INTRODUCTION

This study guide will enable students to incorporate what they have learnt during their
experiential training and theory they are currently learning in class. This guide will
ensure a third year student (S3 and S4) undertaking a national diploma programme in
building to enhance his management skills in the industry.

This course is divided into two sections

The first section will enable the student:

 To plan and control a small project completely.

 Handle the contractual aspects on site as well as the general office and site
administration aspects, and
 Quality control, cost elements of a project (budgets, cost control)

The second section will enable the student:

 To lead labour and personnel effectively, motivate them and communicate

with them effectively.
 Apply the principles and procedures in labour relations
 Enhance skill development in the society
 Look after the health and safety of workers and
 Enhance a, good public relation with the people around him/her.

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 SECTION ONE

Chapters Topics Pages

Chapter 1 Contract Management 2-10

Chapter 2 Planning techniques/ Programming techniques 11-21
Chapter 3 Office, Site administration and Documentation 22-40
Chapter 4 Financial reporting and control 41-63
Chapter 5 Contract law and Applicable clauses in a Standard Contract 64-84
Chapter 6 Quality Control 85-92
Bibliography 93

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 CHAPTER 1

1.0 CONTRACT MANAGEMENT

1.1 Definition

Policy is a course of action adopted especially in state affairs, companies, institutions

etc.

1.2 Introduction

The general policy of a company is formulated usually by unanimous agreement of

the board of directors. It is beneficial to those in authority that such a policy is
incorporated into a policy document, the contents of which should be available for
observance and implementation.

Policies are normally modified when required in the light of new technology,
experiences, development and problems encountered.

1.2.1 Areas in which policies apply

The general policy embraces the total organization and its activities and details the
strategy by which a company should achieve its objectives. The principal areas, which
should be covered by a policy, are:

 The general purposes and objectives of the company

 Executives’ responsibilities
 Marketing and sales
 Production/construction
 Finance
 Personnel

The areas aforementioned should deal with some or all of the points listed below:

a. The general purposes and objectives of the company

1. The recapitulation of the main details so contained in the memorandum and

articles of association.
2. The maintenance of competitiveness with rival companies
3. The improvement of facilities and employment for the area and integration of
the firm into the community
4. The achievement of suitable dividends for shareholders.
5. The maintenance of suitable salary and wage levels, and to help the economic
needs of the community.
6. The observance of legal requirements.
7. The expected expansion in the future.

b. Executive responsibilities

1. The role of each executive position

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 2. The parameters of responsibility, accountability and power of each executive
position.
3. The methods whereby changes can be made to the main policy – usually by
discussion.
4. The actions expected by executives regarding outside interests, e.g. not to have
interest in rival companies.
5. The prevention of conduct which, may be unlawful.
6. The service conditions of each executive and methods whereby grievances,
disputes or problems may be resolved.
7. The compulsory membership of committees and attendance at meetings.
8. The areas in which decisions can be taken, and those areas, which must have
the approval of the managing director or board.
9. The supervision of work and assessment of performance of subordinates
10. The disciplining of employees and their positions regarding labour relations.

c. Marketing and sales

1. The methods of marketing and percentage expenditure thereon.

2. The local, regional national and international requirements for obtaining work.
3. The type of activity/ commodity to be offered, and commodity mix.
4. The type of client to aim for.
5. The method of advertising (special offers, promotions etc.) and % of turnover
expended thereon.
6. The types of public relations exercises.
7. The salesmanship techniques, and whether agents are to used or not.
8. The insistence of keeping statistics for observation on trends, degree of
competition, etc. in various fields of work.

d. Production /construction

1. The levels of expenditure on research and development.

2. The purchase of materials by centralized or decentralized methods.
3. The stocks of materials
4. The use of plants either by hiring or buying or both and other fixed assets.
5. The % use of subcontractors and labour only subcontractors
6. The quality assurance expected
7. The use of work-study.
8. The use of incentives and bonus systems.
9. The methods of distribution of the commodities
10. The security measures to be taken regarding the works from outsiders and
employers.
11. The production mix (public and private sector).

e. Finance

1. Budgeting
2. Cost planning
3. The use of resources
4. The methods of attracting investors and financing projects.
5. The tax situation.

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 6. The spreading of the risk.
7. Methods of investment.
8. The maintenance of statistics on the economic climate.
9. Depreciation/inflation
10. Overseas financing of work.
11. Dividends to shareholders.

f. Personnel

1. Recruitment / forecasting needs.

2. Promotion from within or outside the firm.
3. Dismissals and appeal system
4. Remunerations
5. Motivation /morale
6. Extra payments (overtime, bonus etc).
7. Training /education
8. Safety representatives
9. Health and welfare.
10. Holidays, leave.
11. Revenue to be allocated to this area

1.3 Policies on-site

The site manger implements the company’s general policy in numerous areas i.e.
personnel, production, health and welfare, safety, industrial relations, security, public
relations, quality control, communication, conditions of contract, purchasing etc

The amount of knowledge and experience a site manger must have to conduct the
affairs of the company successfully at site level is vast, his/her subordinates,
supervisors, have delegated responsibilities in order to assist him/her.

At each stage of the work on-site policies are being formulated by decisions and
actions taken by the site manager or supervisors. At all times, therefore, it is essential
that suitable and sensible decisions are made because they set precedents by which
everyone, the site staff and operatives, would conform to during their period on the
site.

NB.
The precedents set for a particular site become the policies for that site. It must be
remembered that each area, as shown above, cannot be dealt with in isolation within a
company; they must be interrelated. The objectives in each area must be geared to the
achievement of the general objectives of the company.

As an example, enlarged markets should not be the aim if production capacity and
finance is, and will remain, limited.

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1.4 PLANNING

1.5 Definition

Planning concerns the ways in which resources i.e. material, labour and money can be
arranged so as to achieve the project objectives

1.6 Introduction

A construction project must be completed successfully in terms of time, cost, quality

and safety. Therefore, the project must be properly organized and planned by the
contractor who wishes to undertake the work.

The construction firm or contractor first becomes involved in a project when he/she is
invited to tender for a project. The tender is an offer from the contractor to carry out
the work for a stated sum of money. If the client accepts the tender, a contract is
agreed between the client and the contractor.

The planning process is involved from the beginning and can be conveniently
separated into the following three phases

1. Pre-tender planning
2. Pre-contract planning
3. Contract planning

1.7 Planning process

The arrangement of the resources will establish the overall plan for the project in
contracting terms. The following factors will affect the project construction plan:

Time, cost, quality, availability of labour, and availability of plant, type of site,
construction methods, contract & personnel.

The planning team typically includes the following people:

Planner, contracts manager, site manager, estimator, materials and plant procurer,
surveyor, construction director and planning supervisor (safety)

The grouping of the people in the planning team depends upon the size of the
company. E.g., in large construction company there will be a dedicated planning
department to carry out the planning function and lead the other members of the
team through the planning process.

In a small company the person undertaking the planning role may well be the
contracts manager or the site manager. However, in the early planning stages of many
larger projects the site manager will not yet have been appointed. The combination of
personnel should be able to give the necessary expertise required to allow an effective
plan to be produced.

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The planner will bring knowledge of planning and programming techniques, while the
contracts manager and site manager will have a practical and technical input.
The estimator, together with the surveyor, will be able to advice on the cost of
different techniques and methods of construction as well as on the labour costs of
different plans.

The material and plant procure is experienced in obtaining supplies and therefore
brings a valuable insight into availability. He can also advice on the output levels of
plant and the suitability of different types of plant for a project.
The construction team should ensure that the planning team is working towards its
objectives of producing an effective plan, while providing an overall company view
of the balance of company resources on different projects.

The responsibilities of the team will be to produce the following outcomes:

 An overall construction strategy

 Site layout plan.
 A master programme
 A schedule of materials
 Schedule of plant schedule of labour
 Short-term programme.
 Monitoring and control procedures
 Health and safety plan.

These planning outcomes must be produced while also bearing in mind the clients’
objectives and also ensuring that all activities are carried out in an effective and safe
manner.

1.8 Planning stages

The process of planning can be divided into the following three phases:

1. Pre-tender planning
2. Pre-contract planning
3. Contract planning.

NB. To a certain extent each phase contains similar activities, the difference being in
the amount of detail and accuracy required at each stage.

1.8.1 Pre-tender planning

The time available for pre-tender planning may vary between six and eight weeks,
depending upon the type of project. While the contractor knows that he may not win
the tender, resources in terms of time and personnel must nonetheless be made
available to ensure that a competitive tender is submitted.

The contractor depends upon a certain number of tenders being successful in order to
stay in business. During this phase the contractor will decide on the construction
strategy and produce a pre-tender report. To achieve this the planning team must
study the contract documents and visit the site.

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The study of the contract documents should highlight any discrepancies in the
document, any unusual clauses in the contract, any special or unusual construction
details, and any unusual item in the specification or bills of quantities.
The visit to the site should reveal the following details:

 The exact location of the site

 The access to the site
 Details of services
 Geography of the area
 Local knowledge about the site
 Location of tips in relation to the site
 Local availability of labour
 Local availability of material and plant.
 Local weather conditions
 Whether any construction work is commencing or completing in the area
 Condition and closeness of surrounding buildings.

The knowledge acquired from the desk study of the contract documents and from the
site locality investigation is combined with the method statement and used to produce
a pre-tender report.

The pre-tender report will help the contractor to establish the risks involved in the
project. Adjustments can also be made to the project cost and time estimates and so
allow a competitive tender to be submitted.

1.8.1.1 Checklist of pre-tender documents

Site inspection report, method statement, outline construction programme,

organization structure, subcontractors lists, suppliers quotations, cost breakdown, list
of site layout requirements, health and safety plan

1.8.2 Pre-contract

If the contractor is successful in obtaining the work the process of pre-contract

planning can commence.

During this second phase the initial method statements and outline programme are
analyzed in detail with a view to converting them into a working document, which
can be used for monitoring and control purposes. It is at this stage that the timing of
activities is set, together with the reappraisal of sequencing of activities that was put
forward at pre-tender stage.

The mechanics for the awarding of contracts to the suppliers and subcontractors is put
in place, with the contractor seeking to obtain better terms and conditions now that the
works are certain.
A detailed site layout plan is prepared to show the arrangement of site
accommodation, material storage and plant in a manner, which will enable the work
to be carried out effectively and efficiently.

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The site organization structure should now be formalized, naming the key site
personnel and showing the lines of reporting between people and groups.
Site services such as water, electricity and telephone can now be confirmed with the
relevant bodies and connection dates identified.
Materials, which have long delivery periods, may need firm ordering at this stage
even though the contract commencement date may be some time away.

1.8.2.1 Checklist of pre-tender planning documents

Subcontractors file, suppliers file, method statement, site layout plan, organization
structure, master construction programme, labour resource schedule, material
schedule, plant schedule and health and safety plan.

1.8.3 Contract planning phase

This phase of the planning process takes place during the construction period and it
involves planning processes, which are essentially short term.
The site manger must now breakdown the master programme into monthly and
weekly sub-programmes. Increased amount of details is now required to ensure that
activities take place at the correct time and in the correct sequence.

The use of method statements and programmes will be required to allocate specific
tasks to the labour force on a weekly or daily basis. The site manger will issue daily
allocation sheets, which will list the tasks to be undertaken.
An important aspect of the contract, planning phase is the exercise of monitoring and
controlling activities to ensure that the project is running smoothly.

1.8.3.1 Short term planning (Operations programme)

Short-term programming can cover a period of four to six weeks or may cover a stage
of the work. The programme considered here will cover a period of six weeks. A new
programme is drawn up every forth week, thus giving a two week overlap and
allowing a review to be made of the work outstanding from the previous month; any
work outstanding from the previous month; any work behind schedule can then be
included in the current programme.

The purpose of the short-term programming is to ensure that work proceeds in

accordance with the overall programme. The overall programme is that converted into
a working schedule and must be updated regularly, whilst a review is simultaneously
made of all requirements by checking schedules.

This programme provides a detailed sequencing of activities for a particular activity

or operation. Finishes such as painting can be shown on an operations programme.
Each area of building and sequencing of these areas can be shown. This programme
allows the delay period between undercoating paintwork and finishing coat to be
clearly shown.

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1.8.3.2 Medium term planning (section programme)

This programme deals with a particular phase or section of the works over a particular
time period of the contract. For example, the substructure works can sometimes be
considered as section programme, particularly if the works consist of complicated
activities, such as piling or basement construction.
The time period is in months and weeks, but a more detailed breakdown of the
activities allows the site manager to plan activities from week to week. This
programme can also be used to depict subcontractors’ work on site. The section
programme is a sub-programme of the master programme and amplifies the sub-
programme.
The medium planning can be updated at weekly intervals from the weekly site plan
and a review made of the operations in the coming week to see if they are affected.

1.8.3.3 Long term planning (master programme)

The master programme includes all the major activities for the entire project. This
programme gives a broad picture of the scope of the works and the intended time
period. The time period is usually shown in months and weeks and the major
activities are plotted against these period.
This programme can be up-dated weekly from the weekly site plan, and will show the
overall position of progress to date.

1.9 Scheduling

A schedule is a tabular layout, which lists items and gives the number or other details.
Scheduling is a convenient method of communicating design details about
components which are repetitive and numerous.
Schedules also assist with the measurement of certain works sections. The use of
schedules can give the following advantages:

 Ease of access to information

 Logical presentation of information
 Ease of reference
 Simplified checking of errors, omissions or description in tender
documents.
 Time saved in taking-off
 Up dating of information

The most common applications of such schedules are in the following operations:
 Advance programming
 Checking deliveries
 Estimating
 Measurement of quantities
 Ordering materials
 Locating and carrying out work.

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1.9.1 Preparation of schedules

It is not possible to standardize the content and arrangement of schedules because of

the diversity of the subjects. The preparation of a schedule is made easier by the
following logical procedure for all subjects:

 Decide on the subject matter

 Design format of the schedule
 Identify individual components
 Identify components by reference to location.

1.9.2 Labour schedule

This is drawn up on the basis of the overall programme by adding up the labour
required each week. It shows the approximate number of each trade required and the
total number of contractors’ men on site.
A minimum of two labourers are kept on site for unloading and general seeping and
cleaning up, and two extra labourers have generally been provided, the only
exceptions being in week no. 35 to 40, when it is felt that extra labourers would not be
economical.

1.9.3 Plant schedule

This is also drawn from the overall programme and shows the major items of plant
required each week. Incase of dismantling times it has to be included.

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 CHAPTER TWO

2. PLANNING TECHNIQUES/ PROGRAMMING TECHNIQUES

2.1 Method statement

Definition

A method statement is a comprehensive description of the contractor’s approach to

carrying out the construction work.

During the pre-tender and pre-contract planning phases the contractor will have
produced a method statement for the works. Because the method statement is central
to planning process it is described here as a special item:

The method statement will include the following items:

 The nature of the site

 The location of the site
 Contractor’s expertise for the type of work
 The contractor’s intended timescales for the works
 The intended order of the works
 The amount and type of labour required
 The amount and type of plant required

The layout and format of method statement can vary from company to company.
Some companies prefer to list all the elements in a report format, while others like to
fill in a ready-made form or proforma.

Whatever layout is used, the contractor must ensure that all the activities or operations
associated with the project are included in the method statement. The planner must
use a systematic analysis of all activities in order to produce the programme of
works.

The early method statement, at the pre-tender phase, will include alternative methods
for carrying out the activities so as to allow choice. The latter method statement,
during the pre-contract stage, will have a more detailed analysis.

METHOD STATEMENT
Project: Date: Sheet:

Client: Prepared by:

Opera Operatio Sequence of Mtls Plant Labour Safety Output comm

No. operat. Qty.

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2.2 Programme

Definition

A programme is the conversion of the construction plan to time related chart.

All construction work must be programmed to ensure that activities are sequenced in
the correct order. The construction programme sets out the progression and sequence
of the works for key activities in sufficient detail to show the contractor’s plan for
carrying out the works with respect to time.

A programme is important because it supports the following actions:

 Inform the client of the contractor’s intentions
 Provides a timetable of activities
 Determine plant requirement time
 Determine materials requirement time
 “ labour “ “
 Provide a basis for control and monitoring of activities
 Aid the production of cash flow chart
 Provide time evidence in relation to claims
 Enable all parties to assess the consequences of delays and interruptions
 Allow an assessment of changes or alterations to the works during the
construction period with respect to time and therefore cost.

2.3 Techniques of programming

Programmes can be worked out and presented in a number of forms, each with its
own advantages and disadvantages. The method of producing the programme is
known as the programming technique and there are essentially three techniques with
which you should be familiar.

1. Bar or Gantt charts

2. Networks
3. Line of balance

2.3.1 Bar chart or Gantt chart

The bar chart or the Gantt chart was developed by Henry l. Gantt, a management
scientist who lived during the early part of the 20th century. He developed a pictorial
method of showing planned progress against actual progress (Fig 1)

The bar chart shows the time, usually in months and weeks, horizontally along the
top, with the activities listed vertically down the left hand side, the bar chart is the
most commonly used programming technique and it has its pros and cons.

Advantages of the bar chart

 Simple to produce
 Easily understood by everyone on site
 Gives a good pictorial representation of the construction sequence

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  Can be updated easily.
 Different levels of programmes can be easily related to each other, e.g.
master, section and operation programme.
 Key dates can be easily shown on the programme.
 Can be easily used to indicate progress and thereby aid monitoring and
control of the project.
 Can be drafted on a preprinted proforma.

Disadvantages
 Difficult to show the interrelationships between activities
 The representation of the construction sequence may give too simple a
picture.

The important information, which should always be shown on a programme includes

the following:
 Name of project
 Name of client
 Contractor’s name
 Date of production of programme date of any amendments
 Name of person who produced the programme.

2.3.2 Networks

This programme shows a network of interrelated activities, highlighting the start and
finish of each activity. There are numerous networks, programming techniques, but
the following two types are traditionally used in the construction industry:

1. Activity-on-arrow
2. Activity-on-the-node (also known as precedence network).

The objective of network programming is to identify the critical activities and show
their relationships. This enables the planner to arrive at a minimum time in which the
project can be undertaken. Network programming may also be known by the
following terms:

1. Network analysis
2. Critical path analysis (CPA)
3. Critical path method (CPM)

Advantages
 Shows the interrelationships of activities.
 Requires the planner to think logically
 Critical activities are identified
 Non-critical activities identified and this allows the planner to balance
resource requirements.
 Resources such as materials and plant, which may act as a restraint on
the programme and cause delay, are highlighted.
 The effect on future activities of a delay on a previous activity can be
easily analysed.

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  Effects of delay can be identified and claims by the contractor for
extensions of time to the project can be substantiated more easily.
 The effect on the programme of speeding up activities can be assessed.
 Networks are suitable for complex and difficult projects.

Disadvantages

 Difficult to be understood by all parties in a contract.

 Updating and redrafting can be time consuming and difficult.
 Requires the planner and users to have an expert knowledge of the
construction process and methods used in the project.

NB. The use of computers can now reduce the amount of time required to produce
and redraft a network. After the analysis of the network it can be converted into a bar
chart, which is more easily understood. The resultant bar chart has the advantage of
both techniques. The interrelationships between, activities can be shown by linking
activities on the bar chart.

2.3.3 Line of balance

The line of balance LOB, which is also known as the elemental trend analysis ETA, is
used to programme repetitive work.

The use of bar chart and networks in repetitive work becomes cumbersome and
does not balance the rate of work against similar sequential activities. The line of
balance is similar in concept to the bar chart in that bars represent the activities. But in
this case the times are plotted on the horizontal axis with the number of units
requiring similar activities plotted on the left-hand vertical axis.

The concept is of gangs for a particular trade moving from one unit to the next unit in
sequence.
Typical examples of this technique are for multiple housing projects or fitting –out of
a number of floors in multi-storey building. Indeed, any project, which consists of a
number similar units or sections with similar activities, can be programmed using the
line of balance technique.

Advantages

 Rate of working of one trade against another is clearly shown

 Information is easily understood
 Provides good pictorial representation of construction sequences.
 Effects of delays are clearly shown
 Resources ca be leveled against one another
 Progress can be recorded easily as an aid to monitoring and control
 Requirement dates for materials and plant can be easily identified
 Different rates of output are evident
 Effects of accelerating the activities are clearly shown.

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Disadvantages

 Suitable only for repetitive work

 May give too simple a picture of the construction process as a lot of
information is summarized on the chart.

