A new era in South African infrastructure - Launch of SAICE’s GCC 2025

The General Conditions of Contract (GCC) are a standard set of legal and contractual rules that define how a contract is supposed to work in practice – especially for construction and engineering projects. The GCC 2025, published by the South African Institution of Civil Engineering (SAICE), has replaced the previous 2015 edition. It sets out the rights, responsibilities and risks of everyone involved in a project including the employer, the contractor and the engineer. It covers things like the scope of the work, timeframes, delays, variations, risk, insurance and dispute resolution. Think of the GCC as a rulebook that covers how the project is run from start to finish. The reason why the GCC is so important is that it creates legal certainty as South African construction law relies heavily on contract law. By using a standard form like the GCC ambiguity is reduced, it aligns with South African legal principles and has been tested in courts. It is also widely accepted in public-sector projects like municipalities, SANRAL, waterboards and SOE’s.  The GCC also aims to fairly allocate risk by avoiding to dump all risk on one party. In the case that a dispute does arise the GCC provides structured steps to resolve it by firstly, making it the engineer’s decision, secondly adjudication and thirdly arbitration or litigation. This is especially important in South Africa as court processes can be slow and expensive.  Why was a new GCC created?  The previous edition had a few problems including late payments, claims escalating into disputes and unclear termination and suspension rights. The previous edition encouraged a “claim-first” culture and dealt with problems after they happened which led to delays and expensive litigation. Earlier contracts dumped excessive risk on contractors, failed to clearly define who carries which risks and led to inflated tender prices.  The GCC 2025 reflects lessons learned from years of litigation, arbitration and stalled projects. SAICE’s CEO Sekadi Phayane-Shakhane stated “It’s been about ten years since the contract was last updated. GCC 2015 was a well-understood contract, but practices and challenges have changed. GCC 2025 is about ensuring our industry has a document that is relevant, practical, and fair.”  What are the key changes that was introduced by the GCC 2025? Firstly, gender-neutral language has been adopted throughout. Secondly, there is now an early warning and proactive contract management. This requires of parties to notify each other of potential problems before they become formal claims. This aims to reduce disputes by promoting early engagement and mitigation. Thirdly, GCC 2025 clause 18.1 has removed the option to orally make variations, from now on only written orders can form the basis of valid variation instructions. One of the biggest changes however relates to how disputes are handled. A two-stage claims process has been introduced. Contractors get 28 days to notify a claim and a further 28 days to provide details. This allows contractors to prepare more detailed claims as they now have more time. This also gives a stricter deadline for the employer’s agent to rule on claims as the claim will be automatically rejected if the responses aren’t provided on time.  The contract also tries to mirror international best practice by introducing clearer rules around dispute boards. This is to ensure that conflict is resolved early and cost-effectively. It is important to note that a party cannot enter arbitration or litigation proceedings without first complying with the adjudication board’s decision.  The GCC also strengthens a contractor’s rights by allowing suspension and eventual termination if payment is not made. To try and provide some relief for late payments the interest has been increased to the prescribed rate plus 3%. The retention amount that employers may hold has also been limited. Retention may not exceed 10% of any amount due to the contractor. If the contractor is required to provide security then the retention may not exceed more than 5% of the contract price.  These changes reflect lessons learned from previous years and challenges including the COVID-19 pandemic. There are provisions specifically made for government-declared states of emergency and disasters as valid reasons for project delays.   What must affected parties do now?  Employers must ensure that they update tender documents and train project managers and engineers. Employers must ensure that instructions, determinations and variations are recorded with precision. Contractors must revisit risk pricing and ensure that they understand suspension and payment rights. They will also need to update their internal systems to manage tighter claim timelines and documentation requirements. Legal advisers must review the amendments to the GCC 2025 carefully and align dispute clauses with client strategy. The GCC 2025 is expected to become the standard for many new projects thus industry players must familiarise themselves with the changes and update their internal processes.   Conclusion  The GCC 2025 is part of a broader move toward collaboration, certainty and early risk management. These changes demonstrate a conscious response to the practical challenges that have plagued construction projects for years. The GCC 2025 aims to reduce uncertainty and limit costly litigation or arbitration. However, the success of the GCC 2025 will depend on how parties adapt their practices to meet the new standards. If it is applied consistently than the GCC 2025 will improve project outcomes, protect cash flow and foster a less adversial construction environment. It is believed that the contract will create a more stable and fair environment for both employers and contractors. Legal guidance for those going through the transition could make the difference between compliance and costly mistakes.   For further assistance, consult an attorney at SchoemanLaw.   Zandrie  Rademeyer | SchoemanLaw Inc    Attorney:  Contract Law  https://schoemanlaw.co.za/our-services/family-law/