Construction Industry Development Board Bill: briefing

NCOP Public Services

30 August 2000
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Meeting Summary

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Meeting report


30 August 2000

Documents handed out:
Construction Industry Development Board Bill
Slide Presentation - text outline of presentation only (see Appendix 1)

An overview of the Construction Industry was provided by means of a video presentation. The committee was then briefed on the reasons and benefits for establishing a statutory body known as the Construction Industry Development Board.

Mr Jerome Govender from the Department of Public Works briefed the committee on the construction industry and the objectives and benefits of the Construction Industry Development Board which will be established by means of this recently tabled Bill.

Overview of the progress towards the establishment of the Construction Industry Development Board (CIDB).
In the overview, the following points were made:
- South Africa has an established construction industry which is a great source of employment. For every R1 million ploughed into the industry, 15000-20000 jobs are sustained.
- It is, however, unpredictable. It has periods of boom and bust. During the latter, it sheds skills and jobs, thus impacting negatively on development.
- Costs are continuously being driven down by clients. Because contracts are given on the basis of price, this leads to poor performance and quality as contractors attempt to cut margins everywhere.
- The construction industry must still be transformed as it is racially defined and Blacks are still on the periphery.
- The Public Sector is faced with delivery constraints in terms of the construction industry. There are still stifling regulations for emerging contractors.

A White Paper process was set in motion from 1996 to set up the Construction Industry Development Board (CIDB), which eventually led to the CIDB Bill with the following objectives:
- To solve the problem of volatility and instability in the construction industry.
- To enhance industry performance through best practice.
- To promote new industry capacity and
- To develop the role and capacity of the public sector.

Core focus areas from the White Paper
Current state of the construction industry.
Growth, Performance and Delivery

The need for the CIDB
It was recognised that problems in the construction industry cannot be addressed in a piece-meal way nor can they be effectively dealt with by either public or private sector alone. There was a need for a focused national agency to provide support to public and private sector organizations to meet this challenge, hence the CIDB Bill.

However the government could not wait for the CIDB to deal with issues, the following programmes proceeded before the establishment of the CIDB:
- Emerging Contractor Development Programme.
Affirmative Procurement Policy.
- Project Management Course for the Public Sector for delivery management in the construction industry.
- Exploration of mechanisms to deal with delayed payments by the public sector.

The role of Government
Government as the biggest spender in the construction industry must ensure that there is value for money. It must play a role as a facilitator and regulator to ensure social and economic responsibility and ensure industry growth and development. This was translated into the decision to establish the CIDB by means of the CIDB Bill.

Objectives of the CIDB
- Strategic vehicle for improvement of the marginalized sector and emerging contractors.
- To play a pivotal role in infrastructure development.
- Sustainable industry growth.
- Quality improvement of leadership in the construction industry.
- Determine and establish best practice.
- To promote in the construction industry the following:
Best practice
Ethical standards
Sustainable growth to enable the industry to deliver to the broader society
Appropriate research
Implement Government Policy.

Envisaged benefits of the CIDB
It will lead to:
- Core national competence.
- National authority recognized by the public and private sectors.
- Reduced duplication effort by different organs of the state.
- Improved risk management and reduced cost to the private and public sector.
- It will ensure that accelerated transformation and development do happen.
- It will lead to the establishment of best practice.
- Sector status reports.
- Improved planning parameters for industry training requirements.
- Standardized and simplified contracts.
- Enhanced development of emerging sector.
- Enhanced public sector capacity to manage the delivery process

- At the moment public sector has delivery constraints.

The process ahead will involve public hearings before the Bill becomes an Act.

Questions and Answers
Mr Sulliman (NNP, Northern Cape): Regarding the composition of the CIDB, what process is going to be followed with regard to the appointments made? Will there be a relationship between the tender board and the CIDB?

Answer by Mr Govender:

Mr Mkhaliphi (ANC, Mpumalanga): Best practice is mentioned many times in your presentation - what constitutes best practice? You talked about the conservation of the construction industry. Won't that be misconstrued to mean the conservation of the status quo in the construction industry?

Answer: The Bill allows for best practice to determined by the government. The Board is about transformation and change. It is not about conserving anything. There is no reference to conserving in the Bill.

Committee member: Is training going to be given to the board members or to the construction workers?
Answer: It is training for workers in the construction industry. It is designed for the emerging sector not on technical expertise but on business skills.

Committee member: How urgent is this Bill?
Answer: This has been a long process. We would like to see this Bill enacted in this session of Parliament. The delay is taxing the team members who function as volunteers.

Mr Marais (ANC, Free State) - Are there no disadvantages with the CIDB?
Answer: (Mr Govender) - No, there are disadvantages, but it needs to be monitored carefully. Mechanisms have been refined over a period of time. Realistically, there might be something that we have overlooked.