2.4 Production of programmes

All the programme types identified in the previous sections involve the same early
steps in production:

 List all activities

 Sequence all activities
 Time all activities
 Produce the programme

2.4.1 Activities

All the activities in a project can be identified with the aid of the method statement,
which has been prepared earlier in the planning stage. The activities should correlate
with particular trades or sections of the work. For example, excavation work requires
labourers and brickwork to DPC. Level requires bricklayers. Roof work requires
carpenters and roof coverings require roofers.

2.4.2 Sequence

When the activities have all been listed, the planner then sequences them into logical
and practical order. This involves the production of a logic diagram, as shown in the
activity-on-the-arrow (fig. 2)
A broad sequence of activities will include the following:

 Site set-up
 Site clearance
 Substructure
 Superstructure
 Fit-out
 External works

However each of these broad areas has to be broken down into activities or operations
as previously explained.
There are three fundamental questions that the planner must ask when deciding how
and where to place an activity in the sequence. They are:

1. What activities must be completed before this activity can be carried out?
2. What activities can only be carried out after completing this activity?
3. What activities can take place at the same time as this activity?

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2.4.3 Timing

This may be obtained from published standard times for activities, such as the rate of
output for a particular size of concrete mixer, or the number of bricks that a bricklayer
can lay in an average eight-hour day.

The planner together with the estimator uses the method statement to calculate
outputs, while making any allowances for variations in the activity or difficulties that
may be encountered with respect to the particular project.

The use of the work-study principles may also be appropriate in calculating activity
durations. Past experience of particular activities and methods of construction also
plays a part in predicting activity durations.

2.4.4 Programme

If the programme is of bar chart type, the activities can now be plotted. The resultant
draft programme is discussed with the contracts manager, and their input is used to
make amendments.
The site manager who implements the programme on site must believe in, and be
committed to, the timescale and sequence of construction. The programme is of little
use if the site manager believes that he has been set an impossible timescale and feels
no ownership of the programme.

2.5 Network production

2.5.1 Activity-on-the-arrow production

It is of great importance to know the code of the network in fig 2

 The circle represents an event or node. It can be divided into three parts,
two of which contain time and one, which contains part of the activity
reference.
 The arrow represents an activity. The length of the arrow is not related to
time.
 The activity description is always written on top of the arrow.
 A broken or dotted arrow is a dummy. A dummy activity is used purely to
maintain logic in the network and because it is not an activity it does not
have duration. The use of a dummy also avoids two activities having the
same reference.
 The duration of the activity is always written below the arrow.
 In activity on-the-arrow, the activity always has two reference points.
E.g. activity 3-7, or activity A-B. All projects must begin and end with an
activity. All activities between the beginning and the end must be tied-in to
other activities. This avoids leaving activities “dangling” or hanging
unresolved.
 A critical activity is an activity, which has least or no “float time”.
 Float time is amount of spare time available before an activity can start.
 Critical path is the pathway or sequence of activities through the network,
which has the least float time, or no float time. The duration of this

16
 pathway is the shortest possible time in which the project can be
completed.
Explanation of the fig AOA
 The fig. On the left hand side of the circle (event) is the EST of the activity
on the arrow following the circle. It is also the EFT of the activity on the
arrow before the circle.
 The fig. On the right hand side of the circle is the LST of the activity on
the arrow following the circle. It is also the LFT of the activity on the
arrow before the circle.
 The EST represents the earliest possible time that an activity can begin and
the LST is the latest time that an activity can begin.
 The EFT and the LFT are the earliest and latest possible times when an
activity can end.
 If the earliest and latest start times are the same for a particular activity,
and the earliest and latest finishing times are the same for that activity,
then the activity is a critical activity

A non-critical activity has float, and therefore there is some discretion as to when it is
carried out, provided that it is carried out within the timeframe allowed. That frame is
the time between the earliest possible start time and the latest possible finish time.
Example, an activity such as drainage works may have an earliest possible start time
of day 10. The activity requires 12 days to complete and the latest possible finish is
day 45. Therefore, the timeframe available for the drainage works to be carried out is
35-days, i.e. 45 minus 10. As drainage takes 12 days, the amount of spare time or
float is equal to 23 days.

The formula for calculating floats for a particular activity is as follows:

Latest finish time (LFT) – [Earliest start time (EST) + Duration (D)]= Total float

Earliest finishing time EFT- [Earliest starting time (EST)+Duration (D)]= Free
floats

Knowing the timeframe and float of an activity allows the contractor to carry out that
activity when resources are available. This helps the contractor to balance the use of
resources such as labour and plant.

2.5.2 Activity on the node production

The activity on the node, or precedence, diagram uses similar logic to the activity on
the arrow diagram, but it is presented differently. With technique, the activity is
represented by a box or node, with the arrows showing logic between the boxes.

If there is a delay or lag between an activity and another, then this delay figure is
written under the arrow. A lag between one activity and another could be, e.g. the
delay striking formwork from an in situ concrete column, thereby allowing concrete
time to set.
The relationship between nodes can therefore be clearly shown using the following
relationship:

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  Start to finish
 Finish to start
 Lag start to finish
 Lag finish to start
 Lag start to start
 Lag finish to finish.

The above features of activity on the node (precedence) diagrams allow activities to
overlap and this is a distinct advantage over the activity on the arrow network, when it
is difficult to show activity overlaps. (Fig.3)

Explanation of AON

 The EST is placed in the top left corner of the node.

 The LST is placed in the bottom left corner of the node.
 The EFT is placed in the top right corner of the node
 The LFT is placed in the bottom right corner of the node
 The activity reference is written in the center of the node, with the activity
duration written below the reference

2.5.3 Analyzing the network

The analysis of both AOA and AON networks is similar. Begin at the first activity
and, working from left to right through the network, calculate the earliest start and
earliest finish times for each activity. This is known as the forward pass.

Having reached the end of the last activity, work from right to left back through the
network calculating the latest finish and latest start times. This is called backward
pass.
When working through the network, take care to calculate all paths into the event or
node. For the forward pass always use the highest number and for the backward pass,
use the lowest number.

NB: the pathway with the least float time or no float is critical path and is the
pathway, which determines the overall duration of the project.

2.6 Line of balance production

When preparing a line of balance consider the following steps

1. List the main activities.

2. Assess the time needed for the completion of each activity
3. Assess the labour or gang size needed for each activity.
4. Identify the plant to be used for each activity.
5. Decide on buffer times between activities.
6. Calculate total time for one unit.
7. Decide on rate of handover of subsequent units.

The four items can be identified and taken from the method statement.

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The buffer time between activities provides for spare time in case activities get
delayed or take longer than anticipated. The buffer will absorb delays in completion
of a previous activity, which means that the next activity will not be delayed and can
commence on time as planned. This feature is important, as the resources will have
been arranged for the activity.

The DURATION of the BUFFER normally depends on the experience of the planner
or site mangers in relation to the particular activity. Factors, which cause delays, such
as the weather, are considered. During foundation work e.g. delays due to the weather
are quite common.

The slope of the bar or line representing the activity depends upon the rate of working
or output. The steeper the line, the faster the activity takes place over the units.
Ideally, all the lines should be parallel; however, in practice this does not occur, as
different activities proceed at different rates.

The rate of output will depend upon the following factors:

 Type of plant used

 Size of gang employed
 Nature of the activity
 Weather
 Handover rate

The handover rate may be dictated by the client e.g. the client may want a certain
number of houses ready for sale every week. Once the first house is completed, the
rest may have to be handed over at a rate of say four per week.

When calculating the rate of output, the planner computes the number of gangs
required for a particular activity, bearing in mind the handover rate.

In order to meet the handover rate the number of gangs may be computed to be three
and a half. This is known as the theoretical gang size. The planner then has to adjust
the number of gangs to either three or four, as half a gang is not practical. If three
gangs are chosen the activity line will be slower than the ideal to meet the hand over
rate of four gangs, hence vice verse.

When all the rate of output for all the activities have been calculated with respect to
gang sizes and the buffer times have been decided upon, they can be plotted to
produce the programme.

2.7 Other applicable techniques

2.7.1 Resource scheduling or allocation

Resource scheduling is concerned with scheduling activities and their resources

within predetermined constraints. Initially when a network is drawn, no account is
taken of limit of availability of resources for any particular activity and it is assumed
that resources are always available when required. In some cases, however, the

19
resources may be required on different activities, which are on parallel paths in the
network.

Resource constraints are the most common. If the resource requirements for all
activities are known, once the project has been scheduled you can calculate a resource
profile for the project as a whole, this is known as a resource schedule and is either
listed as a table of resource levels with time or is drawn as a resource histogram.
This will take cognizance of the labour, plant and material schedules.

2.7.2 Resource leveling

If availability of resources is a critical factor, then insufficient resources may well

influence the project duration. Resource leveling is used to ensure availability is not
exceeded.

2.7.3 Resource smoothing

If the project duration is of prime importance, the first analysis will often show an
excessive duration. The critical path method is extremely useful in these
circumstances as it highlights those activities, which must be examined in order to
reduce the project duration. The aim will be to reduce the time required for those
activities, which will result in least, cost overall.

Resource smoothing is used when some smoothing of resources is carried out within
the activity floats to limit fluctuations in demand.

2.7.4 Cost control curves

It is common to plot earned value and accrual on a time chart at each reporting period.
As the project progress they form the customarily shaped curve, called an ‘S-curve’.
The shape is caused by the work of the project taking some time to accelerate at the
start, and slowing down towards the end.
It provides a visual representation of whether the project is under or overspent as it
progresses. If the originally planned expenditure profile also happens to be plotted on
the curve, the comparison of earned value to planned expenditure tells to you whether
the project is ahead or behind schedule (on average) and so provides an element of
time control.

2.7.5 Progress recording techniques

Progress can be recorded on pictorial diagrams by colouring plans and elevations

when certain sections of work are completed. This method is often used on housing
projects and gives a quick visual impression of overall progress, but other ways are
also available depending on the type of building and the amount of detail necessary.
In this instance progress will be shown on the planning charts (programmes), which
clearly indicates’ what is happening and where corrective action will have to be taken.

20
2.7.6 up-dating techniques

The short-term programme can be up-dated at weekly intervals from the weekly site
plan and a review made of the operations in the coming week to see if they are
affected.

The overall programme can also be updated weekly from weekly site plan, and will
show the overall position of progress to date.

Keeping the head office informed by means of a shuttle programme, which is up-
dated by the site manager each week. Alternatively a progress report can be sent to
head office giving the % completion of operations, with reasons for delay and any
other relevant information.

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 CHAPTER THREE

3. OFFICE, SITE ADMINISTRATION AND DOCUMENTATION

3.1 Office

Definition

An office is any place or room set a side specifically for work of administrative,
clerical or communication nature.

OR

It is a unit that receives stock and provides information, hence movement and use of
business assets is exercised thereby ensuring safety and the firms profitability.

3.1.1 Function of an office

 To receive and obtain information, through letters, telephone calls, visitors

etc.
 To prepare and process information, in the form of letters, invoices,
vouchers etc. with the help of office machines like photocopies, computers
etc.
 To send out information in the form of letters, circulars, reports, phone
calls
 To record information in books, registers, computers
 To control assets of the business by weighing and formulating a system
and policy regarding the use of various items.

3.1.2 Services commonly provided by an office

 clerical i.e. filing, typing, reproduction of documents etc.

 communication i.e. internal and external means of communication, mail,
telephone exchange.
 Administrative: personnel work, designing systems and procedures,
making policies, legal information to workers etc.
 Accounting: receiving and paying cash, processing various accounting
documents etc.
 Stores: stock taking and availing items needed in an office.

3.1.3 Filing office documents

Documents can be filed in either the following ways:

 Alphabetically
 Numerically
 Depending upon the subject matter e.g. civil projects or building projects
 Geographical location projects in Gauteng or in Limpopo

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3.1.4 Principles of good filling system

 It should be easy and simple to understand and use.

 The information should be easily obtainable.
 The system should be compact to save space.
 It should be economical to install and obtain.
 The system should allow for growth in relation to future needs.
 Should be easily accessible without having to disturb of distort the system.
 Should be appropriate to the needs of the business concerned.

3.1.5 Site office

The site office is involved with the following activities:

 Communication control i.e. mail, drawing registers, filling, telephone calls

 Operations control i.e. contract programme, method statement etc.
 Quality control i.e. specifications
 Material control i.e. chasing orders, daily or weekly materials returns, store
keeping.
 Plant control i.e. plant utilization sheets, plant hiring

3.2 Controlling and recording of drawings

Introduction

An architect should produce a sufficient number of project drawings to enable all

operations at site level to proceed smoothly. The delay in submission of drawings by
the architect normally causes frustration on the principal agent or the contractor hence
loss of confidence upon the architect.

Sets of drawings are generally divided into the following groups:

 Location drawings (general arrangement drawings)

 Assembly drawings (detailed drawings)
 Component drawings

3.2.1 location drawings

They show information related to:

 Site and external work (site layout plan) services.

 Building floor plans.
 The elements i.e. position of and dimensions of walls, floor, roofs, etc.

3.2.2 Assembly drawings

Shows the detail of the junctions of one element with another element i.e. joint of a
floor to the walls, or wall to a foundation.

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3.2.3 Component drawings

They record drawings having elements and sub-elements. These drawings are
normally produced for components, which will be made in a factory workshop, or
work area away from the building e.g. doors, window frames, R.C. beams, etc.

3.3 Details normally found on drawings.

1. A short but concise title e.g. foundation details.

2. Name of designer (architect, structural engineer, etc.)
3. Job number (different job number for architects office or structural
engineer’s office.
4. Sheet number,

3.4 Drawing register

A drawing register is used to record drawings received on site. The register states;

* The number of drawings received.

* From whom the drawings were received.
* Date they were received.
* No of copies of each drawing received.
* Date they were received.
* No of copies of each drawing received.
* Date each drawing was amended or superceded
* The scale of each drawing.

3.5 Storage of drawings on site

The storage of drawings on site may be by one or more of the following methods:

* Laid flat on a drawing chest

* Rolled up and in racks
* vertically hung between Brackets
* folded carefully and stored min files in metal cabinets.

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3.6 MEETINGS

Introduction

Meetings are required to maintain effective communication with the project manager;
project team and other parties concerned e.g. those responsible for industrial relations
and emergencies, as well as the client.

There are different types of meetings, these are:

 Conversation – a talk of familiar discourse between two or more persons

(individuals may make notes of what was agreed).
 Forum – this is a discussion where the audience takes part, normally after a
platform speaker introduces or speaks on a subject.
 Conference – this is an infrequent gathering of many people with common
interests to discuss business, exchange ideas on latest views, and listen to
papers being presented.
 Discussion – to examine in detail points or ideas; generally to arrive at an
agreement.
 Seminar – where a group of advanced students work in a specific subject of
study under a teacher/lecturer.
 Interview – a meeting to consider the suitability of a person or subject with a
view to engagement or a meeting with a famous or infamous person with a
view to publication.
 Debate – where a large number of individuals gather to argue the case for or
against a proposition, which revolves around a current topic.

NB: In all these types of meetings individuals may take notes, but this does not mean
that the meetings are formal.

These meetings can be organized in one of the different forms below:

a) Informal Meetings
b) Formal Meetings

a) Informal meetings

Informal meetings points are discussed generally without an agenda and without
any formal minutes being taken as a correct record of what was said.

Problems associated with informal meetings:

* No true record of what was discussed.

* No proof of what was agreed.
* No record of those in attendance.
* No record of those who were supposed to attend but did not or whether
they sent their apologies.
* No proof of who agreed to do certain tasks.

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 b) Formal meetings

For any meeting to be meaningful a proper agenda would be drawn up and during
the meeting minutes should be taken. The following are necessary for formal
meetings:

* Plan and arrange the meetings.

* Identify the people who are to attend the meeting, always remembering it is
essential to have a chairman and a secretary,
* an agenda – prepared and distributed before the meeting.
* Minutes should be taken using the sub-headings of the agenda, which should be
typed up quickly after the meeting.
* A set of rules for debate and a constitution should be followed (rules and
regulations of the organisation).

3.7 TYPES OF MEETINNGS ON-SITE

At site level the architect and contracts manager could chair the monthly meetings
alternately. These types of meetings are:

1. PROJECT MEETINGS – generally called by the architect who

may expect the following individuals to attend: Professional
Quantity Surveyor, C.O.W., consultants, main contractors’
representatives (contracts manager and site supervisor), nominated
sub-contractors and suppliers’ representatives.

2. SITE MEETINGS – called by the contracts manager when required

to review progress, etc with representatives from sub-contractors
and suppliers, site supervisor and other site staff.

3. DOMESTIC SITE MEETINGS – called by the site manager (or

sometimes by the contracts manager) usually on weekly basis to
plan and maintain progress or to discuss other site problems.
Those in attendance would be the foreman/supervisors, ganger,
general foreman, the contractor, quantity surveyor, programmer
and site engineer.

3.8 Characteristics of a good chairman

 He should be knowledgeable of debating procedures;

 Be able to control (lead and not be led) and ensure that discussions and
questions should be through the Chair;
 Be courteous and friendly but firm;
 Follow the agenda without deviation;
 Allow each committee member to have his/her say without interruption; and
 Time conscious i.e. start and finish on time.

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3.9 DOCUMENTATIONS

3.9.1 DAYWORKS

Dayworks are those works, which are undertaken which cannot be accurately
measured and priced beforehand, and not are there any similar operations in the bills
of quantities.
It’s hence a method of payment to a contractor for additional work ordered by an
architect during the contract that cannot be properly measured and valued using
original or adjusted bills of quantities rates.

Dayworks are certain works such as repairs or replacement work e.g. diverting water
pipe on site. Payment is made from a fund (normally called a contingency sum)
provisionally allowed in the bills of quantities for unforeseen work.

NB: Contingencies are sums inserted into the contract documents to cover alterations
to the project without the need to approach the client for additional funds.

If the principal agent orders dayworks after the commencement of defects liability
period, the contractor is invited to insert appropriate % additions for overheads and
profits for labour, materials and plant.

3.9.2 DAYWORK SHEETS

They are completed by the site supervisor each day of the week, that work is
undertaken for the client and which is to be paid for on a daywork basis.

The site supervisor records the work undertaken, the job and job number, the date of
the work, the operatives’ names and hours worked, and material and plant used.

The clerk of works or the architect’s (principle agent) signature should be obtained
approving the details.

A copy of the form (daywork sheet) should be sent to the head office or (if site based)
send to the contracts surveyor for the total costs to be incorporated, and for
submission for inclusion on the monthly valuations.

3.9.3 VARIATION ORDERS

Definition

Variation orders are alterations, reductions or additions on a structure or project.

They are authorized changes to the contracted works confirmed in writing by an
architect instruction. It is normally the responsibility of the consultant Quantity
Surveyor to value and agree the value of these changes with the contractor.

27
3.9.3.1 Causes of variations in a construction project:

* It can be an alteration or modification of design, quality, etc.

* Additions, omissions or substitution of original work.
* Removal of completed work (change of mind).
* Contractors request for variation when the construction of a particular section
of the building may not be able to proceed as designed.

3.9.3.2 Steps for processing a variation to a contract:

* Accept the request to vary the contract instituted by the architect,

contractor or client.
* Record the details of the variation i.e. in regard to the five M’s :
money, machinery, manpower, material and minutes.
* Establish the procedure to be followed to cost the variations e.g.
- lump sum price
- bills of quantities (B.O.Q)
- schedule of rates.
* Prepare the cost of the variation.
* Submit the proposal for approval.
* Accept the written advice to proceed.
* Proceed with the work.
* Notify the proprietor of the adjusted contract value.

3.9.3.3 Procedure for presenting variation to a client

* Present the variation as a saving or extra to the contract.

* Provide limited details to show that the addition/deduction method of
costing has been used where appropriate.
* Include completed variations to the progress claims.
* Present a statement of adjusted figure showing the effects of variations on
the contract price and provide a revised contract figure.

3.9.3.4 Disadvantages of variations

* Construction programme is interfered with.

* Client’s budget increases.
* Architects have to re-draw.
* Engineers have to redesign.
* Extra measuring for quantity surveyor (Q.S)

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3.9.4 CALCULATION OF VARIATION

Example of variation calculation

Variation 1

Variation 1 calls for the deduction of six 3000 x 1500 windows and the inclusion of
two 3000 x 2000 and two 2100 x 1200 windows. Considering there is no item to
cover the 3000 x 2000 windows, the builder will have to arrange for a new price from
the supplier.

