Thursday, May 30, 2024

Business, Word Masters Club

Avoiding disappointments when dealing with labour only building contracts

by Fansen Nkomo

Clients who intend to execute building projects can either utilise supply and fix arrangements, whereby the builder/Contractor brings in materials, labour, equipment and everything necessary to bring the works to completion. With the client only left with the obligation to pay the contractor for labour and materials. Another option is a labour only arrangement, whereby the client buys materials and the contractor supplying labour and “equipment”.

The labour contract has some grey areas that can potentially create different expectations, which can result in conflict situations between the client and the contractor and these need to be ironed out beforehand. From the above, three things ought to be clarified, first, the meaning of materials and secondly what labour only is and finally who supplies everything else which is not materials or labour only.

The meaning of materials – For this article, we defined materials as items that will “permanently” stick to the structure or that will stay with the structure owner when the construction project is complete. Examples include cement, brick, and sand. One may also add water to the list, though it will not be tangible when the building is complete; this is because water helps to convert most materials into a usable form. Depending on the agreement in place, the client can take responsibility for the storage and security of the materials.

Is it labour or labour only? – The inclusion of the word only after labour is often misleading. Apart from providing human resources, one would, and reasonably so, assume that the contractor should feed the employees. It implies that materials and labour have been clarified, including the respective responsibilities of the client and contractor. However, the question remains: What about everything else that is neither materials nor labour?

Who supplies everything else – Everything else can refer to equipment (scaffolding, formwork), machinery (compactors, generators) and tools (wheelbarrows). Whose responsibility is it, between the client and the contractor, to supply ‘everything else’? Failure to clarify this area often leads to disappointment when one party feels let down by the other. It is vital that when the contractor submits a quotation, it should be clear on whether or not “everything else is included”. Similarly, it is part of the client’s due diligence to interrogate what a labour only quotation means.

The choice of who provides everything else is entirely dependent on two contracting parties. At times the client may at their discretion opt to do so. However, where the client is silent, the contractor ought to include in their pricing, everything else that is necessary to execute and complete a construction project and avoid “surprising” the client. Before accepting a labour only quotation, it is prudent that the client seeks clarification on the supply of everything else; otherwise a cheaper quote may end up being expensive in the long run due to some grey regions.

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