Appendix 1:


Inter-related set of Problems
Volatile and unstable industry
Impact on sustainable development
Costs continuously being driven down by clients
Often translates into poor performance and quality as contractors attempt to recover margins elsewhere
Historical barrier for entry to the emerging sector
Public Sector delivery management

White Paper Strategies
Growth and Stability of the Construction Industry
Enhanced industry performance (through Best Practice)
Promoting new industry capacity (skills development and promoting the emerging sector)
Developing the role & capacity of the Public Sector

Need for the CIDB
cannot be addressed in piece-meal approach
cannot be effectively dealt with by either Public or Private Sector alone
need for a focussed national agency to provide support to assist public and private sector organisations meet this challenge

Core focus areas emanating from the White Paper
[PMG Editor's Note: Graphs not included]

Priority Programmes
Programmes that have proceeded before establishment of the CIDB
Emerging Contractor Development Programme
Affirmative Procurement Policy (Targeted Procurement)
Project Management Course for the Public Sector
Delayed payments by the Public Sector

Role of Government
Value for money
Social & economic responsibility
Ensure industry growth and development

Enabling Legislation to Establish the CIDB
[PMG Editor's Note: Diagrams not included]


CI - Indispensable role in the economy
Instability, volatility & structural problems
Unique nature of industry
Constraints to emerging sector
Investment constraints - need to promote
Impact on public - quality, productivity, she
Need for leadership, drive best practice
Vision for industry development strategy

Preambles to each chapter
Chapter One - Definitions
Best Practice means a desirable & appropriate standard, process, method or system in relation to the delivery process and the life cycle of fixed assets
Organ of State means an organ of State as defined in section 239 of the Constitution of RSA, Act No. 108, 1996

Chapter Two - Establishment of the CIDB
Objects of the Board
To promote the contribution of the Construction Industry
Provide strategic leadership
Determine & establish Best Practice
Promote :
Best Practice
Uniform application of policy
Ethical standards
Sustainable growth
Appropriate research
Implement Government policy
Powers, Functions and Duties
Must implement policies, programmes & projects
May initiate policy refinement and development in cooperation with Government
Must facilitate communication
Must establish a stakeholder forum
Must provide information on Best Practices, performance improvement, etc.
Must determine Best Practice priorities in consultation with Government
Must establish and maintain:
Register of Contractors
Best Practice contractor recognition scheme
Register of Projects
Best Practice projects assessment scheme
Must promote the uniform application of policy throughout all spheres of Government
Must identify and advise on Public Sector delivery constraints
Must publish a code of conduct
May monitor economic activity and measures according to which Public Sector spending is scheduled
May consult with organs of state to determine construction related budgets and application
May develop, promote and update the construction industry research agenda

Chapter Two - Appointment of the Board
At least 9 but not more than 13 members
Appointed through a formal process
Criteria will comprise a reasonable balance of expertise and knowledge whilst broadly reflecting the race, gender and geographic composition of SA
Remuneration determined by the Minister in consultation with Minister of Finance

Chapter Two - CEO of the CIDB
CEO appointed by the Board in consultation with the Minister
Five year contract period
Subject to performance agreements, etc.
Remuneration determined by the Board as approved by the Minister and Minister of Finance

Chapter Two - Stakeholder Consultation
The Board must constitute a Stakeholder Forum to inform it on matters that affect Construction Industry Development
Comprises individuals with experience, skills, expertise necessary to inform the Board appropriately
Represent Stakeholders
The Board must at least once per year convene a meeting of the Stakeholder Forum with the Minister

Chapter Two - Evaluation & Review
Submit an annual business plan for approval by the Minister
Submit an annual report.
Be subject to an independent evaluation every 5 years to determine the relevance and value added by the CIDB

Chapter Three - Register of Contractors
Tool for managing risk; promoting best practice; nature & performance of contractors
Single register (reciprocity with other statutory registers - NHBRC)
Mandatory for public sector
Private sector use will be encouraged but not prescribed
Viable to operate because of IT developments
Phase 2 - Contractor Recognition Scheme

Chapter Four - Register of Projects
Gather information on nature, value and distribution of projects
Projects above a certain value will be registered (continuation of current situation where all projects are subject to some sort of registration)
Projects above a certain value subject to a registration fee
Best Practice Project Assessment Scheme (phase 2)
after establishment of RoP projects above a prescribed value subject to assessment

Chapter Five - Financial Management
Subjects the Board to the Public Finance Management Act (PFMA)
Deals with funding of the Board, financial year end, etc.
In terms of the PFMA, the Board is the accounting authority and the members are jointly and severally liable

Chapter Six - General
Matters such as restriction on the use of name, enforcement of Code of Conduct, secrecy, etc.
The Minister must ensure appropriate consultation with other affected Ministers
The Minister may, by notice in the Gazette, make regulations on any matter that is required or permitted to be prescribed in terms of the Act

Envisaged Benefits of the CIDB
core national competence and resource
national authority recognised by the public and private sectors.
Reduced duplication of effort
Improved risk management and reduced cost.
Accelerated transformation and development
The establishment of best-practice
Sector status reports
Improved planning parameters for industry training requirements.
Standardised and simplified contracts
Enhanced development of emerging sector.
Enhanced public sector capacity to manage the delivery process

Process ahead
State Law Advisor
Portfolio Committee
Parliament and National Council of Provinces
Operational and Implementation plan
Framework for regulations


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