Extract of a page from the bill of quantities under the heading ‘Metalworker’

ITEM QTY UNIT TOTAL

COST R R
Bronze anodized aluminium double-hung
windows
4 800 3 200
A 2100 x 900 supplied and fixed
2 1 200 2 400
B 2100 x 1200 ditto
8 2 000 16 000
C 3000 x 1500 ditto

Builder costs a 3000 x 2000 window:

Quotation for supply and fixing of two 3000 x 2000 bronze anodized aluminium
double-hung windows: R5000.

Builder’s charge for one window would be R5000 ÷ 2 = R2500 each.

The builder costs this variation using the additions/deductions method.

Items Qty Unit Total

Cost R R

Additions

A 2100 x 1200 aluminium windows as pages 6/B 2 1200ea 2400

B 3000 x 2000 ditto pro-rata page 6/C 2 2500ea 5000

Total additions 7 400

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Deductions

A 3000 x 1500 aluminium windows as page 6/C 6 2000ea 12000

Total deductions 12000

Deductions R12 000

Additions 7 400

Net deductions 4 600

Builder’s overhead (12%) (if not already in rates) 552

5 152
Builder’s profit (8%) (if not already in rates) 412

Total deductions from contract R 5 564

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3.10 CONTROL OF MATERIAL ON SITE TO MINIMIZE WASTE

Introduction

The waste of materials can result from either the head office or site staff’s inability to
schedule materials accurately. With delivery dates inconsistent with requirements
leading to possible storage difficulties because of inadequate space on confined sites,
and the inability of site supervisors to control the whole aspect of materials receipt,
storage, and distribution and correct usage.

In order to minimize waste of material on-site, the following should be adhered to:

3.10.1 Taking-off and scheduling

The buyer can have the responsibility to take off and schedule material from the bills
of quantities or from the production drawing/ working drawings. Where the site
supervisor is given such a roll he/she must be careful to ensure the correct quantities
and details of the quality of materials are extracted from the drawings and
specifications. It is emphasized that it is necessary to make allowances for material
waste, and adherence to a realistic % from correctly recorded estimators or
purchaser’s figures obtained through previous experience must be made.

There is no need of allowing for excessive extra lengths or quantities on, say, joists to
give a suitable margin of safety. In case of excessive allowances more waste is bound
to occur on site.

3.10.2 Requisitioning and ordering

Site supervisors, if allowed to make orders themselves would find it advisable to

enquire from head office with which supplies or manufacturers’ orders should be
placed for the various materials.

When calling for orders one should ensure that there is enough storage room and
materials should not be brought early on-site as there is more chance of damages and
loss arising.

3.10.3 Receipt and checking of deliveries from suppliers or contractors own yard.

Delivery note should accompany delivered goods and must be presented by the
delivery drivers as a proof of the consignments, quantity and quality.

Delivery note should not be signed until the goods are checked and if damages have
arisen during transit or if there are discrepancies between the delivery note and
deliveries the amount should be indicated on both copies.

Materials that are being transferred from one site to another should be, accompanied
by a copy of material transfer sheet. A check should be carried out to verify that the
materials agree or correspond with the transfer sheet.

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3.10.4 Off-loading and handling

Careless offloading and handling of material should be avoided on site, as this leads
to wastage of material. Supervisors on site should pay attention to the way in which
materials are being handled.
Depending with the material they can be off loaded differently e.g. bricks can be off
loaded by forklift or manually or a self-unloading truck.

The lifting of small loose materials is facilitated better if the suppliers pack their
goods in boxes, bags, etc. to prevent breakages and reduce waste.

3.10.5 Storage and protection

Site layout plan should be drawn up to outline all material storage areas for safe
keeping/storage of material. The area should be clearly marked with notices so that
proposed drainage runs are not blocked. Hence a storage compound layout would
also serve to highlight to every one concerned where the various delivered materials
are to be placed for safekeeping, so that if the site supervisor is occupied when there
is a delivery, other supervisors, storemen, etc., may be able to direct the delivery
drivers to appropriate unloading points by referring to the site layout plan retained in
the main site office.

The storage areas would have to be clearly marked with notices so that proposed drain
runs and other service positions are not encumbered.

Consider the following in regard to storage:

 Hardstands for heavy material should be provided

 Provide concrete blinded areas for loose materials such as sand and gravel,
with separate bays for different grades.
 Show clear marks and laid-out areas for different materials, such as
reinforcement bars and mesh, concrete products, blocks, tiles, timber etc.
 Provide huts for bags of cement, plaster and lime, taking care to stack
materials so that the earliest deliveries are used first.
 Ensure there are level beds for bricks, etc. with covering provided (polythene
or tarpaulin) until materials are required. If pallets (or polythene on the base)
are used they prevent sulphates and other contaminants from the ground
affecting the materials.
 Store scaffolding fittings in strong bins and not sacks. Scaffold poles when not
in use should be stored on racks in the compound area.
 Lay drainage pipes on their sides in neat stacks, using wooden wedges to
prevent movement.

3.10.6 Issuing and distributing

* An efficient store keeping system needs to be set up on site as soon as possible to

ensure the operatives are issued, when required, with the correct quantity and quality
of materials.
* A booking out system of special and valuable material should be operated so that
carelessness by operatives in using the materials issued can be pin pointed.

32
3.10.7 Use of materials

* Operatives should appreciate the value of the material with which they work with
and should act responsibly when using them.
* Bricklayers should take care of the material by not having lots of half bricks around
him.
* Plasterers should ensure that the droppings are not wasted but should be re-used.

3.10.8 Quality control and supervision

Architects will require specimen material to be submitted by the main contractor for
his/her approval before use. Also specimen sample of work may have to be provided,
on-site, at the commencement of a contract so that they can be used as a guide to
everyone, particularly the architect and his representative i.e. the clerk of works,
regarding the quality of work expected.
A typical example is to provide a brick panel built as a display to show the bonding,
mortar thickness and the standard of pointing and straightness of the courses, or a
sample of in-situ pile to be used for piling foundation.
It is also the responsibility of the supervisors, site engineers or other designated
employees to ensure that the test on materials received, or about to be used, are
checked, and verified to be ideal for the project.

3.10.9 Security

Security is a vital aspect as far as site supervision is concerned. Ordinary theft,

pilfering, vandalism and other losses add to the value of materials to be written off as
a loss or waste.
A suitable system of material control should be adopted using specially designed
forms to show, present stock, deliveries, amounts used and % waste. This monitors
material used and hence material wastage.

NB. Site cleanliness and layout also gives an indication of how well a site is being
run. On some mismanaged sites one can barely take a step without treading on
discarded but otherwise sound materials.

3.11 DEFECTS LIABILITY PERIOD

This is a period, normally six to twelve months, after the completion of the works
when the contractor must make good any defects in the building for which he is liable.
Once the defects have been made good to the satisfaction of the principal agent, a
certificate of making good defects will be issued and the remaining retention monies
held will be released to the contractor.

3.12 RETENTION

This is a percentage of each interim payment due to a contractor, which the client is
allowed to hold back under the terms of the contract. The contractor is normally
entitled to the release of one half of the retention monies when the works are

33
practically completed and the release of the balance at the end of the defects liability
period.

3.13 COMPLETION CERTIFICATES

There are three different types of completion certificates issued to a contractor:

 Practical completion certificate

 Works completion certificate
 Final completion certificate

Practical completion certificate

The Principal Agent (P.A) will issue a certificate of practical completion after the
contractor has completed the works required in the contract.
* If not achieved the principal agent issues a practical completion list defining
outstanding works and defects to be rectified.
* If works on practical completion list are completed within 7 (seven) calendar days,
the works are inspected and if satisfactorily achieved the certificate is issued.
* After issuing the practical completion certificate, the employer/client posses the
works and the site, of which ½ retention is paid to the contractor i.e. 1 moiety.

Works completion certificate

* The principal agent issues the contractor a works completion list within 7 (seven)
calendar days of practical completion defining outstanding works on date of practical
completion and are to be completed or rectified to achieve works completion
certificate.
* P.A. inspects works within 7 (seven) calendar days of receipt of such notice and if
satisfied issues the Works Completion Certificate.

Final completion certificate

* Defects liability period commences after date of works completion ending at

midnight within duration of 6 – 12 months from such a date.
* P.A. will issue certificate of final completion at the end of defects liability period
and a copy to the employer.
* If defects list issued to the contractor is still outstanding the Final Completion
Certificate is not issued, only until all the defects have been completed.
* A certificate of making good defects will then be issued and the other ½ retention,
after which within 7 calendar days a final completion certificate will be issued.

Certificate of P.C. Works Completion Certificate Certificate making good defects F.C.C.
7 days defects period 6 – 12 months 7 days

34
REPORTS

A report is usually a statement of facts and ideas presented for the attention of
someone seeking information so that decisions can be made.
Routine or recurring reports tend to be made by filling in specially designed standard
forms, such as daily or weekly site report, site diaries, etc. to prepare special reports
you have to consider the following factors:
 Observe the terms of reference
 Enquiring and collecting of information
 Arranging the material
 Drafting the report and editing
 Typing and checking

Terms of reference

One should obtain clear instructions from the person requiring the report regarding the
following factors:
 The kind of information required
 The amount of information required
 Date by, which the report is required.

Drafting the report

Different companies have adopted layouts, which are more suitable them for both
internal and external use.
Reports for internal use are usually on less formal lines than those produced for
external use, which are more formal.

Outline of a report may have the following details:

Suitable headings with details of the subject matter at the beginning

The use of sub- headings and paragraphs to break the written work into easily
readable information
A contents section would assist the reader to easily allocate the area of the report that
he/she is interested in. i.e.
 Terms of reference
 Introduction and present situation
 Suggested improvements/alternatives
 Recommendations
 Conclusions (appendices if there are any charts or other documents, etc. which
need to be added)
The person drafting the report should sign it at the end.

Editing

Always read through the draft copy carefully before submitting it for typing. Be a
ruthless self-critic and observe conciseness. Avoid awkward phases and unnecessary
words.
Figure 1 shows an example of a written report

35
PROGRESS REPORT

These are reports prepared by different parties in a given organisation stipulating the
progress of work. In construction various parties prepare their progress reports e.g.
the project manager, consultants, Q.S.

PROJECT MANAGER’S PROGRESS REPORT

To be issued monthly and include details such as:

* Project status i.e.

- authorized change orders during the month
- update capital budget.
* Cost plan status and summary of financial report.
* Programme and progress
- design
- construction
* Update of anticipated final completion date.
* Client decisions and information requirements.
* Risk and uncertainties.
* Design development status.

CONSULTANTS’ REPORT

They are issued monthly and including input from consultants and contain details
such as:
* design development status
* information requirements/request status
* status of contractor/sub-contractor drawings
* quality control
* change orders on design

MAINTENANCE INSPECTION

Introduction
To perform adequately in the critical functional area of maintenance, the property
manger must first ascertain the physical condition of the property and take remedial
steps if required. He must then develop a planned maintenance programme for the
property and manage the execution of the programme.

It is convenient to classify maintenance programme into structural (interior and

exterior) maintenance programmes, electrical and mechanical maintenance
programmes and, in certain cases, site maintenance programme.

NB. This section will only look into planned structural maintenance and building
inspection sections only.

36
Planned structural maintenance

This type of maintenance is undertaken to prevent buildings in the property portfolio

from deteriorating to the owners’ disadvantage. It will also allow minor defects to be
repaired which could in time, if left unattended, develop costly, major repair jobs.

Each building is to be inspected at least once a year by the building inspector. A copy
of the inspection reports should be submitted to the assistant manager: structural
maintenance. The inspections should be divided into three categories, namely:

 Building inspection
 Fire inspection
 Redecoration plan

Building inspection

Types of defects

The following defects should be reported:

Cracks, foundation settlement, loose wall cladding, loose plaster, damp penetration,
broken or defective glazing, damaged screeds and floor surface, overloading of floor
slabs, deterioration of paintwork etc.

Building maintenance inspection report

It is useful to classify the building to be inspected into one of categories. This makes
the inspection report more meaningful, provides a better picture of the general
condition of the building and provides for giving most attention to the buildings of
higher prestige value. The four categories are:

Category A

This will include buildings in a city center, in a small town where it is of public
relations or prestige value. These buildings should at all times be maintained in first-
rate condition. The building may be a prestige shopping center, a luxury block of flats
or a building in a small town surrounded by prestige buildings.

Category B

This category will include shops, flats and offices in a suburban area or out of the city
center where the public relations or prestige value is not as high as in category A. this
category of building can be maintained at a lower level.

Category C

Small country buildings, out-of-town centers and of low public relations or prestige
value. These could include warehouses, stores and lower class buildings.

37
Category D

These are buildings, which may be due for demolition in the near future. The
buildings are allowed to deteriorate but not become dangerous.

NB. In category A buildings all repairs are considered as urgent, category B repairs
should be repaired as soon as possible. Category C repairs carried out when
convenient and category D repairs carried out when absolutely necessary.

Inspection planning

The building inspector should draw up an inspection card for each building which
indicates when the building is due for the following inspections:

 Building inspection
 Fire inspection
 Redecoration

Building maintenance inspection report. Example

BUILDING MAINTENANCE INSPECTION REPORT

Name of building…………….. Building code……………………………...

City or town…………………... Building classification A B C D
Inspector………………………
Office…………………………
Date of inspection…………….
Signature……………………… Initial of manager………………………..

INTERIOR
ASSESSMENT OF GENERAL POSSIBLE POINTS
BUILDING CONDITION COMMENT POINTS

Floors
Walls
Ceilings
Partitioning
Stairs, treads and nosing
Entrance foyers
Arcades
Toilets
Tea kitchens
Passages
Windows
Landings
Shop fronts
Cleanliness of building
Refuse areas
Lifts and escalators

38
Electrical installation
Air-conditioning
Plant rooms
Internal gardens/plants

Totals
Award as % possible

You are to comment generally on these items. Detailed reporting will be done by the
regional engineer or authorized representative.

HANDOVER CHECKLIST

A precise handover checklist prepared by the principal agent will normally consist of:

* Copies of certificates, approvals and licenses.

* Final cleaning and removal of rubbish.
* Date when the release of the retention money takes place.
* Water and electricity meters to be read and recorded.
* Inspections and tests that need to be carried out.
* Final account, final certificate arrangements.
* Access by contractors due to additional contracts.
* Security in terms of providing the cabinet key and key schedule.

HANDOVER PROCEDURE

The actual handover procedure applicable to a specific project, will be detailed by the
project manager or principal agent in the handbook of the project concerned

When practical completion is reached, the principal agent immediately issues a

certificate to that effect and the contractor ceases to be responsible for the site and
relinquishes possession to the employer.

At this stage the principal agent and contractor should arrange a hand-over meeting
with the employer and ensure that he or his staff fully understand the main aspects
that will generally cover the precise details of the following activities and should be in
writing:

* The provision of the required number of planned maintenance schedules and

specialist manufacturers working instructions.
* Responsibility for insurance changes hands to the employer.
* Monitoring proposals for the training of engineering and other service staff and
assistance in the actual implementation of agreed scheme.
* To manage the end of the defects liability period and implement it’s relevant
procedures.
* To establish arrangements for the final account, issuing the final certificate and
carrying out the post-completion activities in the projects.
* To deal with contractors who fail to execute outstanding works or correct defects,
including the possibility of implementing any contra-charging measures available

39
under the contract.
* Ensures all statutory inspections and approvals have been satisfactorily completed
and subsequently to arrange for all outstanding works.
* Setting up procedures to monitor and supervise any post-handover works, which do
not form part of the main contract.

40
 CHAPTER FOUR

FINANCIAL REPORTING AND CONTROL

Introduction

Construction activities are expensive and require considerable initial expenditure and
financing during the construction process. Many of the parties involved in a
construction project may require finance, including the building owner, the contractor
and subcontractors.
Finance for construction can be described as the funds needed and the process of
obtaining these funds, usually by borrowing. The majority of business organizations
borrow money from some other organization on understanding that it must be repaid
together with a charge for the service.

Need for finance

It may be necessary for the building owner to borrow the finance on a long or medium
term for the development and await a return on the investment before the finance can
be repaid.
In the case of the contractors, they may have to use short-term finance such as
overdrafts to finance the project before receiving payment from the building owner.
The principal reasons for seeking finance can be considered under the following
headings:

 Insufficient internal finance

 Committed internal finance
 Competitive cost of external finance.

Insufficient internal finance

Many organizations do not have sufficient funds in order to finance a construction

activity. Building owners may require a building to use it themselves, or they may sell
or lease the building on completion. In each case the building owner will require
considerable initial capital.
Contractors will require finance to fund the construction activity before they receive
payment from the building owner.

Committed internal finance

An organization may have sufficient funds, but such funds may already be committed
to other investments. If the funds of the organization were used for construction, this
might deplete the financial resources of the organization and affect alternative
investments.

Competitive cost of external finance.

It may be more profitable for building owners or contractors to borrow money from
external sources rather than use the internal funds. The borrowing will allow an

41
organization to continue with other company investments, which are yielding good
returns.
This economic concept is termed capital gearing. It is normally better to be reasonably
highly geared: to make use of other people’s money rather than use one’s own money,
even though it may be expensive to do so.

Impact of finance

Each source of finance affects a business in the following three distinct ways:
 Risk
 Income
 Control

Risk

The major risk is that the business will not be capable of meeting the financial
commitments relating to the principal or interest. The total risk of the mix of capital
sources is known as the financial risk of the business.
Financial risk can be explained as the capital invested in a project for which their is a
substantial element of risk, especially with money invested in a new venture which
may or may not provide an adequate financial return.

Income

The income effect of financial sources relates to the cost of funds. Each source of
finance has a cost attached to it. Reducing the cost of finance should increase the
income of the owners.

Control

The control effect of financial sources refers to new sources of finance affecting
management or ownership control. It is the job of the financial manager to provide the
required finance at minimum loss of control, while at the same time maximizing the
income to the owners.

Terms of finance.

A contractor may require finance for a variety of projects over different periods of
time; this may be grouped into three types;

 Short-term finance
 Medium-term finance
 Long-term finance

Shot-term finance

Finance may be required for up to one year for a short term only, to pay for land and
building work from inception to eventual completion. This capital is normally raised
to cover exceptional demand for funds over a short period of time. This form of

42
finance is most expensive and is usually used to assist a company with its cashflow
and working capital requirements. The following are types of short-term finance:
Bank overdraft, discounting, bank loans, value added taxation, trade credit

Medium term finance

Medium term normally refers to time period of one to five years, which is required to
finance specific expansion projects. This period is normally to long a time to be
covered by term funding, but insufficient to warrant the use of shares. Types of this
mode of finance are:
Hire purchase, leasing and debentures

Long-term finance

Long term refers to time period of more than five years, and is generally used for
long-term investment purposes. The traditional method of providing long-term
finance is by means of a mortgage. Insurance companies and pension funds most
mortgages in the commercial and industrial sectors, while building societies provide
the largest share of mortgages for private housing building market. Examples of this
type of finance are:

Government incentives, pension funds, mortgage, capital grants, bonds

Sources of finance

Introduction

Financial institutions such as banks and building societies advertise widely in the
press and on television about the availability of funds for borrowers. However, one
should not be misled by the advertisements into thinking that obtaining finance is
easy.
To source finance can be difficult for the borrowing organizations. Although the
sources will lend money, they will do so only if they believe that there is a very high
probability that the loan will be repaid.

The principal origins of financing are from the following institutions:

 Financial institution
 Central government
 Local government

Financial institutions

Definition

A financial institution is any organization, such as a bank, building society or finance

house, that collects funds from individuals, other organizations, or government
agencies invests these funds or lends them to borrowers.

43
Some financial institutions, such as brokers and insurance companies, are non-deposit
taking. They fund their activities and derive their income by selling insurance policies
or by undertaking brokerage activities. Examples of such institutions are:

Bank, building society, pension funds,

Central government

The government is a large client of construction industry. Any changes in its policy
towards building and engineering projects are likely to have a considerable effect o
the performance of the industry. E.g. a reduction on government investment in
housing, roads, schools, colleges, health care or other schemes will have a direct
impact on the availability of finance incentives for organizations wishing to invest in
such projects. Government incentives are:

 Tax incentives
 Regional development funds
 Grants and
 Subsidies

Local government

Local government policy, which is implemented by the local authorities, such as town
councils, may also encourage local investment and offer funds to encourage local
investment. Examples of local government incentives are:

Inner city development, grants, construction of civic buildings, enterprise boards

Conditions attached to finance

Introduction

Before an organization approaches a financial institution, the prospective borrower

will need to consider the following questions:

 Why is the finance required?

