS AND CONTRACTORS GENERALLY WILL PREFERTHE ‘INDEX METHOD’ FOR CPA (BEING A “SCIENTIFIC BASED CALCULATION”)

CONTRACTORS (LARGE OR SMALL) WILL NOT BE ABLE TO SUSTAIN PRICING / TENDERINGPOLICIES TO ALLOW FOR THE RISK OF PRICE FLUCTUATIONS

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THE ISSUE


A WORKING COMMITTEE CHAIRED BY STATS-SA ESTABLISHED PARTICIPANTS INCLUDE SAFCEC, SANRAL, SEIFA, SAICE AND OTHERS

THE PURPOSE IS ESTABLISHING NEW INDICES BY YEAR END

INFORMATION AND DATA FOR NEW INDICES OBTAINED FROM TWO SOURCES,NAMELY: ORGANS OF STATE, EMPLOYERS AND CONTRACTORS GENERALLY WILL PREFER

THE “INDEX METHOD” FOR CPA (BEING A “SCIENTIFIC BASED CALCULATION”) 3-YEAR SURVEY (STATS-SA, 2014): FOR THE COMPOSITION OF THE INDICES, I.E.

THIS WAS HOW CONSTRUCTION ORGANISATIONS PURCHASED DIFFERENT MATERIAL GROUPS

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WHAT IS BEING DONE


LABOURFURTHER DISCUSSION REQUIRED:

WHETHER A LABOUR INDEX, BASED PART ON CPI AND THE WAGEAGREEMENT IS NECESSARY

STATS-SA’S OPINION THAT THIS IS AN INDUSTRY DISCUSSION

IT IS STATED THAT INDUSTRY PARTICIPANTS CAN FORMULATEOWN “INDEX”

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WHAT IS BEING DONE


FUELSTATS-SA IS NOT OBJECTING TO CONTINUE WITH CURRENT FUEL INDICES:

IT IS POSSIBLE THAT ONLY A NATIONAL INDEX, WITH NODIFFERENTIATION BETWEEN COASTAL AND INLAND

CLARIFICATION REQUIRED AS TO THE LEVIES PLACED ON FUELQUESTIONS REGARDING WHOLESALE / PUMP PRICE?

MEMBERS’ OPINIONS WILL BE SURVEYED

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WHAT IS BEING DONE


MATERIAL & PLANT

A DUAL APPROACH IS ENVISAGED HEADLINE INDICES (BEING A BASKET OF OTHER INDICES) PUBLISHED RESPECTIVELY

THE UNDERLAYING INDICES INCLUDED IN EACH HEADLINE INDEX WILL ALSO BE PUBLISHED

THE ADVANTAGE WILL BE THAT INDUSTRY SANRAL / SAFCEC AND THE LIKE, CAN AGREE BASKETS TO SUIT DIFFERING PROJECT TYPES

BASKETS CAN BE CHANGED MUCH QUICKER TO ALLOW FOR OTHER CIRCUMSTANCES

SEPARATE BITUMEN OR NON-BITUMEN BASED BASKETS CAN BE MAINTAINED

THE IMPLICATIONS OF A “PLANT HIRE INDEX” ARE INVESTIGATED

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WHAT IS BEING DONE


SPECIAL MATERIALS AND BITUMEN

AUDIENCE PARTICIPATION!

SHOULD THE “RISE AND FALL” METHOD FOR BITUMEN CONTINUE?

IS THERE A CASE FOR TREATING BITUMEN ON AN INDICE BASIS?

SHOULD THERE BE ANY OTHER SPECIAL MATERIALS IDENTIFIED?

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WHAT IS BEING DONE

South African Forum of Civil Engineering Contractors | LR 2/6/3/138 11

MATERIAL: NEW INDEX DEVELOPMENT

CURRENT DEVELOPMENTNEW

STANDARDEXCLUDINGBITUMEN

EXCLUDINGSTEEL

ROADS & EARTHWORKS

CIVIL ENGINEERING

STEEL (STRUCT & REBAR) 27.0 34.6 0.0 17.7 39.7

CEMENT 22.3 28.0 30.8 16.8 30.8

AGGREGATES 16.3 20.4 22.4 30.2 10.9

BRICKS BLOCKS & TILES 8.5 10.6 11.7 1.4 2.6

PIPES, TUBES & FITTINGS 3.4 4.3 4.7 7.7 6.4

PAINT 1.6 2.1 2.2 - -

GEOFABRICS - - - 0.9 0.6

OTHER - - - 2.3 6.4

BITUMEN 20.9 0.0 28.0 23.0 2.6

South African Forum of Civil Engineering Contractors | LR 2/6/3/138 12

MATERIAL: NEW VS OLD


AN IMPORTANT ASPECT HERE IS DECIDING ON A: CAPITAL COST BASED INDIEX (RELIABLE INFORMATION READILY AVAILABLE)

OR

HIRE RATE BASED COST INDEX (QUESTIONS REGARDING RELIABILITY)

ANY OPINIONS IN THE AUDIENCE?

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PLANT: NEW INDICE DEVELOPMENT


ALL PARTIES DESIROUS TO HAVE NEW INDICES

STATS-SA LIKELY TO CONTINUE WITH STATUS QUO, UNTIL NEW INDICES IN PLACE

FURTHER “INDEX DEVELOPMENT” REQUIRED BETWEEN SAFCEC, SANRAL AND OTHER ORGANS OF STATE (TRANSNET, ESKOM AND THE LIKE EMPLOYERS)

RATIONALISATION OF INDICES:

BITUMEN INCLUDED & EXCLUDED

14

WHAT IS BEING DONE


THANK YOU

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project escalation · sanral / safcec and the like, can agree baskets to suit differi ng project...

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