 How much finance is required?
 How and when is the money to be paid?
 Will the organization require further borrowing during the loan period?
 What security can be offered to the financial institutions?

NB. This finance agreement will normally take the form of a legal contract between
the financial institution and the borrower, and this agreement may need to be
renewed every 12 months.

Information required from borrower

The financial institution will require the following information:

44
  Copy of audited accounts of last three years of trading
 Financial accounts
 Forecasts of anticipated profits on future contracts
 Cashflow forecast
 Schedule of work in progress
 Schedule of fixed assets and equipment
 Schedule of borrowings
 Capital expenditure plans
 Report on company personnel and structure
 Copy of strategic plan and organizational objectives.

Typical conditions attached to borrowing

These will include the following:

Repayment, interest, breach of agreement, varying agreement, applicable law,

security, protection insurance, commission, early settlement, taxation, notice, use of
finance and eventual ownership.

FINANCIAL MANAGEMENT

Construction often involves complex and intensive site operations linked to large
sums of money, which need careful financial management. There are a great variety
of patterns of construction work and finance, which lead to a wide selection of
commissioning options available to the client.

This sub-topic examines the principal management techniques used in controlling

finance during the overall construction process.

Financial management can be described as the management of the money of an

organization in order to achieve the financial objectives of that organization.

The objectives of an organization can be divided into two main categories:

* Financial objectives
* Non-financial objectives

Financial objectives

 Maximum profit
 Interest of shareholders

Non-financial objectives

 Welfare of employees
 Welfare of management
 Welfare of society
 Provision of a service and
 Responsibility to customers and suppliers.

45
Management processes

The process of managing finance involves two principal aspects:

 Financial planning
 Financial control

Financial planning

Financial planning involves forecasting the future needs of the organization. The
process is linked to the objectives of management, which in turn will formulate the
policy of the organization. Typical issues of financial management include the
following:

* The amount of finance required

* When the finance is required
* How the finance is raised
* What type of finance is available
* How the finance is allocated.

Good financial planning ensures that sufficient funding is available at the right time to
meet the needs of the client or contractor for short, medium and long-term capital.
Short-term finance may need to be made available for the purchase of plant or
machinery. In the medium or long-term the organization may need to finance the
construction of a new head office.

Planning the flow of cash in the organization is one of the major functions of
management. Incorrect cash flow can cause loss of profit and the subsequent failure
of a company.

Cash flow forecasting

A cash flow forecast is a statement of the estimated cash flows in and out of an
organization. The forecast can give the organization an early indication of any
shortages or surplus of cash.

The cash flowing in, known as positive cash flow, is the cash received. Cash flowing
out, known as negative cash flow, is the cash paid out. The difference between cash
flowing in and out is known as the net cash flow. This may be a surplus (more cash in
than out), or a deficit (more cash out than in). These terms should not be confused
with ‘profit’ and ‘loss’.

Preparation of cash flows

The process of preparing a cash flow involves predicting cash flows for individual
projects, which, in turn, are amalgamated into the master cash flow for the company.
The master cash flow will also provide for those general overheads, which cannot be
allocated for individual projects. In a very large company a separate cash flow
forecast the following type of information is needed:

46
* Contract budget in monthly or cumulative form
* Contract period
* Payment periods
* Retention details
* Defects liability period
* Anticipated profit release
* Delay in meeting the cost commitment.

Use of cash flow

The cash flow forecast will enable an organization to carry out the following
functions:

* Ensure that cash is available to meet day-to-day requirements

* Meet periodic demands for longer term cash requirements
* Plan payments for larger financial commitments
* Repayment of debts
* Transfer surplus cash for investment
* Ensure temporary credit arrangements are in place when required.

An example of a cash flow forecast is shown in Figure below. Effective cash

planning will give visible benefits to the business such as increased efficiency and a
more stable financial structure.

Example of cash flow

Details of case study

Contract value R100, 000.00

Contract period 16 weeks
Payment intervals monthly
Retention rate 3%
Profit allowances in estimate 15%
Delay in meeting cost (average payment delay) 4 weeks
Interest payable in financial contract 20%

Cash flow table

________________________________________________________________________

Valuation Cumulative cumulative cost

Value (cumulative value (cumulative value
x 100/100 –15% less 3% retention)
profit)

(R) (R) (R) (R)

________________________________________________________________________

1 20,000 17,000 19,400

47
 2 45,000 38,250 43,650
3 90,000 76,500 87,300
4 100,000 85,000 97,000

Financial control

Once the necessary funding has been raised, it is necessary to keep the finance under
control. Measures, which ensure that finance is put to the most profitable use, need to
be devised and maintained.

The process of financial control involves devising systems, which regulate financial
matters and check actual performance. An important tool is the comparison of actual
financial performance against the planned performance.

Part of the system of financial control in an organization is a budgetary control system

which measures the progress of the *initial financial plan*.

Budgeting

Budgeting can be explained as the forecasting and monitoring of both the income and
expenditure of the organization.

Budgeting is the process of financial control whereby the actual income and
expenditure for a period is compared with an appropriate budget allowance for each
item in the same period.

The budget is normally prepared prior to the start of a trading or operating period and
sets out the objectives, activities and policies to be carried out during that period of
the business. Annual budgets for the whole year are commonly broken down into
shorter control periods of operation such as months or, in some cases, weeks.

It is important for the contractor to know the amount of capital that is needed for a
project and when it is required. In order to find these figures, the contractor needs to
draw up a programme of work and use this programme to find the rate of expenditure
and rate of income over a particular time period.

The difference between the expenditure and the income will give the amount of
capital required. Separate budgets can be established for a number of resource
headings, such as those listed.

The main aims of budgetary control are identified below:

* To ensure that planned profits are maintained

* To provide future cost information
* To provide a continuous comparison of actual cost to planned cost
* To enable corrective action to be taken.

Good financial control will involve the setting up of a cost control system that suits
the particular needs of an organization. In order to regularize the costing system the

48
organization needs to adopt a number of cost headings against which to record costs
(see Table 1).

Table 1 Typical cost centres

_____________________________________________________________________

Cost code Description Subdivision

Number
_____________________________________________________________________

10 Labour

20 Materials Directly employed

Labour only subcontractors
Labour overheads

30 Plant Mechanical
Non-mechanical maintenance

40 Subcontractors Domestic subcontractors

Nominated subcontractors

50 Salaries Head Office salaries

Site-based salaries
Hourly paid wages
Directors’ salaries
Fees to consultants

60 Assets

70 Staff training

80 Expenses
_____________________________________________________________________

Construction project finance

Financing the construction process involves the use of two fundamental principles of
construction costing:

* Cost planning
* Cost control

Cost planning and cost control are normally carried out by the Quantity Surveyor and
the processes need to be effective for the following reasons:

* Client demands
* Current economic conditions
* Increased competition

49
* Need for control of construction costs
* Distribution of costs in a balanced manner.

Using the Royal Institute of British Architects Plan of Work for the design team can
conveniently represent the process of cost planning and cost control. The stages of
cost planning and cost control and their relationship to the RIBA plan are shown in
Table 2.

Design stage finance

Inception

Inception is the first stage in the design sequence, where the client approaches the
architect with a list or brief of what is required. The client needs an indication of he
total cost at this stage.

Feasibility

At this stage the client will need assurances that the project under consideration is
feasible. The Quantity Surveyor is normally expected to prepare a feasibility report.

Outline proposals

At this stage of the design, the level of information available to the design team and
Quantity Surveyor should be sufficient to enable the lump sum estimate previously
prepared to be allocated to cost headings. A convenient cost breakdown would be to
use the eight major groups of elements as devised by the Building Cost Information
Service (BCIS), which is a service provided by the Royal Institution of Chartered
Surveyors (RICS). This elemental breakdown provides a useful cost framework for
the Quantity Surveyor to monitor and control cost as the design develops.

Table 2 Stages of cost planning and control

_____________________________________________________________________

RIBA plan Stage Cost Costing methods

process
_____________________________________________________________________

A Inception Briefing Cost Interpolation of historical data

planning

B Feasibility
_____________________________________________________________________

Preparation of first reliable estimate

_____________________________________________________________________

C Outline proposals Concise elemental cost estimate

Sketch plans Cost planning
D Scheme design Detailed elemental cost estimate

50
_____________________________________________________________________

No major changes in design

_____________________________________________________________________

E Detailed design

F Production information Approximate quantities

Cost checking
G Bill of quantities Tendering Cost control

H Tender action Tender reconciliation

J Project planning Cost checking

K Site operation Construction Interim valuation

Financial statements

L Completion Final accounts

_____________________________________________________________________

Scheme design

As the design information develops, the Quantity Surveyor can break down the cost
into a greater number of cost centres in order to achieve control on the distribution of
the cost. (A useful framework is to use the BCIS standard list of elements as listed
hereby.) The object of splitting the cost down into so many divisions is to ensure a
better-balanced design and to ensure that the client gets value for money.

Details prepared by Architect

Design cost checked by Quantity Surveyor

Cost of element Cost of element

exceeds target is within target

Design changed Cost target found

to bring within to be unrealistic.
Cost limit Increase cost and
that for any other
associated element

Finish cost check

Figure 1 Outline of cost checking process

51
Detailed design

During the detailed design the Quantity Surveyor will be involved in cost checking
the monies allocated to the various elements to ensure that the sums allocated are still
realistic (see Figure 1). The Quantity Surveyor may use approximate quantities to
check the individual costs.

Tendering stage finance

The tendering stage concerns the period from the production of the tendering
documentation to the selection of the successful contractor.

Production information

After the final cost check, the Architect and the other members of the design team
start to prepare the detailed information necessary for the Quantity Surveyor to
prepare the Bill of Quantities. The typical documentation produced includes:

* Tender drawings
* Specification.

Bill of quantities

The Bill of Quantities is prepared, checked, printed and sent out to the tenderers.
Further cost checks are carried out, as the completed work sections are measured, and
costed and compared with the budgetary allowances.

Tender action

The Quantity Surveyor compares the submitted prices with the cost plan. On receipt
of the tender the Quantity Surveyor evaluates the tenders and, after checking,
recommends to the client a suitable contractor to agree the contract and to commence
the works.

Construction stage finance

Site operation

Once the work commences on site the Quantity Surveyor needs to control the cost of
the project. This is done by compiling interim valuations and financial statements,
which are produced at regular intervals. The financial statements, together with the
cash flow forecast, show the estimated final cost of the project, taking into account
any variation orders that may have been issued, together with adjustments for prime
cost and provisional sums.

Completion

52
The Quantity Surveyor prepares a final account, which includes the payment of the
contract work, changes to the contracted works and any claims for delays or
disruption to the works.

Cost control terms explained

Interim valuations

An interim valuation of the work, usually made monthly, prepared by the consultant
Quantity Surveyor on behalf of the main contractor. The Quantity Surveyor
recommends a payment to the Architect who, in turn, issues an ‘Interim Certificate’,
which is then forwarded to the client as authorization to make payment.

Financial statements

A financial report normally prepared by the consultant Quantity Surveyor to update

the client on the current and projected expenditure on the construction project.

Variations

Authorized changes to the contracted works confirmed in writing by an Architect’s

instruction. It is normally the responsibility of the consultant Quantity Surveyor to
value and agree the value of these changes with the contractor.

Final account

A final claim for payment of work, which is normally prepared by a consultant

Quantity Surveyor on behalf of the contractor. The account should include all claims
in respect of all work carried out by the main contractor and any specialist
subcontractors or supplies.

Claims

A claim made by the contractor for additional payment, allowed for in the contract,
because of unexpected events such as the issue of variation orders and disturbances to
the regular progress of the work.

Systems of cost control

Unit cost control

This system of cost control is normally applied to non-repetitive construction work.

For this system to be of value as a control tool they must be issued as soon as possible
after their compilation, which is usually the week following that which they refer.

Any unit cost that is in excess of or the target by more than a predetermined margin
require further investigation and should be brought to the attention of management,
thus applying the principle of management by exception.

53
The information is collected by means of the allocation sheet and the weekly
summary sheet, together with actual measurement of work done.

A weekly cost control sheet is then used to compile all the information arrived at via
the allocation sheet, summary sheets and records of measured work. The unit cost for
each operation can then be calculated and this facilitates control by comparison with
set unit targets.

Operational or stage cost control system

This second system of cost control can be applied to repetitive construction work and
is usually classed as an operational cost system. The objective of this system is to
arrive at the cost of completing each operation on each block and then to compare this
with a target for each. An operational cost in excess of or below the target by more
than a predetermined margin requires further investigation and should be brought to
the attention of management.

Information is collected as in unit cost system by the use of daily allocation and
weekly summary sheets. Measurement of work is done not physically on site but by
the use of working drawings. In case of a variation it will entail physical
measurement.
A weekly operational cost sheet is then used to convert the completed operations into
monetary terms.

Project cost record

This sheet records the cost of every operation completed to date. As information
becomes available it is added to the operational cost sheet on a weekly basis, so that
this sheet enables the cost of completing each operations and each block to be readily
compared with the original estimates.

Adjustment of historical cost data

The historical data from an already-analysed building may be used to prepare cost
estimates, but the proposed new building may differ in the following ways:

* Size
* Shape
* Number of storeys
* Specification.

It is also necessary to make adjustments for the three factors of price, quantity and
time.

Price

Historical costs reflect the market price level at the date of tender of the building
analysed. It is necessary to update these costs by use of an appropriate index. It may
also be necessary to adjust the price level in the second period for ‘price and design
risk’.

54
Quantity

Quantity can be adjusted in the following three ways:

* By proportion
* By approximate quantities
* By inspection.

Proportion

the method of proportion involves the use of quantity factors, which represent a
mathematical relationship between two measurement variables. Examples of such
factors together with a typical proportional adjustment are shown below.

Approximate quantities

This method involves taking off dimensions from drawings. At the early stage of
design, however, the information is not normally detailed enough to use. We will see
the use of approximate quantities at a later stage in the design.

Inspection

It is usual to examine a number of analyses of similar projects to obtain a range of

costs, and then to exercise personal judgement of the figure to use in the cost plan.

Quality

Quality may also be adjusted by proportion, by approximate quantities or by

inspection. However, as the specification is not normally available at the early design
stages, it is more usual to make the quality adjustment by coupling inspection with
simple calculations. An example of a quality adjustment is shown in the example.

Examples of price adjustment

Index adjustment

Adjust using tender index Adjust for price and design risk
Add 8% Add 5%
________________________________________________________________________

Historic building tender date Proposed tender date Proposed completion date

R16,600,000.00 x 1.08 = R17,928,000.00 x 1.05

= R18,824,400.00

Rate adjustment

Building A (historic building)

55
Gross floor area of building 1310m²

Examples of price adjustment

External wall area 760m²

760
Quantity factor = 1310 = 0.58

Building B (proposed building)

Gross floor area of building 1410m²

External wall area 420m²

420
Quantity factor = 1410 = 0.30

If the rate per m² of external wall rate for the proposed building B is calculated as
follows:

0.30
R25.50 x 0.58 = R13.19/m² for the proposed building

Quality adjustment
Suppose there is a quality change in the cost of face bricks, the comparable material unit
rates might be R4.00/m² for the historic building and R5.10m² for the proposed building.
The adjustment is calculated as follows:

R5.10
R4.00 = 1.28, which is a 28% increase

Overall adjustment

Rate for historic building: R25.50 per m²

Price factor: 1.08 (8% increase)

Quantity factors:
Historic quality factor: 0.58
New quality factor: 0.30

Quality factor: 1.28 (28% increase)

The rate for the proposed building is calculated as follows:

0.30
R25.50 x 1.08 x 0.58 x 1.28 = R18.26 per m²

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Approximate estimating methods

Unit method

The unit method of approximating lend itself to certain types of buildings where the
building’s function can be expressed in terms of units such as beds or seats.
Examples of the technique’s application are listed.

The unit method is useful early in the design stage where a client may only be able to
express the requirements in simple unit terms.

Advantages of cost method

* Provides a convenient form of stating a cost limit

* Provides a simple method of comparing different schemes
* Speed application.

Disadvantages of unit cost method

* Lack of precision
* Unsuitable for estimating the cost of individual and different buildings
* Difficult to adjust unit cost accurately to take account of variables
* Difficult to relate to changes in storey heights
* Difference in time excluded
* Location of the site excluded
* Method of construction excluded.

Example of unit cost method

Assume that a hospital project intended to cater for 200 patients has been completed
for a total cost of R16,600,000. The unit cost of each hospital bed is:

Building cost R16,600,000

Number of beds provided 200 = R83,000 per bed

Superficial method

The superficial method is the most popular method of approximate estimating. The
total floor area of a building is measured between the internal faces of the enclosing
walls. This area is then multiplied by a calculated unit rate per square meter in order
to obtain the probable cost.

Advantages of the superficial method

* Simple method
* Easiest to remember
* Rapid method
* Widely used by Architects and Quantity Surveyors

57
* Readily understood by the employer
* Wide availability of data.

Disadvantages of superficial method

* Buildings must be of similar shape, size, height and specification.

Example of superficial method estimate

Assume that a hospital has been built with the following floor areas (measured within
external walls):

Ground floor plan: 750m²

First floor plan: 750m²

So the total floor area is 1500m²

The cost of the hospital can now be expressed in terms of price per m² of floor area:

Building cost
Cost per m² = Total floor area

R16,600,000
= 1500 = R11,000.00/m² approximately

Cube method

In the cube method the cubic content of a building, that is the volume displaced by air.
This cubic content is multiplied by a rate per m³ in order to establish the estimated
cost.

The cube method has now been replaced by other more accurate methods of
approximate cost estimates. It is felt that the volume of air displaced within the
building does not directly reflect the quantities of both labour and materials forming
the enclosure, the vertical and the horizontal divisions of a structure.

Storey enclosure method

The storey enclosure of single price-rate estimating aims to take the following factors
into account:

* Shape of the building

* Total floor area
* Vertical positioning of the floor areas
* Storey heights of buildings.

This method has been rarely used in practice, mainly because it involves more
calculations that the methods described previously, and also because there are no rates
published for this method.

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Elemental method

The elemental method provides a method of examining and comparing building costs
using information from a Bill of Quantities. The contract sum or tender figure is
subdivided into the cost of the various building elements.

These elemental costs are then expressed by means of a common criterion, such as the
cost per m² of gross floor area.

Advantages of elemental method

* Rapid and accurate method of preparing realistic estimates

* Allows for adjustments to be made to individual elements
* Excellent base system for making comparisons with the cost
distribution for the individual elements
* Also indicates possible cost distribution for the individual
elements in addition to lump sum figure.

Disadvantages of elemental method

* A degree of skill and understanding of cost planning is

required for interpreting the difference between the elements,
and calculating their effect on cost
* Method requires more time to prepare than others.

Approximate quantities

The method of approximate quantities is generally considered to be the most reliable

and accurate method of approximate estimating. It involves more work than the other
methods and, on occasions, lack of information precludes its use. Maximum use is
made of one set of dimensions for a number of items or work sections.

Advantages

 An estimate can be divided into individual items or elements, which assist

the development of a balanced design.
 Adjustments can be made to an estimate for specification changes and
other reasons with the minimum of fuss or disturbance.

Post-contract financial processes

The financial processes that occur after the contract has commenced are generally
known as post-contract financial processes. These are:

 Financial report/statement
 Interim valuations
 Final account
 Claims.

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Financial reports

As the project progresses, the Quantity Surveyor should keep the building owner
(client) informed about the financial position of the contract. A useful report includes
information on the known and anticipated expenditure compared with the overall
budget allowances. This report often accompanies the Quantity Surveyor’s interim
valuation recommendation.

The building owner is concerned not only with the current cost position, but also with
the likely pattern of future payments over the remaining contract period. This
information would normally be presented in the form of an updated cash flow forecast
by which the building owner can ensure that there are sufficient funds to pay for the
balance of the projected final costs.

In the event of substantial additional expenditure, it may be necessary for the building
owner to raise further finance. An alternative may involve the building owner
requesting that savings are made in the project design in order to keep the final costs
within the budget figure.

Many of the disputes, which arise on construction contracts could be avoided by

better communication and the adoption of formalized procedures for the regular
reporting on the financial state of the works to the parties.

Some contract terminology

Contract sum

Price for carrying out construction as entered on the contract documents.

Contingencies

A sum inserted into the contract documents to cover alterations to the project without
the need to approach the client for additional funds.

Fluctuations

A provision in a building contract to compensate a contractor for increases in the cost

of labour and material resources during the course of the project.

Claims

An entitlement to additional payment to the contractor for delay and disruption to the
contract works.

Interim valuations

It is standard practice in construction contracts for contractors to receive payment

from the building owner at regular intervals, usually monthly, as the project

60
progresses. This payment is commonly referred to as an interim certificate or interim
valuation.

Normally, it is the responsibility of the building owner’s consultant Quantity Surveyor

to prepare the valuation and recommend an amount due to the contractor. The
Architect will normally accept the Quantity Surveyor’s valuation statement and issue
an interim certificate which is, in turn, forwarded to the building owner as authority to
make payment to the contractor.

The degree of accuracy required when preparing an interim valuation must be

balanced by the fact that the Quantity Surveyor must safeguard the interests of the
building owner, yet also be fair and legal towards the contractor.

The components of an interim valuation include:

* Value of works executed:

Preliminaries
Measured work
Nominated subcontractors’ work
Nominated suppliers’ work
Profit and attendance for the above
* Value of variations
* Value of dayworks
* Value of unfixed materials on site and off site
* Value of any contractual claims
* Value of fluctuations
* Value of retention held and released
* Previous payments to contractor
* Recommended value of certificate.

The degree of measurement to be undertaken depends upon the nature and complexity
of the works and the stage they have reached. It is common practice for the Quantity
Surveyor and the contractor to meet at regular intervals, usually monthly, for the
purpose of valuing the works.

Example of an interim valuation

Preliminaries 28,000.00
Measurement work 185,000.00
External works 20,000.00
Nominated subcontractors/suppliers 13,000.00
Variations 1,800.00
Materials on site 13,000.00
Materials off site 7,000.00
Claims 10,000.00
Fluctuations 5,000.00
__________

282,800.00

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Less 8,034.00
Retention @ 3% (not in claims or fluctuations) __________

274,766.00
Less
Previous payment 196,000.00
__________

Interim payment due R 78,766.00

Final accounts

The final account is the final statement or claim prepared by the consultant Quantity
Surveyor in conjunction with the contractor. The account should include all claims in
respect of all work carried out by the main contractor and any specialist
subcontractors or suppliers.

The contractor should forward to the Quantity Surveyor all the necessary information
in order for the Quantity Surveyor to prepare the account. When the final account has
been completed a copy is sent to the contractor, together with extracts to any
nominated suppliers or subcontractors, for their agreement.

The bulk of the final account will consist of measured work priced at rates of the
original Bill of Quantities. However, a number of ‘adjustments’ must be made to the
original contract sum, as listed.

When preparing the final account, the Quantity Surveyor should allow the contractor
the opportunity to be present when measurements or details are recorded. The draft
final account is a useful mechanism in maintaining cost control of the contract if it is
commenced at the beginning of the project and is updated as the project progresses.

Example of a final account

Total amount of original contract sum 278,000.00

Less
Provisional sum adjusted 35,000.00
__________

243,000.00
Less
Prime sum cost adjustment 40,000.00
__________

203,000.00
Add
Expenditure on provisional and prime cost sums 70,000.00
_________

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 273,000.00
Add
Variations 50,000.00
Add
Fluctuations adjustment 10,000.00
Add
Recovery on claims 15,000.00
_________

348,000.00
Add
Value added tax @ 17.5% 60,900.00
_________

Final account sum R408,900.00

Claims

A claim is a request by a contractor for additional payment to which he believes he is

entitled by the terms of the construction contract.

In general, the contractor is required to give notice on the occurrence of certain

events. Contractual claims arise from unexpected events which can be grouped as
follows:

* Issue of variations in the specifications and quantity of works

* Disturbance of the regular progress of the works.

Settlement of claims is not a precise science but uses the basic principles of
investigation and assessment. The preparation of a claim involves consideration and
possible use of the following headings:

* Materials
* Labour disruption
* Attraction money and bonus payment
* Inflation
* Head office overheads and profit
* Interest charges
* Cost of accelerating the works
* Cost of overtime
* Cost of preparing a claim
* Out-of-sequence working.

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 CHAPTER FIVE

CONTRACT LAW

INTRODUCTION

Probably the two most significant aspect of a building project is the form of the
contract (with its conditions of agreement) and the contract price. If either of these is
poorly negotiated, the contract will be a burden on your business, instead of a
profitable venture.

You will recall that, in the chapter on tendering, we stressed the importance of the
form of contract and the associated conditions of agreement.

If the tender is accepted, the conditions of agreement become binding and you will be
required to sign the contract.

Any item or condition of agreement in a contract can be changed, added or withdrawn

if agreed to by both parties, but the time to do this is during the negotiating period
before both parties sign the documents.

Contracting in building can be lucrative if the work runs smoothly without dispute or
disruption. When the relationship between contractor and proprietor is allowed to go
sour and disputes between them arises, both parties reach for their copy of the
contract and telephone their solicitors.

The contract form and its conditions of agreement can be a path to a smooth ride
through a building project or an albatross around your neck.

THE LAW OF CONTRACT

A contract involves an agreement which gives rise to rights and obligations which can
both be enforced by law. Basic to the nature of a contract is the concept of agreement
or bargain, with each side contributing something to make it binding.

The law of contract is fundamental to the operation of any building or engineering

project. The law of contract applies to the main building contract, all subcontracts for
specific works, employer/employee relationships, insurance, sale of goods and land,
hire purchase, companies, partnerships, and agency. It applies to everything that
impinges on the project in legal terms.

Further, the law of contract is the law of enforcement of promises. It is to be found

principally in the judgments of decided cases. Originally the law only recognized the
enforcement of a debt, but gradually it evolved to include any promise or undertaking.

The combined effect of the decided cases means that a set of principles exist which
apply to all situations where mutual promises have been made or bargains struck.
This is called a simple contract.

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A promise is legally binding only if it complies with the principles derived from case
of law contract.

Valid contracts

A valid contract is an agreement between two or more parties where legal rights and
obligations are created which are enforceable by law.

Essentials of a valid contract

These may be summarized as follows:

* the intention of the parties to create a legal relationship enforceable by law

* an offer by one party and its acceptance by another
* valuable consideration or execution under seal
* legal capacity of the parties to act
* a genuine consent by the parties
* legality of the objects of the agreement.

The lawful interpretation of the meaning of these essentials is important, so consider

the following elaboration of the terms.

Basic laws of contract

Intention

Unless the intention of the parties is to constitute an agreement enforceable at law,

there can be no valid contract.

Offer and acceptance

Offer

An offer is a proposal by one party to enter into a legally binding contract with
another. The offer may be in writing, verbal or implied by conduct.

It is necessary for an offer to be communicated by one person, called the offerer, to

another person, the offeree, before an acceptance of that offer can eventuate.

The offerer can, at any time before acceptance, withdraw the offer, but this advice
must reach the offeree before he or she has accepted, otherwise there is a binding
contract.

An offer will lapse under the following circumstances:

* if not accepted within the time stated

* if not accepted within a reasonable time where no time limit has been stated
(this decision would of course rest with a court)
* if a counter-offer is made by the other party.

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Acceptance

Acceptance occurs when the party to whom an offer is made agrees to the proposal of
the offerer. This acceptance may be made verbally, in writing or by subsequent
conduct, and must be made in the manner indicated by the offerer.

Acceptance must be unconditional, otherwise it amounts to a counter-offer and can be

made only by the party or parties to whom the offer was made. The consent of the
offerer is necessary to any revocation of acceptance by the offeree.

Valuable consideration (or execution under seal)

In simple-form contracts, the gain or benefit (‘valuable consideration’) accruing to the

party making the offer must be stated. This means that on a contract building works,
the payment must be stated.

In formal contracts, the special manner in which the contract’s ‘valuable

consideration’ is expressed and to which the law gives particular effect, must be
executed under estoppel (the inability to deny stated details of a contract).

Legal capacity of the parties to act

Not all persons can enter into a contract and the power to do this is known as the
‘capacity to contract’. There are (or can be) restrictions on the following groups’
capacity to contract:

* Aliens (may have their capacity restricted in times of war or national emergencies)
* Minors (people under the age of 18, though special provisions can be made)
* Bankrupts: An undischarged bankrupt is prohibited from obtaining credit in excess
of a given amount by the Bankruptcy Act (1991 limit)
* Corporations: the law grants to a corporation a definite legal existence quite
apart from the individuals who compose it and whose responsibilities are limited
by the instrument creating the corporation.
* Lunatics and alcoholics (if they were incapable of knowing what they were doing
at the time of the contract, or if the other party was aware of their condition at that
time).
* Married women: creditors may only claim against a married woman’s separate
property as distinct from that owned by her husband. There is no disability as
regards entering into contracts.
* Convicts: within South Africa felons during their terms of sentence are not
prevented from exercising their right to enter into a new contract, or enforce a
contract previously made.

Consent of all parties

This must be genuine and not in any way induced.

Legality of object of agreement

Contracts must not violate statues, statutory regulations or common law.

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FORMS OF CONTRACT

Simple and formal contracts

Contracts may be divided into two main groups: simple contracts and formal
contracts.

Simple contract

All contracts which are not executed under seal are termed simple contracts. Simple
contracts may be formed:

* by means of a verbal agreement

* implied from the conduct of the parties
* in writing
* evidenced by some form of written memorandum.

The important essential in all simple contracts is that evidence of valuable

consideration (the gain or benefit accruing to the party giving the promise) must be
present for their validity.

The period during which a right of action can arise in the case of a simple contract is
five years.

Formal contracts

These are contracts of record and contracts under seal.

A contract under seal prevents a party to it from denying the facts expressed in it,
which is not the case in the matter of simple contracts. The term estoppel (inability to
deny stated details of contract) is at times used to describe a contract under seal.

The period during which a right of action arising out if a contract under seal can be
enforced is generally 20 years.

TYPES OF CONTRACTS

Express and implied contracts

These are the forms of contract most often encountered in the building industry.

Express contracts

This is the normal form of building contract, its characteristics being:

* a statement of responsibilities as regards various forms of commitment and

the times at which they will be implemented
* Reference to various documents (such as plans, specifications, bill of
quantities

67
 etc) which form part of the contract documents
* provision for arbitration
* time for completion
* penalty clauses.

Implied contracts

This is a form of contract by implication only, which is created by a court decision

resulting from litigation. It results from failure either by ignorance or design by the
parties concerned to enter into a properly valid contract.

OPERATION OF THE CONTRACT

Privity of contract

This is the term used to describe the legal relationship that exists between the parties
to a contract. The general rule is that only the parties to the contract can:

* acquire rights under it

* incur liabilities under it.

The person offering should carry out his or her obligation and the person giving the
consideration should receive the benefits accruing there from.

Assignment of contracts

Generally, to enforce rights or incur liabilities under a contract, a person must be one
of the parties to it. In certain circumstances, however, the original contracting parties
may assign their rights and liabilities to assignees who may then enforce, or be bound
by the terms of the agreement as the case may be.

An assigner is the one who assigns or transfers his or her part in the contract to
another. An assignee is the one to whom such assignment or transfer is made.

Discharge or conclusion of contract

A contract may be discharged or dissolved in the following ways:

* performance of specified provisions of the contract

* agreement between the parties prior to full performance
* operation of law
* impossibility of performance
* lapse of time
* breach of contract.

Some of these terms requires a word or two of explanation.

Performance

This is the usual method of completing a contract and may be by:

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* actual performance of the specified conditions of the contract
* payment of money in full or in part for incompleted sections of the contract.

Operation of law

A contract may be discharged independently of the wishes of the parties by:

* bankruptcy
* material alteration to the provisions of the contract
* merger.

Impossibility of performance

Where the performance of the contract is obviously absurd, legal precedent has
established that the parties could not have intended to be legally bound by such an
agreement: that, in fact, there was no contract.

Lapse of time

Generally speaking, a contract is not discharged by the passage of time unless a time
limit is specified in the contract.

Breach of contract

Breach of contract is a means by which a contract may be terminated. The breach

may be either a total or partial failure of one party to comply with the contract’s
obligations or conditions.

Damages

The object of awarding damages for breach of contract is to compensate the injured
party for any losses resulting from such a breach. Damages may be of three main
types:

* nominal or token damages

* ordinary (these are usually estimated as being the amount of loss actually
incurred as a result of the breach)
* exemplary (these damages are not only awarded as a means of compensation
but also as a punitive measure against the defaulting party).

Classification of damages

Damages may take one of the following forms:

* unliquidated
* liquidated
* penalty.

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1. Unliquidated damages

Where no amount is mentioned in the contract and the matter is left to a court to
decode the amount, they are said to be unliquidated.

2. Liquidated damages

Where an amount is mentioned in the contract to be paid by a defaulting party upon

breach of contract, it will be construed as liquidated damages, provided that the
amount is a genuine estimate of damages for loss sustained through breach of
contract.

3. Penalties

Where liquidated damages is not the case it will be construed as a penalty, particularly
if the amount is not compatible with the loss sustained, or if the amount stated is an
unreasonable amount. If the amount stated is a penalty, then only the actual loss
sustained can be recovered.

PREPARATION OF CONTRACTS

BLANKS, AMBIGUITIES, ERASURES AND ALTERATIONS

It is essential when preparing and signing contracts to eliminate any blanks,

ambiguities, erasures or alterations.

* Blanks must be ruled and initialled.

* Ambiguities must be cancelled out and initialled.
* Erasures should never be permitted.
* Alterations should be made in ink or, in the case of large alterations,
they should be completely retyped and stuck over the appropriate area
of the contract. Such alterations should be initialled.

Where an alteration is an error, it is usual to mark the appropriate passage STET

(which means ‘let it stand as before’). This also requires initialling.

Marking of documents

Documents relating to the contract must be accurately described in the agreement and
also annexed to that agreement in a formal manner.

In the case of a building contract their respective reference numbers and date of issue
should describe all drawings in the agreement. The specifications should be described
by the numbers of pages as well as by the full title of the contract. Frequently each
page is identified and initialled.

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BUILDING CONTRACTS IN GENERAL

The basic structure

In addition to the extent and nature of the work as presented by the drawings and
specifications, and (if required) as measured in the bill of quantities, tenderers will
need to know the conditions of contract under which they will be expected to work, if
they are awarded the contract.

It is essential that the words ‘contract period’ are clearly understood. The whole
structure of a building contract is based on the principles outlined in it, particularly in
respect to practical completion: it is envisaged that the owner keeps out from
underfoot and doesn’t move in until the builder has cleaned up and left.

Experience will tell you that this ideal situation seldom happens, but it is absolutely
vital to remember that if the owner takes occupation before practical completion is
certified, the contract will have to be varied in respect to certain important provisions.
These will be dealt with as we go along.

A clear picture of the owner’s objectives is also essential, because without him or her
there wouldn’t be a contract.

First though, let us dispose of a bit of loose talk. It is common to hear people talk of
the ‘contract document’ when correctly they should be talking of the agreement and
the general conditions which, along with any special conditions, the drawings,
specifications and possibly other things as well, add up to form the ‘contract
document’.

Words and their meanings do overlap of course. The word ‘documentation’ is a

handy one to describe the process of producing all the drawings, the specification, the
bill of quantities (if one is required), the general conditions and the special conditions
(if any), which form the basis of the contract. These usually start off as tender
documents and later become contract documents.

To describe the drawings and specifications as the architect’s documents is also

correct.

The agreement

Before continuing, if we look around for forms of agreement as distinct from

conditions, we will find that they are all much the same in content.

* spaces for the names and addresses of owner and builder

* a description of the works
* a list of drawings and specifications
* the contract sum
* a reference to the conditions applicable
* spaces for signatures of the parties and witnesses.

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One form of agreement will look different from another, however, and we will also
find it may be included as part of the document containing the conditions or as a
separate page (or more), which may sometimes also be described as an instrument or
indenture.

The general conditions

For our purposes let us call the pre-printed document the ‘general conditions’ and
accept that there is no single standard set of general conditions, which will suit or be
adequate for every job.

The aim of all contracts and their conditions is to tie things up at the outset to an
extent where later disputes cannot occur. The most important issue will always be:
how much money is to be paid for how much work in how much time?

Unfortunately, we have not been able to reach the happy state if avoiding disputes
with regard-to building contracts – the best we have been able to achieve might be
given the lengthy title of:

A contract with a firm price at the start which incorporates conditions or

administrative provisions for dealing with variations and other matters and which
everybody hopes will be precise and clear enough to prevent disputes.

To arrive at a firm price, a builder or a number of builders tendering in competition

have to be fully informed of the extent of work, which they are expected to undertake.
This gives rise to the selection of general and special conditions.

The drawings, specification and, perhaps, the bill of quantities comprise the tender
documents.

Status of the owner

There are several standard pre-printed conditions documents available. Which one is
chosen will depend on a number of factors, some of which may even need non-
standard conditions.

The type of owner will often affect which general conditions document is adopted.
Owners fall into one of the following groups.

Government

It is desirable to have standard documents but wherever you go you will find that the
conditions used by governments differ from those used by others (eg buildings for law
courts).

Statutory bodies

These organizations will usually use the government conditions (eg buildings Police
Service).

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Large companies

Very large organizations, principally engaged in building, mining and/or engineering

works, often develop their own conditions. Let us call them company conditions and
expect that when we come across them they will bear the name of the company and
we will have to study them.

Smaller companies and individuals

Smaller companies and individuals are not usually big enough or not engaged
frequently enough in building to produce their own set of conditions. These groups
depend on a standard, non-government document which is cheaply and readily
available.

Lending authorities

No attempt has been made to list the variety of lending authorities. You will
encounter a number of sets of conditions with similar content. Often an administrator
who is an architect, an inspector or a representative is also appointed.

Unskilled/ Silly people

This refers specifically to owners who allow an unwise builder to prepare an

inadequate drawing and two page specification, or have documents prepared by an
unskilled ‘expert’ and embark on a contract based on them, plus one typewritten sheet
which forms the agreement conditions. These silly people deserve all they get by way
of disgruntlement and dispute – the builder too, with perhaps not much in the way of
payment.

Builders should bear in mind that they have a big responsibility to give an owner
sound advice. Maybe the owner can’t be talked into an architect’s administration and
inspections but the contract should be founded on proper documents.

Nature of the work

Different kinds of work will require different contract conditions. For example, the
conditions applicable to a new building, on which it is possible to put a firm price,
will not readily apply to a messy alteration job.

Time influences

A large project on an expensive site ties up a lot of money. What are known as
‘carrying charges’ can become big enough to make owners seek ways to reduce
design, documentation and construction time. Full tender documentation and the
normal competitive tender processes are far too slow when costs are rising rapidly.
Selecting a builder with known ability may get things started quicker, provided a price
can be arranged. Non-standard conditions can be prepared to cater for such an
approach. This can be roughly categorized as fast track.

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Rising costs

This problem has been with the building industry for a long time. In all but the very
small job, provisions must be made for dealing with rising costs in the form of
conditions generally known as adjustment of contract value clause. Such a clause is
usually inserted into contract documents to cater for excessive inflation.

Old and new

Until recently there were really only two forms of contract. The first was applicable
to new works and based on competitive tendering to give rise to a lump-sum contract.
The second was applicable to complex alteration jobs where competitive tendering
and even the establishment of one reasonable price are impossible, thus producing the
cost plus contract.

Since then there have been many attempts to find a form of contract that will:

* save the most time overall

* reduce time spent on documentation
* give the owner the full or partial benefit of competition
* fix a firm price or alternatively, a means of arriving at a likely maximum
* cater for rise and fall
* have no loopholes to open the way for extras, either in money or time
* minimizes disputes
* still attract a builder.

TYPES OF CONTRACTING ARRANGEMENTS

All building works in South Africa are executed under some form of contracting
arrangement. At the start when you determine the extent of the work, you set off a
series of decisions, some voluntary, some automatic.

The process of building is complex but its progress is simple.

The size of the proposed work and its type will, in fact, determine the choice of the
following commodities:

* site and design

* architect (or not)
* finance source
* builder or contractor
* time for completion
* building contract agreement and conditions.

It is the last item in the above list, ‘building contract agreement and conditions’, that
is important. All of the other commodities have to be contained in that item.

Some building works are small, simple, self-contained and very predictable in their
construction techniques. These types of projects lead themselves to a firm, lump-sum
tender price. Competitive bids can be readily sought from building contractors.

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Tender prices are generally keen and close in comparison. This is because the work
has no unknowns: an example of this would be a brick veneer cottage on a level block
of land.

Much more complex for the contractor is a renovation-addition job on a two-storey

building. The building being on the heritage list could further complicate this. Also,
the proprietor may not know the extent of anticipated funding. This project, as
complicated as it first appears, could still be formally contracted.

Major building works need to be especially tight in their control by contract. The
more complex the bigger projects are, the more precise and complex the contract
conditions and agreement must be.

Examples would be retirement villages, hospitals and large government contracts,

multi story office blocks.

Specification of contracts

Listed below are some contracting arrangements for building works.

Lump-sum
In this form of contract, the contractor completes the work as documented for a fixed
amount of money. An architect may or may not supervisor the work.

Cost, plus a fee

This is used where the work is difficult or its extent is difficult to establish. The
builder is paid for the invoice costs of materials, labour and subcontract amounts.

In addition the contractor receives a predetermined fee during the works or on

completion.

Cost, plus a percentage

This is used in similar circumstances as for the previous item. The exception is that
the contractor receives additional payment in the form of a percentage of the total
cost. The percentage, like the fee in the previous item, pays the contractor for
builder’s overhead and profit.

Schedule of rates

This contracting arrangement is used for simple works where the extent of the work is
unknown or it is ongoing in stages. The contractor presents monetary claims for
various work items. The rate is inclusive of builder’s overhead and profit.

Work is measured on completion and the contractor gets paid on quantity at the
appropriate rate. For example:

* Ready mix concrete R500 per m³

* brickwork (face bricks) R1200 per 1000.

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Labour only

The contractor provides site worker to work at a pre-established hourly rate of pay.
The pay rate includes the on cost on labour, builder’s overhead and builder’s profit. It
is usually referred to as the charge-out rate.

The proprietor usually provides materials, plant and equipment.

Do-and-charge

This form of contracting arrangement is difficult and not recommended for the
following reasons:

* It is difficult to establish sound contract conditions and agreement.

* The project usually ends with an argument between contractor and proprietor.
* One of the parties involved is usually exploited.

It is difficult to grasp that in our tough commercial world that anyone would
contemplate building work under these arrangements. It is like builders-writing their
own cheques from the gullible proprietors’s chequebook. However, some building
works are done this way.

Owner-builders’ work

Owner-builder licenses are readily obtainable from the Department of Public Works
(DPW) or Master Builders Association (MBA). Anyone can obtain a license by
providing:

* A fee and extra for compulsory insurance

* a copy of the plan of the proposed work (not necessarily approved)
* a rate notice for the property
* the premium for comprehensive insurance.

_____________________________________________________________________

Value of work (Rands) Premium (Rands)

_____________________________________________________________________

_____________________________________________________________________

Trade contractors secure a lot of work from owner-builders. However, the contract
needs responsibilities clearly defined, regardless of the project’s size. The ‘buck
stops’ with the owner-builders. But be aware, the owner-builder can report the
contractor to the MBA for faulty work done. If the relationship really sours, civil
action can be taken.

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Package deal: design and construct

The contractor enters into a contract with the proprietor to carry out the design and
construction of a building project to a brief, which sets out the proprietor’s needs; the
contractor may also be responsible for selecting or purchasing a site for the project.

The contractor prepares a total price for the complete projects in accordance with the
brief and the subsequent contract agreement and conditions.

The contractor may initially negotiate the contract without competition. However,
some proprietors arrange competitive bids from design-and-construct building
contractors.

CONDITIONS OF CONTRACT

GENERAL CONDITIONS

The form of contract with its general conditions is chosen very early in the
formulation of a contract. Skill is required to select the most appropriate contract.
The main factors used in making the right choice are:

* the status of the owner-proprietor

* the contractor
* the building project
* the location
* the time for completion
* the source of finance

The general conditions are separated into clauses. Each clause is standard to that
form of contract and is combined for easy reference. In this chapter, we don’t
elaborate on each clause but some of the most important:

* contract documents
* Statutory obligations
* possession of the site
* site conditions
* materials and workmanship
* access to the site
* subletting
* adjustment of contract value
* progress payments
* prime cost and provisional sums
* variations to contract
* insurances
* delays and extensions of time
* practical completion.

Some of the above clauses have been elaborated below:

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APPLICABLE CLAUSES FREQUENTLY ENCOUNTERED IN BUILDING
CONTRACTS.

Clauses dealing with the time of completion, extension of such time and penalty for
delay.
Contract instructions clause.
Clause dealing with when and how payment is to be made (interim payment and final
accounts)
Clause dealing with defects rectification
Clause dealing with prime cost items and provisional sum items
Clause dealing with the right of either employer or the contractor determining the
contract
Clause dealing with the adjustment of the contract price, because of changes in the
cost of labour, material and plant.
Clause dealing with the manner in which disputes should be resolved

Time of completion, extension of such time and penalty for delay

Time of completion

Practical completion

Practical completion of the contract will be achieved once the Principal Agent (PA) is
satisfied that the works stated, are complete. The principal agent shall inform the
contractor of the period required for inspection of the works for issuance of the
practical completion certificate. Upon the issue of the certificate of practical
completion the employer shall be entitled to the possession of the works and the site.

Works completion

Within 7 calendar days of the date of practical completion the principal agent shall
issue to the contractor a works completion list defining the outstanding work and
defects which were apparent at the date of practical completion and are to be
completed or rectified to achieve works completion.

If in the opinion of the contractor, the work on the works completion list has been
completed the contractor shall notify the principal agent who shall inspect such work
within 7 calendar days of receipt of such a notice. Where in the opinion of the
principal agent the work on the work completion list:

Has been completed, the PA. Shall forthwith issue a certificate of works completion
to the contractor with a copy to the employer,
If not satisfied the contractor will repeat the procedure above.

Final completion

At the end of defects liability period the PA, shall inspect the works and where the
work:

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Has reached final completion the PA shall issue a certificate of final completion to
the contractor with a copy to the employer.
Has not reached final completion the PA shall forthwith issue to the contractor a
defects list defining the defects, which have appeared during the defects liability
period, which the contractor shall rectify to achieve final completion.

Extension of time or revision of the date of practical completion

The PA shall review the date of practical completion without adjusting the contract
value due to delays caused by:

 Inclement weather
 The inability of the contractor to obtain materials and goods at the required
time
 Civil commotion, riot, strike or lockout
 Late supply of a prime cost item
 Default by a nominated contractor

Revision of date of practical completion and adjustment to contract value is

implemented due to the following:

 Site not being given to the contractor on time

 Failure to issue, or late issue of a contract instruction
 Suspension or cancellation invoked by a nominated or selected
subcontractor due to default by the employer or PA.
 Insolvency of a nominated subcontractor

Penalty implemented for delay.

If the contractor fails to bring the works to a practical completion on the date stated in
the contract or the revised date.
The contractor shall be liable to the employer for the penalty per calendar day at the
rate stated in the contract or schedule.
The principal agent shall calculate the penalty due from the date or revised date. The
employer/principal agent shall deduct such penalties from any monies due or become
due to the contractor under this contractor.

Contract instructions

Under this clause the principal agent may issue contract instructions to the contractor
regarding:

 Alteration of design, quality or quantity of works provided that such

contract instructions should not substantially change the scope of the
works.
 Rectification of discrepancies, errors in description or omission in contract
documents other than this document.
 Removal of any materials and goods from site and the substitution of any
materials and goods thereof

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  Access for previous contractors and subcontractors to remedy defective
works
 Removal or re-execution of any work
The contractor shall comply and duly execute all contract instructions except, the
contractor shall not be obliged to execute any contract instruction for additional work
issued after the date of practical completion, other than making good physical loss and
repairing damage to the works.

NB. An oral instruction issued by the principal agent or any other agent shall be of
no force or effect. Neither the contractor nor the employer may rely upon an oral
instruction for any purpose.

Payment of works done

Interim payment to the contractor

The contractor shall be entitled to receive from the Principal Agent (PA) interim
certificates at intervals not greater than one calendar month of all the works that he
has executed during that calendar month.
The contractor shall cooperate with the PA in the preparation of the payment claim
information, for an interim payment certificate, by providing to the PA all relevant
documents and assessments of quantified amounts of work completed by not later
than the day of the month as stated in the schedule.
The PA shall issue each interim payment certificate to the contractor with a duplicate
original to the employer by not later than the day of the month stated in the schedule.

The value certified in the interim payment certificate shall separately include:

 A reasonable estimate of the value of work executed

 A reasonable estimate of the value of materials and goods on site
 Amounts previously certified.

The value of materials and goods that shall be included in the interim payment
certificate are those:

 Not prematurely delivered of offered for delivery

 Prematurely delivered or offered for delivery where the placing of the
order was in terms of the requirements of the principal agent
 Stored and protected against loss or damage
 Covered by insurance.

Final account and final payment

The PA shall prepare a Final Account (FA) for submission to the contractor within 90
working days after the date of practical completion. The contractor shall cooperate
with and assist the PA in the preparation of the final account by timeously supplying
all relevant documents on request.
The contractor shall then be given the FA for acceptance within 45 working days of
the receipt. If the contractor does not object the FA the pa shall issue the final

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payment certificate. The amount is the difference between the total of FA and
amounts previously stated under interim certificates.

NB. The final payment certificate shall not be issued before the issue of the certificate
of final completion.

Rectification of defects

Defects liability period

The contractor shall be made aware of the contract conditions stipulating a period
after practical completion, which the builder is required to maintain and make good
any defects, which become evident in the building. After the works completion
certificate has been issued, defects liability period shall commence and end at
midnight 90 calendar days from such date.
At the end of defects liability period the PA shall forthwith inspect the works and
where the works:

Have reached final completion the pa shall issue a certificate of final completion to
the contractor and a copy to the employer.
In case he is not satisfied the PA shall issue the contractor a defects list defining the
defects, which have appeared during the defects liability period, which the contractor
shall rectify to achieve final completion

Latent defects liability period

The latent defects liability period shall commence at the start of the construction
period and end (5) five years from the date of final completion. Defects, which may
appear up to the date of final completion, shall be addressed as above.

Where the schedule states that this agreement is for a government contract the latent
defects liability period shall end 15 years from the date of final completion.

The contractor shall not be liable to the employer for defects, which may appear after
the expiry of the latent defects liability period.

Prime cost and provisional items

Prime cost (PC) provisional sums are lump sums included in the contract sum to cover
the cost of parts of the work, which are not measured in the bills of quantities. They
are for goods to be obtained by the contractor under such conditions’ as the architect
shall instruct. Such goods shall be, fixed by the contractor, and the settlement of the
account shall be dealt with as follows:

Prime cost sums

Prime cost or PC amounts are for special materials and goods, which are to be chosen
by the architect or engineer and fixed by the contractor. The amounts allowed are for
the purchase of particular units or materials and the contractor should add further

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amounts to cover his services for arranging and checking the supply of materials and
goods.
PC sums are often used for ironmongery, sanitary fittings, carpets and tiles.

Provisional sums

Provisional sums are sums of money inserted in the BOQ for the complete execution
of specialist sub-contractors work, such as lift installation escalators, air conditioning
and electrical installation.
The principal contractor has the opportunity to insert separate prices for profit and
attendance on each of the provisional sums applicable to work of the specialist sub-
contractors.

The contract sum shall be adjusted by the omission of all such prime cost or P.C
amounts in the bills of quantities, and the addition of the sums actually paid by the
contractor

The right of either the employer or the contractor to determine the contract

Cancellation by employer- contractors default

The employer may cancel this agreement where the contractor:

Fails to submit to the PA on acceptance of his tender or negotiated amount:

 The priced bills of quantities
 The selected security
 The waiver of lien where required.

Fails to commence work within the period stated in the schedule and proceed with due
skill, diligence, regularity and expedition.

Refuses to comply with the contract instruction

The insolvency of the contractor is when the contractors’ estate is sequestrated as

insolvent, or if, being a company it is placed on voluntary or compulsory liquidation.

Cancellation by contractor- employers default

The contractor may cancel this agreement where:

 The employer fails to appoint principal agents and other agents as stated in
the schedule
 The employer failing to notify the contractor of the new PA or agent
appointed. Appointing a pa that a contractor doesn’t want and he has put it
in writing after 5 working days of the receipt.

The employer fails to give possession of the site to the contractor.

The employer fails to provide a payment guarantee

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The PA fails to issue any payment certificate

The employer fails to pay the amount certified

The employer prevents the PA from exercising his independent judgement regarding
the performance of his duty in terms of this agreement and the contractor being
prejudiced by such action.

Insolvency of the employer

Adjustment of the contract value because of changes in the cost of labour,

material and plant

The PA shall determine the value of adjustments to the contract value according to the
bills of quantities unless otherwise stated
Adjustment to the contract value resulting from a contract instruction shall be
determined as follows:

 Items of additional work of similar character and executed under similar

conditions shall be priced at the rates in the BOQ /Lump sum document.
 Items of additional work not of similar character or not executed under
similar conditions shall be priced, where applicable, at rates based on those
in the BOQ/ lump sum document and adjusted to suit the changed
circumstances.
 In case the above two areas are not applicable such work shall be priced at
new rates which take into account the labour, engineering, drawings,
material, transport and plant necessary for executing the work plus an
allowance of 10% mark up.
 Items of work omitted shall be valued at the rates in the BOQ/lump sum
document, but where the omission of such work varies the circumstances
in which the remaining work is carried out, the value of the remaining
work shall be determined by bulletin 2 above.
 The price can also be adjusted using contract price adjustment provision
(CPAP) using the information stated in the schedule.
 Where adjustments need to be measured on the site the contractor shall be
given the opportunity to be present and shall be supplied with a copy of the
measurement.
 The PA shall rectify all identified discrepancies, errors in the description
or quantity, or omission of items from the contract documents. Such
rectification shall be treated as an adjustment to the contract value where
there is monetary implication.

Dispute

Settlement of disagreement and disputes

Should there be a disagreement between the employer or his agents and the
contractor. The contractor may request the PA to determine such disagreement by a
written decision to both parties. On submission of such a request a disagreement in
respect of the issues detailed therein shall be deemed to exist.

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The PA shall give a decision specifically to the employer and the contractor within 10
working days of such a request. Such decision shall be final and binding on the
parties, unless either party disputes the same by notice to the other and the pa within
10 working days in which case a dispute shall be deemed to exist.

Should a PA fail to give a written decision within 10 working days a dispute between
the parties shall be deemed to exist.

The dispute may be submitted to mediation within 15 working days of the date on
which the dispute was declared, agree on and appoint in writing the person to act as
mediator.
The mediator shall then meet the parties to decide the procedures, representation and
dates for the mediation process. Then meet the parties individually or together to help
settle the dispute.
In case they reach a settlement the mediator records all the details which will be
binding. In case of no further agreement the mediator may end the mediation within
45 working days of the date of appointment or any extended period. He will then
record the ending of the mediation and furnish each party with a copy within 10
working days.

Whether the parties resolve the dispute or not they shall bear their own costs, although
these costs may be subject to later arbitration award.

In case the parties don’t resolve the dispute they refer it to arbitration. When the
dispute is referred to arbitration

It will be conducted in terms of the Arbitration Act of 1965 unless otherwise stated.
An arbitrator shall, be appointed by the parties, within 10 working days of the date of
submission of the dispute to arbitration. The Association of Arbitrators (Southern
Africa) can make such an appointment on behalf of the parties within 10 working
days on their request.
It’s then the obligation of the arbitrator to open or revise any certificate, opinion or
notice relating to the dispute as if they have not been given.
The parties, unless otherwise agreed, shall request the arbitrator to give a reasoned
award to resolve the dispute.

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 CHAPTER SIX

QUALITY CONTROL

INTRODUCTION

Over the last two decades the drive towards quality improvement has been nothing
less than a revolution. The drive being essentially customer driven, according to
Kerzner the following are factors that need to be considered
 Higher performance requirements
 Faster product development
 Higher technology levels
 Materials and processes pushed to the limit.

According to Kerzner the quality concepts, developed from 1950-60 period from
sorting of good from bad, had the following underlying principles:
 The cost of quality
 Zero-defect program
 Reliability engineering
 Total quality control
From the above, the present emphasis is clearly on a process of “quality management”
as a “strategic tool”

Quality management concepts

Kerzner states that the following six quality management concepts should exist in
order to ensure that quality management as a strategic tool is established in an
enterprise:

Quality policy

 The format is a printed statement, which states

 Enterprises’ quality principles
 Promotes consistence
 Provides explanation to outsiders regarding quality
 Offers guidelines regarding quality and
 Provides regular updating

Quality objectives

Quality objectives are written extension of quality policy and ensure that:
 The policy is attainable
 It defines specific goals
 Is understandable and
 Provides deadlines for achievement

Quality assurance

A quality assurance system will:

85
  Identify objectives and standards
 Be multifunctional and prevention oriented
 Plan for data collection
 Plan for maintenance and improvement of performance and
 Includes quality audits

Quality control

Quality control systems will

 Select what to control
 Set standards for decision making
 Establish measurement methods
 Compare results
 Prescribe corrective action
 Ensure accurate measuring devices and
 Document the quality management process.

Quality audit

A quality audit ensures that:

 Planned quality is met
 Products are safe
 Laws and regulations met
 Data is correct
 Corrective action and
 Improvement are seen to be done

Quality plan

A sound quality plan will:

 Identify customers
 Design processes to ensure that the expectations are met
 Inclusion of suppliers in the process and
 Embodiment of quality policy

NB. The six concepts above should be implemented to ensure that the enterprise
achieves the quality levels that it has set for its products and/or services.

Quality management on site follows the normal management element approach,

entailing planning, organizing, leading and controlling the conversion of inputs to
outputs. Being a process that is managed, there should be well, defined evaluation
mechanisms in place as part of controlling outcomes. A typical manual should be
devised and regularly updated.

The classic mistake should not be made to regard quality control only as a tool to
ensure new products or buildings of a high quality. It is of equal importance to subject
refurbishments, alterations, repairs, maintenance and even re-do work to quality
management.

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Success in any sphere is only achieved if there is commitment, procedures and people
accepting responsibility and accountability.

Quality should not be reduced to a simple concept, which relates to the end product
being of a “high” or “low” quality only. Whilst the final evaluation of a product is
obviously the end objective, it is of paramount importance that quality, more
specifically quality management, is understood as a process.

A process with inputs, converted by management to outputs, the latter in present day
competitive markets is aimed at:
 Retaining customer,
 Win back lost customers and
 Obtain new ones

The message from the competitive market environment today is clear: “Do it right the
first time”. This has to be achieved through prevention and process appraisal, and not
by incurring internal failure whilst in production, an external failure in the hands of
the customer.

Definition of quality

Quality can be defined in many ways. The ISO 9000 defines quality as the totality of
feature and characteristics of a product or service that bears on its ability to satisfy
stated or implied needs.

OR

Those products or services that are perceived to meet/exceeds the need or expectation
of a customer or client that represents outstanding value

Quality control and supervision of building products

Definition

Quality control is “an aggregate of functions designed to insure adequate quality in

manufactured goods”. This is accomplished by an “initial critical study of engineering
design, materials, processes, equipment, and workmanship, followed by periodic
inspection”. Furthermore an analysis of the results of inspection “is used” to
determine causes for defects, and by removal of such causes.

Quality control is essential to the construction industry. A large number of contractors

use quality control methods to improve productivity, eliminate the cost of rework and
increase customer satisfaction.

When to inspect work

Knowing when to inspect work-in-progress is beneficial to the quality control (QC)

personnel. The following discussion indicates when and what to inspect on the
jobsite:

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Inspection before the commencement of work

This inspection is made for each major work activity and is used to verbally build the
item of work. A majority of the time, a preparatory inspection is held for each section
of work. This involves holding a meeting to perform the pre-inspection of materials,
methods, and personnel that are used to perform the work.
Submittals of industry standards are used to verify that the work to be performed will
be completed in compliance with the project documents. The use of sample panels for
work such as masonry or in-situ terrazzo finishes is a prime example of this type of
inspection.
The workmanship and materials of the sample panel are inspected and approved prior
to its implementation into the construction process. Corrections made at this stage of
inspection will cost less and will not impact the project schedules as much as if work
was stated before problems were discovered.

Inspection during work-in-progress

The inspection of the work in progress must be performed on a continuous basis.

Quality control (QC) personnel must maintain constant watch on work as it begins
and ends toward completion. It is very important to verify that work starts out
correctly otherwise rework to correct the problem will occur. It is easier and less
expensive to correct work as the work progresses instead of discovering defects after
the work is completed. No one likes to perform the same item of work more than
once.

Inspection of work after completion

Each work activity must also be inspected upon completion. This action is necessary
to detect any deficient work prior to the next work activity to be performed. A snag
list consisting of the list of deficiencies discovered should be made and given to the
parties responsible for the defective work.

Verification that each deficiency has been corrected must be made to ensure that there
are not any outstanding deficiencies. This section of inspection will require the
performance testing of installed materials/equipment.

Specialized inspections

There are three types of specialized quality control inspections performed on the
jobsite. They are as follows:
 Pre-concrete installation inspection
 Pre-wallboard installation inspection
 Pre-ceiling installation inspection

As stated by the names, these inspections are performed prior to the placement of
concrete of the installation of both gypsum wallboard and ceilings (gypsum board or
acoustical). These pre-work inspections are aided by the use of ready–made
inspection reports.

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Materials used should conform to the types and standards laid down in the
specifications. It would improve matters if all delivered materials, were checked by
those taking receipt of them. If unspecified materials were used and were rejected
later by the clerk of works, it would be expensive to cut out and provide the proper
type: stricter control by the supervisors would prevent this kind of inconvenience and
expensive rejection from happening.

Where the architect designs’ and supervise the works he/she expects specimen
materials to be submitted by the main contractor for his/ her approval before use. Also
specimen samples of work may have to be provided, on-site, at the commencement of
a contract so that they can be used as a guide to everyone, particularly the architect
and his representative, the clerk of works; regarding the quality expected.

If future work falls below these standard specimens they may be rejected. A typical
sample usually takes the form of brick panel being built as display to show the
bonding, mortar thickness and the standard of pointing and straightness of the
courses.

The testing of some materials on-site is normal practice, and results would have to be
made available to the architect and once again if the results fall below the South
Africa Bureau of Standards (SABS) and the specifications, the material will be
rejected or the part of the building under construction affected by the substandard
materials would have to be removed.

What to look for when inspecting work.

Since quality is the responsibility of everyone involved in the construction process,

most of the graduates accepting construction positions will help manage QC
functions. Since it is not always clear as to what one needs to look for in order to
ensure a proper inspection, students should be instructed to watch for “key items”
during inspection.

In order to illustrate this point, a sample checklist for placing steel doors and frames is
as shown below. The checklist shown below is based on past quality control
experiences and hence outlines how QC will have a positive effect on the quality of
work when QC is used during the construction process.

 When delivered to the site, each door and frames should be checked for
damage.
 Ensure proper size and gauge of doors
 Doors and frames must be stored of the ground in a place that offers
protection from the weather.
 DO NOT stack doors or lay doors flat! This will cause doors to warp.
Doors must be stacked on end in carpet, covered racks or other appropriate
methods.
 Check doors and frames for proper material, size gauge finish and
anchorage requirement.
 Verify door installation per door schedule shown in contract documents.
 Fire rated doors/frames must be used in fire rated wall assemblies.

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  Fire rated doors and frames must have a certificate attached to it stating the
rating of fire- resistance.
 Check for proper location of the hinge side of the door and for proper
swing of the door e.g. door swing for stair well and other egress openings
must be out, not into the stairwell
 Door frames, in masonry wall must be installed prior to staring masonry
work (masonry must be stepped back for future installation of door frame)
 Is the doorframe installation straight and plumb?
 If wood blocking is required for doorframe installation, make sure this
activity is completed during the construction of the wall.
 Is there a uniform clearance between the door and doorframe?
 Has adequate clearance been provided between the bottom of the door and
the floor finish for the allowance of carpet or tile to be installed?
 Touch up scratches and rust spots with approved paint primer.
 Exterior doors must be insulted.
 Check for weather-stripping requirements on exterior doors.
 The intersection between the doorframe and wall should be caulked –
check for missing caulking hard-to-reach areas e.g. hinge-side of
doorframe

Materials/equipment compliance test

Every project owner requires the testing of materials and equipment, both prior to
placement and after installation. Students should be familiar with testing methods,
whether or not they will be performing the actual tests. Prior to beginning
construction operations, a listing of each test that will be required should be made out.
This will serve as a checklist to be used by QC personnel throughout the construction
process.

This testing should list the type and frequency of testing required per each segment of
work. Once tests have been performed, a test report documenting the results of the test
should be kept on file or put into a test report folder for future reference.

Site engineers, supervisors’ and other designated employees may have the
responsibility to ensure that the tests on materials received, or are about to be used,
are checked, and they should have some knowledge of the tests and checks to be made
to each type of material, e.g.

Aggregate tests

 Silt tests on fine aggregates (sand)

 Bulking tests on fine aggregates
 Sieve tests
 Moisture content tests on course aggregate,

Concrete tests

There are two types of concrete tests that are used to evaluate concrete on the jobsite
namely:

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  Slump, test and
 The cube/cylinder test
 Compaction factor test

Slump test

The slump test determines whether the desired workability of concrete has been
achieved without making the concrete too wet. This test is performed by placing
concrete in a metal cone in three equal lifts. A rod is the used to tamp each layer of
concrete 25 times. After the top of the third lift is leveled off with the top cone, the
cone is removed and placed beside the slumped pile of concrete. The measurement
from the top of the concrete pile indicates the slump of the concrete.

Concrete cube tests

Concrete cube tests are made from freshly mixed concrete and casting. Typically, four
concrete cubes are made for compressive testing purposes to determine the strength of
concrete one is tested at 7days and two are tested at 28 days: one is used as a back-up
sample). The air content of concrete is also monitored. While the advantage of air –
entrained concrete is that it provides air bubbles that allow room for concrete to
expand during freeze-thaw cycles the disadvantage is that air entrainment reduces
concrete strength. Therefore, it is necessary to ensure that the specified air
entrainment level is not exceeded.

Compaction factor test

Mortar testing

The project specifications for mortar list will state the required proportions of mortar
ingredients i.e. 1 part type of masonry cement to 3 parts masonry sand. Then the
specification will also state the method of obtaining samples for compressive testing
and the strength required for the mortar. Copies of these standards must be obtained to
ensure full compliance with both the project specification and industry standards.

Plumbing tests

All pipes in the building must be checked for leaks. Testing for leaks involves
subjecting all pressurized pipes (i.e. supply, return, fire sprinkler) to hydrostatic
pressure testing, which is measured by water pressure gauge. Usually the test requires
the pipes to hold 150% of the normal operating pressure for 2hrs.

Any drop in pressure indicates the presence of a leak in the line. Once this leak is
found and repaired, the test is restarted for two hours. It should be noted that the leaky
joints must be tightened or taken apart and corrected.
The application of pipe sealant to the outside of the pipe is not an approved correction
method.

Non-pressurized i.e. waste/vent pipes are tested by the “peppermint” test. This test
involves pouring a bottle of peppermint oil down one of the roof vent pipes. Once this
is accomplished, the joints of these pipes are checked for peppermint smell, which

91
indicates the presence of a leak. It should be noted that the individual who pours the
peppermint oil must not be allowed in the building, while testing is in progress. This
is due to the fact that the peppermint smell will linger in the clothes of this individual
and will cause false indications during the inspection of the pipes.

Timber

 Check for woodworm or other infestations or diseases

 Check for dead knots, etc., depending on where the timber is to be used
 Signs of twisting, cupping, splitting and bowing may mean rejection.
Better to reject before unloading than try to get replacement load later.

Bricks

Bricks, check dimensions according to the relevant SABS, if necessary

Check for good arises, regular colour, and the bricks are hard and well burnt with no
cracks, etc.

General

A visual inspection of deliveries can highlight defective materials, and some measure
of protection should be evident to show that care had been taken by the supplier to
safeguard against damage.

One should never allow materials to be unloaded if there is doubt about their standard.
Random statistical sampling of say, between 100 to 200 bricks from a load will
highlight the percentage of defects. If five bricks from the sample of 100 are defective,
this is taken as 5% defects.

Performance tests

Performance tests are required for many of the complicated systems that are installed
in the building. A few of these systems include the fire alarm system, elevators, and
water chillers/ air-handlers. These types of tests are performed by the installer of the
system and are only witnessed and verified by the QC personnel.

Once again, it is important for the QC personnel to have some sort of knowledge
regarding what is involved with testing these systems. The project specifications will
state which industry standards must be followed for proper testing.

92
 BIBLIOGRAPHY

Building and Construction Training Division of NSW, Department of Fair Trading

and Joseph Sierra., (1996) Contracts management in the building industry, 2nd
edition. Open training and Education network, 51 Wentworth Road, Strathfield NSW
2135

Forster G., (1991) Construction site studies production, administration and

personnel. 2nd edition. Longman Singapore

Hare A.V., Kehoe J.G., McMullan R. and Penton M.R., (1997) Construction
management, finance and measurement for construction and built environment
programmes. 1st edition. Macmillan Press Ltd. Houndmils, Basingstoke, Hampsire
RG21 6XS and London

Hauptfleisch, A.C., (1999) Building Practice volume 2

James L. J., (1999), “Implementing Quality Control Topics into the Building
Construction Curriculum”. Association of Schools Construction. Proceedings of the
35th Annual Conference. California Polytechnic State University-San Luis Obispo,
California. pp 319-334.

Joint Building Contracts Committee., (1998), Principal Building Agreement

Kezner, H., (1979), Project Management: A system approach to planning scheduling,

and controlling. Pp 1051-1054 Van Nostrand Reinhold, 115 Fifth Avenue, New York.

Oxley R. and Poskitt J., (1986), Management techniques applied to the construction
industry.

Rodney Turner J., (1999) The handbook of project-based management. 2nd edition.
McGraw-hill, Shoppenhangers road, Maidenhead, Berkshire, Sl6 2QL, England.

The Aqua Group., (1990), Contract Administration for the Building Team. 7th edition
Oxford: BSP Professional Books.

93
INTRODUCTION

This study guide will enable third year students to incorporate what they have come across in
the industry during their experiential training and gel it with the theory part of the of S4
studies.

This section will enable the student to:

 Apply the principles and procedures of labour relations

 Enhance skills development in the society
 Observe occupational, injuries and diseases in a work environment
 Instill health and safety precautions in a workplace
 Lead labourers and other personnel effectively, motivate them and communicate
with them effectively
 Enhance a, good public relations with the people around him/her

SECTION 2
TOPICS PAGES

Chapter 1 Labour relations and legislation 95-126

Chapter 2 Skills development 127-131
Chapter 3 Compensation for occupational injuries and diseases 132-137
Chapter 4 Industrial psychology 138-149
Chapter 5 Personnel management 150-162
Chapter 6 Public relations 163-181

Bibliography 182

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 CHAPTER 1

LABOUR RELATIONS AND LEGISLATIONS

Introduction

There is no simple definition of labour relations, because the term has come to include many
things in both the public and private sectors and wherever people are employed to do work.
Thus it includes relations in hospitals, schools, factories, shops, offices, on farms and in home
between domestics and their employers.

The focus previously was more on mining and manufacturing sectors and was termed as
industrial relations. The fact more employees have been drawn into the ambit of legislation
and the rapid growth of unionization in public and service sectors, the term labour relation
has become more appropriate.

Labour relation involves interpersonal process between two people, or a group of people in a
workplace such as management and employees, or a broader group of formalized employer
body and trade unions, which bargain collectively within a specific sector of the economy.

Labour relation is not only concerned with strikes, although this issue may be given
prominent coverage in the media. It should be viewed as a stable approach to many factories,
offices, and other workplaces where on a daily basis regular contacts informal discussions and
formal discussions are used to solve problems and to pursue agreements on employees’
conditions of employment.

Exclusion from application of labour relations Act are:

(a) the National Defense Force

(b) the National Intelligence Agency; and
(c) the South African Secret Service.

Disclosure of information in regard to labour relations act

(1) For the purpose of this section, “representative trade union” means a registered
trade union, or two or more registered trade unions acting jointly, that have as
members the majority of the employees employed by an employer in a workplace.

(2) Subject to subsection (5), an employer must disclose to a trade union

representative all relevant information that will allow the trade union
representative to perform effectively the functions referred to in section 14(4).

(3) Subject to subsection (5), whenever an employer is consulting or bargaining with

a representative trade union, the employer must disclose to the representative
trade union to engage effectively in consultation or collective bargaining.

(4) The employer must notify the trade union representative or the representative
trade union in writing if any information disclosed in terms of subsection (2) or
(3) is confidential.

(5) An employer is not required to disclose information -

(a) that is legally privileged;

(b) that the employer cannot disclose without contravening a prohibition

imposed on the employer by any law or order of any court;

95
 (c) that is confidential and, if disclosed, may cause substantial harm to an
employee or the employer; or

(d) that is private personal information relating to an employee, unless that

employee consents to the disclosure of that information.

(6) If there is a dispute about what information is required to be disclosed in terms of

this section, any party to the dispute may refer the dispute in writing to the
Commission.

(7) The party who refers the dispute to the Commission must satisfy it that a copy of
the referral has been served on all the other parties to the dispute.

(8) The Commission must attempt to resolve the dispute through conciliation.

(9) If the dispute remains unresolved, any party to the dispute may request that the
dispute be resolved through arbitration.

(10) In any dispute about the disclosure of information contemplated in subsection (6),
the commissioner must first decide whether or not the information is relevant.

(11) If the commissioner decides that the information is relevant and if it is

information contemplated in subsection (5)(c) or (d), the commissioner must
balance the harm that the disclosure is likely to cause to an employee or employer
against the harm that the failure to disclose the information is likely to cause to
the ability of a trade union representative to perform effectively the functions
referred to in section 14(4) or the ability of a representative trade union to engage
effectively in consultation or collective bargaining.

(12) If the commissioner decides that the balance of harm favours the disclosure of the
information on terms designed to limit the harm likely to be caused to the
employee or employer.

(13) When making an order in terms of subsection (12), the commissioner must take
into account any breach of confidentiality in respect of information disclosed in
terms of this section at that workplace and may refuse to order the disclosure of
the information or any other confidential information which might otherwise be
disclosed for a period specified in the arbitration award.

(14) In any dispute about an alleged breach of confidentiality, the commissioner may
order that the right to disclosure of information in that workplace be withdrawn
for a period specified in the arbitration award.

COLLECTIVE AGREEMENTS

Legal effect of collective agreement

(1) A collective agreement binds-

(a) the parties to the collective agreement;

96
 (b) each party to the collective agreement and the members of every other
party to the collective agreement, in so far as the provisions are applicable
between them;

(c) the members of a registered trade union and the employers who are
members of a registered employers’ organization that are party to the
collective agreement if the collective agreement regulates-

(i) terms and conditions of employment; or

(ii) the conduct of the employers in relation to their employees or the

conduct of the employees in relation to their employers;

(d) employees who are not members of the registered trade union or trade
unions party to the agreement if-

(i) the employees are identified in the agreement;

(ii) the agreement expressly binds the employees; and

(iii) that trade union or those trade unions have as their members the
majority of employees employed by the employer in the workplace.

(2) A collective agreement binds for the whole period of the collective agreement
every person bound in terms of subsection (1)(c) who was a member at the time it
became binding, or who becomes a member after it became binding, whether or
not that person continues to be a member of the registered trade union or
registered employers’ organization for the duration of the collective agreement.

(3) Where applicable, a collective agreement varies any contract of employment

between an employee and employer who are both bound by the collective
agreement.

(4) Unless the collective agreement provides otherwise, any party or collective
agreement that is concluded for an indefinite period may terminate the agreement
by giving reasonable notice to the other parties.

BARGAINING COUNCILS

Establishment of bargaining councils

(1) One or more registered trade unions and one or more registered employers’
organizations may establish a bargaining council for a sector and area by -

(a) adopting a constitution that meets the requirements of section 30; and
(b) obtaining registration of the bargaining council in terms of section 29.

(2) The State may be party to any bargaining council in terms of this section if it
is an employer in the sector and area in respect of which the bargaining council
is established.

(3) Of the State is a party to a bargaining council in terms of subsection (2), any
reference to a registered employers’ organization includes a reference to the
State as a party.

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Powers and functions of a bargaining council

The powers and functions of a bargaining council in relation to its registered scope include
the following-

(a) to conclude collective agreements;

(b) to enforce those collective agreements;
(c) to prevent and resolve labour disputes;
(d) to perform the dispute resolution functions referred to in section 51;
(e) to establish and administer a fund to be used for resolving disputes;
(f) to promote and establish training and education schemes;
(g) to establish and administer pension, provident, medical aid, sick pay,
holiday, unemployment and training schemes or funds or any similar
schemes or funds for the benefit of one or more of the parties to the
bargaining council or their members;
(h) to develop proposals for submission to NEDLAC or any other appropriate
forum on policy and legislation that may affect the sector and area.
(i) to determine by collective agreement the matters which may not be an
issue in dispute for the purposes of a strike or a lockout at the workplace;
and
(j) to confer on workplace forums additional matters for consultation.

Constitution of bargaining council

(1) The constitution of every bargaining council must provide for-

(a) the appointment of representatives of the parties to the bargaining council,

of whom half must be appointed by the trade unions that are party to the
bargaining council and the other half by the employers’ organizations that
are party to the bargaining council, and the appointment of alternatives to
the representatives;

(b) the representation of small and medium enterprises;

(c) the circumstances and manner in which representatives must vacate their
seat’s and the procedure for replacing them;

(d) rules for the convening and conducting of meetings of representatives,

including the quorum required for, and the minutes to be kept of, those
meetings;

(e) the manner in which decisions are to be made;

(f) the appointment or election of office-bearers and officials, their functions,

and the circumstances and manner in which they may be removed from
office;

(g) the establishment and functioning of committees;

(h) the determination through arbitration of any dispute arising between the
parties to the bargaining council about the interpretation or application of
the bargaining council’s constitution;

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 (i) the procedure to be followed if a dispute arises between the parties to the

bargaining council;

(j) the procedure to be followed if a dispute arises between a registered trade

union that is party to the bargaining council, or its members, or both, on
the one hand, and employers who belong to a registered employers’
organization that is a party to the bargaining council, on the other hand;

(k) the procedure for exemption from collective agreements;

(l) the banking and investment of its funds;

(m) the purposes for which its funds may be used;

(n) the delegation of its powers and functions;

(o) the admission of additional registered trade unions and registered

employers’ organizations as parties to the bargaining council, subject to
the provisions of section 56;

(p) a procedure for changing its constitution; and

(q) a procedure by which it may resolve to wind up.

COLLECTIVE BARGAINING PROCEDURE pp 36-38

Binding nature of collective agreement concluded in bargaining council

Subject to the provisions of section 32 and the constitution of the bargaining council, a
collective agreement concluded in a bargaining council binds only the parties to the
bargaining council who are parties to the collective agreement.

Extension of collective agreement concluded in bargaining council

(1) A bargaining council may ask the Minister in writing to extend a collective
agreement that are within its registered scope and are identified in the request, if
at a meeting of the bargaining council –

(a) one or more registered trade unions whose members constitute the majority
of the members of the trade unions that are party to the bargaining council vote
in favour of the extension; and

(b) one or more registered employers’ organizations, whose members employ the
majority of the employees employed by the members of the employers’
organizations that are party to the bargaining council, vote in favour of the
extensions.

(2) Within 60 days of receiving the request, the Minister, must extend the collective
agreement, as requested, by publishing a notice in the Government Gazette
declaring that, from a specified date and for a specified period, the collective
agreement will be binding on the non-parties specified in the notice.

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(3) A collective agreement may not be extended I terms of subsection (2) unless the
Minister is satisfied that –

(a) the decision by the bargaining council to request the extensions of the collective
agreement complies with the provisions of subsection (1);

(b) the majority of employees employed within the registered scope of the bargaining
council are members of the trade unions that are party to the bargaining council;

(c) the members of the employers’ organizations that are party to the bargaining
council employ the majority of the employees employed within the registered
scope of the bargaining council;

(d) the non-parties specified in the request fall within the bargaining council’s
registered scope;

(e) the collective agreement establishes or appoints an independent body to grant

exemptions to non-parties and to determine the terms of those exemptions from
the provisions of the collective agreement as soon as possible;

(f) the collective agreement contains criteria that must be applied by the
independent body when it considers applications for exemptions, and that those
criteria are fair and promote the primary objects of this Act; and

(g) the terms of the collective agreement do not discriminate against the non-
parties.

(4) For the purpose of subsection (3)(e), a bargaining council in its appointment of
the members of the independent body must have due regard to the nominations
made by the institutions listed in the schedule promulgated in terms of section
207(6).

(5) Despite subsection (3)(b) and (c), the Minister may extend a collective agreement
in terms of subsection (2) if -

(a) the parties to the bargaining council are sufficiently representative within
registered scope of the bargaining council; and

(b) the Minister is satisfied that the failure to extend the agreement may
undermine collective bargaining at sectoral level.

(6) (a) After a notice has been published in terms of subsection (2), the Minister, at
the request of the bargaining council, may publish a further notice in the
Government Gazette –

(i) extending the period specified in the earlier notice by a further

period determined by the Minister, or

(ii) if the period specified in the earlier notice has expired, declaring a
new date from which, and a further period during which, the
provisions of the earlier notice will be effective.

(b) The provisions of subsection (3) and (5), read with the changes required by the
context, apply in respect of the publication of any notice in terms of this subsection.

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 (7) The Minister, at the request of the bargaining council, must publish a notice in
the Government Gazette canceling all or part of any notice published in terms of
subsection (2) or (6) from a date specified in the notice.

(8) Whenever any collective agreement in respect of which a notice has been
published in terms of subsection (2) or (6) is amended amplified or replaced by a
new collective agreement, the provisions of this section apply to that new
collective agreement.

Collective agreement, arbitration award or wage determination to be kept by employer

Unless a collective agreement, arbitration award or determination made in terms of the Wage
Act provides otherwise, every employer on whom the collective agreement, arbitration award,
or determination is binding must-

(a) keep a copy of that collective agreement, arbitration award or

determination available in the workplace at all times;

(b) make that copy available for inspection by any employee; and

(c) give a copy of that collective agreement, arbitration award or

determination-

(i) to an employee who has paid the prescribed fee; and

(ii) free of charge, on request, to an employee who is a trade

union representative or a member of a workplace forum.

Legal effect of collective agreement P20 - 22

(1) A collective agreement binds –

(a) the parties to the collective agreement;

(b) each party to the collective agreement and the members of every other
party to the collective agreement, in so far as the provisions are applicable
between them;

(c) the members of a registered trade union and the employers who are
members of a registered employers’ organization that are party to the
collective agreement if the collective agreement regulates -

(i) terms and conditions of employment; or

(ii) the conduct of the employers in relation to their employees or the

conduct of the employees in relation to their employers;

(d) employees who are not members of the registered trade union or trade
unions party to the agreement if –

(i) the employees are identified in the agreement;

(ii) the agreement expressly binds the employees; and

(iii) that trade union or those trade unions have as their members the

101
 majority of employees employed by the employer in the
workplace.

(2) A collective agreement binds for the whole period of the collective agreement
every person bound in terms of subsection (1)(c) who was a member at the time it
became binding, or who becomes a member after it became binding, whether or
not that person continues to be a member of the registered trade union or
registered employers’ organization for the duration of the collective agreement.

(3) Where applicable, a collective agreement varies any contract of employment

between an employee and employer who are both bound by the collective
agreement.

(4) Unless the collective agreement provides otherwise, any party to a collective
agreement that is concluded for an indefinite period may terminate the agreement
by giving reasonable notice to the other parties.

Disputes about collective agreements

(1) Every collective agreement, excluding an agency shop agreement concluded in

terms of section 25 or a closed shop agreement concluded in terms of section 26,
must provide for a procedure to resolve any dispute about the interpretation or
application of the collective agreement. The procedure must first require the
parties to attempt to resolve the dispute through conciliation and, if the dispute
remains unresolved, to resolve it through arbitration.

(2) If there is a dispute about the interpretation or application of a collective

agreement, any party to the dispute may refer the dispute in writing to the
Commission if –

(a) the collective agreement does not provide for a procedure as

required by subsection (1);

(b) the procedure provided for in the collective agreement is not operative, or

(c) any party to the collective agreement has frustrated the resolution of the dispute in
terms of the collective agreement.

(3) The party who refers the dispute to the Commission must satisfy it that a copy of
the referral has been served on all the other parties to the dispute.

(4) The Commission must attempt to resolve the dispute through conciliation.

(5) If the dispute remains unresolved, any party to the dispute may request that the
dispute be resolved through arbitration.

(6) If there is a dispute about the interpretation or application of an agency shop

agreement concluded in terms of section 25 or a closed shop agreement
concluded in terms of section 26, any party to the dispute may refer the dispute in
writing to the Commission, and subsection (3) to (5) will apply to that dispute.

(7) Any person bound by an arbitration award about the interpretation or application
of section 25(3)(c) and (d) or section 26(3)(d) may appeal against that award to
the Labour Court.

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DISPUTE HANDLING PROCEDURE (7.2.3) P145 – 148

Resolution of disputes under auspices of commission

(1) The Commission must appoint a commissioner to attempt to resolve through

conciliation –

(a) any dispute referred to it in terms of section 134; and

(b) any other dispute that has been referred to it in terms of this Act.

(2) If a dispute remains unresolved after conciliation, the Commission must arbitrate
the dispute if-

(a) this Act requires that dispute to be arbitrated and any party to the
dispute is resolved through arbitration; or

(b) all parties to the dispute in respect of which the Labour Court has
jurisdiction consent to arbitration under the auspices of the Commission.

Disputes about matters of mutual interest

(1) Any party to a dispute about a matter of mutual interest may refer the dispute in
writing to the Commission, if the parties to the dispute are_

(a) on the one side –

(i) one or more trade unions;

(ii) one or more employees; or

(iii) one or more trade unions and one or more employees; and

(b) on the other side-

(i) one or more employers’ organizations;

(ii) one or more employers; or

(iii) one or more employers’ organizations and one or more employers;

(2) The party who refers the dispute to the Commission must satisfy it that a copy of the
referral has been served on all the other parties to the dispute.

Resolution of disputes through conciliation

(1) When a dispute has been referred to the Commission, the Commission must
appoint a commissioner to attempt to resolve it through conciliation.

(2) The appointed commissioner must attempt to resolve the dispute through
conciliation within 30 days of the date the Commission received the referral.
However the parties may agree to extend the 30-day period.

103
 (3) The commissioner must determine a process to attempt to resolve the dispute,
which may include-

(a) mediating the dispute;

(b) conducting a fact-finding exercise; and

(c) making a recommendation to the parties, which may be in the form of an

advisory arbitration award.

(4) In the conciliation proceedings a party to the dispute may appear in person or be
represented only by a co-employee or by a member, an office-bearer or official of
that party’s trade union or employers’ organization and, if the party is a juristic
person, by a director or an employee.

(5) At the end of the 30-day period or any further period agreed between the parties-

(a) the commissioner must issue a certificate stating whether or not the dispute
has been resolved;

(b) the Commission must serve a copy of that certificate on each party to the dispute or
the person who represented a party in the conciliation proceedings; and

(c) the commissioner must file the original of that certificate with the Commission.

(6) (a) If a dispute about a matter of mutual interest has been referred to the
Commission and the parties to the dispute are engaged in an essential service
then, despite subsection (1), the parties may consent within seven days of the date
the Commission received the referral-

(i) to the appointment of a specific commissioner by the Commission

to attempt to resolve the dispute through conciliation; and

(ii) to that commissioner’s terms of reference.

(b) If the parties do not consent to either of those matters within the seven-day
period, the Commission must as soon as possible -

(i) appoint a commissioner to attempt to resolve the dispute; and|

(ii) determine the commissioner’s terms of reference.

Appointment of commissioner to resolve dispute through arbitration

(1) If this Act requires a dispute to be resolved through arbitration, the Commission must
appoint a commissioner to arbitrate that dispute, if –

(a) a commissioner has issued a certificate stating that the dispute remains
unresolved; and

(b) any party to the dispute has requested that the dispute be resolved through
arbitration.

(2) A commissioner appointed in terms of subsection (1) may be the same commissioner
who attempted to resolve the dispute through conciliation.

104
 (3) Any party to the dispute, who objects to the arbitration being conducted by the same
commissioner who conciliated the dispute, any file an objection with the Commission
and must satisfy the Commission that a copy of the objection has been served on all
other parties to the dispute.

(4) When the Commission receives an objection it must appoint another commissioner to
resolve the dispute by arbitration.

(a) the parties to a dispute may request the Commission, in appointing a

commissioner in terms of subsection (1) or (4), to take into account their
stated preference, to the extent that this is reasonably practicable in all the
circumstances.

(b) The stated preference contemplated in paragraph (a) must -

(i) be in writing

(ii) list no more than five commissioners;

(iii) state that the request with the agreement of all the parties
to the dispute; and

(iv) be submitted within 48 hours of the date of the certificate referred

to in subsection (1)(a).

(5) If the circumstances contemplated in subsection (1) exist and the parties to the dispute
are engaged in an essential service, then the provisions of section 135(6) apply, read
with the changes required by the context, to the appointment of a commissioner to
resolve the dispute through arbitration.

DISCIPLINARY PROCEDURE (7.2.4) P274 – 281

Codes of good practice P205

(1) National Economic Development and Labour Council (NEDLAC) may-

(a) prepare and issue codes of good practice; and

(b) change or replace any code of good practice.

(2) Any code of good practice, or any change to or replacement of a code of good
practice, must be published in the Government Gazette.

(3) Any person interpreting or applying this Act must take into account any relevant
code of good practice.

Code of good practice: Dismissal

1. Introduction
(1) This code of good practice deals with some of the key aspects of dismissals
for reasons related to conduct and capacity. It is intentionally general. Each case
is unique, and departures from the norms established by this Code may be

105
 justified in proper circumstances. For example, the number of employees
employed in an establishment may warrant a different approach.

(2) This Act emphasis the primary of collective agreements. This Code is not intended as
a substitute for disciplinary codes and procedures where these are the subject of collective
agreements, or the outcome of joint decision-making by an employer of collective
agreements, or the outcome of joint decision-making by an employer and a workplace
forum.

(3) The key principle in this Code is that employers and employees should treat one
another with mutual respect. A premium is placed on both employment justice and the
efficient operation of business. While employees should be protected from arbitrary
action, employers are entitled to satisfactory conduct and work performance from their
employees.

2. Fair reasons for dismissal

(1) A dismissal is unfair if it is not effected for a fair reason and in accordance with a fair
procedure, even if it complies with any notice period in a contract of employment or in
legislation governing employment. Whether or not a dismissal is for a fair reason is
determined by the facts of the case, and the appropriateness of dismissal as a penalty.
Whether or not the procedure is fair is determined by referring to the guidelines set out below.

(2) This Act recognizes three grounds on which a termination of employment might be
legitimate. These are: the conduct of the employee, the capacity of the employee, and the
operational requirements of the employer’s business.

(3) This Act provides that a dismissal is automatically unfair if the reason for the
dismissal is one that amounts to an infringement of the fundamental rights of employees and
trade unions, or if the reason is one of those listed in section 187. The reasons include
participation in a lawful strike, intended or actual pregnancy and acts of discrimination.

(4) In cases where the dismissal is not automatically unfair, the employer must show that
the reason for dismissal is a reason related to the employee’s conduct or capacity, or is based
on the operational requirements of the business. If the employer fails to do that, or fails to
prove that the dismissal was effected in accordance with a fair procedure, the dismissal is
unfair.

3. Misconduct

Disciplinary procedures prior to dismissal

(1) All employers should adopt disciplinary rules that establish the standard of conduct
required of their employees. The form and content of disciplinary rules will obviously
vary according to the size and nature of the employer’s business. In general, a larger
business will require a more formal approach to discipline. An employer’s rules must
create certainty and consistency in the application of discipline. This requires that the
standards of conduct are clear and made available to employees in a manner that is easily
understood. Some rules or standards may be so well established and known that it is not
necessary to communicate them.

(2) The courts have endorsed the concept of corrective or progressive discipline. This
approach regards the purpose of discipline as a means for employees to know and
understand what standards are required of them. Efforts should be made to correct

106
employees’ behaviour through a system of graduated disciplinary measures such as
counselling and warnings.

(3) Formal procedures do not have to be invoked every time a rule is broken or a
standard is not met. Informal advice and correction is the best and most effective way for
an employer to deal with minor violations of work discipline. Repeated misconduct will
warrant warnings, which themselves may be graded according to degrees of severity.
More serious infringements or repeated misconduct may call for a final warning, or other
action short of dismissal. Dismissal should be reserved for cases of serious misconduct or
repeated offences.

Dismissals for misconduct

(4) Generally, it is not appropriate to dismiss an employee for a first offence,

except if the misconduct is serious and of such gravity that it makes a continued
employment relationship intolerable. Examples of serious misconduct, subject to
the rule that each case should be judged on its merits, are gross dishonesty or
wilful damage to the property of the employer, wilful endangering of the safety of
others, physical assault on the employer, a fellow employee, client or customer
and gross insubordination. Whether the merits of the case for dismissal might be,
a dismissal will not be fair if it does not meet the requirements of section 188.

(5) When deciding whether or not to impose the penalty of dismissal, the
employer should in addition to the gravity of the misconduct consider factors
such as the employee’s circumstances (including length of service, previous
disciplinary record and personal circumstances), the nature of the job and the
circumstances of the infringement itself.

(6) The employer should apply the penalty of dismissal consistently with the way
in which it has been applied to the same and other employees in the past, and
consistently as between two or more employees who participate in the misconduct
under consideration.

4. Fair procedure

(1) Normally, the employer should conduct an investigation to determine whether there
are grounds for dismissal. This does not need to be a formal enquiry. The employer
should notify the employee of the allegations using a form and language that the employee
can reasonably understand. The employee should be allowed the opportunity to state a
case in response to the allegations. The employee should be entitled to a reasonable time
to prepare the response and to the assistance of a trade union representative or fellow
employee. After the enquiry, the employer should communicate the decision taken, and
preferably furnish the employee with written notification of that decision.

(2) Discipline against a trade union representative or an employee who is an office

bearer or official of a trade union should not be instituted without first informing and
consulting the trade union.

(3) If the employee is dismissed, the employee should be given the reason for dismissal
and reminded of any rights to refer the matter to a council with jurisdiction or to the
Commission or to any dispute resolution procedures established in terms of a collective
agreement.

(4) In exceptional circumstances, if the employer cannot reasonably be expected to

comply with these guidelines, the employer may dispense with pre-dismissal procedures.

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 5. Disciplinary records

Employers should keep records for each employee specifying the nature of any
disciplinary transgressions, the actions taken by the employer and the reasons for the
actions.

6. Dismissals and industrial action

(1) Participation in a strike that does not comply with the provisions of Chapter IV is
misconduct. However, like any other act of misconduct, it does not always deserve
dismissal. The substantive fairness of dismissal in these circumstances must be
determined in the light of the facts of the case, including-

(a) the seriousness of the contravention of this Act;

(b) attempts made to comply with this Act; and

(c) whether or not the strike was in response to unjustified

conduct by the employer.

(2) Prior to dismissal the employer should, at the earliest opportunity, contact a trade
union official to discuss the course of action it intends to adopt. The employer should issue
an ultimatum in cleat and unambiguous terms that should state what is required of the
employees and what sanction will be imposed if they do not comply with the ultimatum. The
employees should be allowed sufficient time to reflect on the ultimatum and respond to it,
either by complying with it or rejecting it. If the employer cannot reasonably be expected to
extend these steps to the employers in question, the employer may dispense with them.

7. Guidelines in cases of dismissal for misconduct

Any person who is determining whether a dismissal for misconduct is unfair should
consider-

(a) Whether or not the employee contravened a rule or standard

regulating conduct in, or relevant to, the workplace; and

(b) if a rule or standard was contravened, whether or not-

(i) the rule was a valid or reasonable rule or standard;

(ii) the employee was aware, or could reasonably be expected

to have been aware, of the rule or standard;

(iii) the rule or standard has been consistently applied by

the employer; and

(iv) dismissal was an appropriate sanction for the contravention

Have the rule or standard.

8. Incapacity: Poor work performance

(1) A newly hired employee may be placed on probation for a period that is reasonable
given the circumstances of the job. The period should be determined by the nature of the
job, and the time it takes to determine the employee’s suitability for continued

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employment. When appropriate, an employer should give an employee whatever
evaluation, instruction, training, guidance or counselling the employee requires to render
satisfactory service. Dismissal during the probationary period should be preceded by an
opportunity for the employee to state a case in response and to be assisted by a trade
union representative or fellow employee.

(2) After probation, an employee should not be dismissed for unsatisfactory performance
unless the employer has –

(a) given the employee appropriate evaluation, instruction, training,

guidance or counselling; and

(b) after a reasonable period of time for improvement, the employee

continues to perform unsatisfactorily.

(3) the procedure leading to dismissal should include an investigation to establish the
reasons for the unsatisfactory performance and the employer should consider other ways,
short of dismissal, to remedy the matter.

(4) In the process, the employee should have the right to be heard and to be assisted by a
trade union representative or a fellow employee.

9. Guidelines in cases of dismissal for poor work performance

Any person determining whether a dismissal for poor work performance is unfair
should consider-

(a) whether or not the employee failed to meet a performance standard;

and

(b) if the employee did not meet a required performance standard

whether or not-

(i) the employee was aware, or could reasonably be expected

to have been aware, of the required performance standard;

(ii) the employee was given a fair opportunity to meet the

required performance standard; and

(iii) dismissal was an appropriate sanction for not meeting the

required performance standard.

10. Incapacity: Ill health or injury

(1) Incapacity on the grounds of ill health or injury may be temporary or permanent. If
an employee is temporarily unable to work in these circumstances, the employer should
investigate the extent of the incapacity or the injury. If the employee is likely to be absent
for a time that is unreasonably long in the circumstances, the employer should investigate
all the possible alternatives short of dismissal. When alternatives are considered, relevant
factors might include the nature of the job, the period of absence, the seriousness of the
illness or injury and the possibility of securing a temporary replacement for the ill or
injured employee. In cases of permanent incapacity, the employer should ascertain the
possibility of securing alternative employment, or adapting the duties or work
circumstances of the employee to accommodate the employee’s disability.

(2) In the process of the investigation referred to in subsection (1) the employee should

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 be allowed the opportunity to state a case in response and to be assisted by a trade union
representative or fellow employee.

(3) The degree of incapacity is relevant to the fairness of any dismissal. The cause of the
incapacity may also be relevant. In the case of certain kinds of incapacity, for example
alcoholism or drug abuse, counselling and rehabilitation may be appropriate steps for an
employer to consider.

(4) Particular consideration should be given to employees who are injured at work or who
are incapacitated by work-related illness. The courts have indicated that the duty on the
employer to accommodate the incapacity of the employee is more onerous in these
circumstances.

11. Guidelines in cases of dismissal arising from ill health or injury

Any person determining whether a dismissal arising from ill health or injury is
unfair should consider-

(a) whether or not the employee is capable of performing the work;

and

(b) if the employee is not capable-

(i) the extent to which the employee is able to perform the

work;

(ii) the extent to which the employee’s work circumstances

might be adapted to accommodate disability, or, where this
is not possible, the extent to which the employee’s duties
might be adapted; and

(iii) the availability of any suitable alternative work.

UNFAIR DISMISSAL

Right not to be unfairly dismissed

Every employee has the right not to be unfairly dismissed.

Meaning of dismissal

”Dismissal” means that –

(a) an employer has terminated contract of employment with or without

notice;

(b) an employee reasonably expected the employer to renew a fixed term

contract of employment on the same or similar terms but the employer
offered to renew it on less favourable terms, or did not renew it;

(c) an employer refused to allow an employee to resume work after she-

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 (i) took maternity leave in terms of any law, collective agreement
or her contract of employment; or

(ii) was absent from work for up to four weeks before the expected
date, and up to eight weeks after the actual date, of the birth of her
child;

(d) an employer who dismissed a number of employees for the same or similar
reasons has offered to re-employ one or more of them but has refused to
re-employ another; or

(e) an employee terminated a contract of employment with or without notice

because the employer made continued employment intolerable for the
employee.

Automatically unfair dismissals

(1) A dismissal is automatically unfair if the employer, in dismissing the employee,

acts contrary to section 549 or, if the reason for the dismissal is -

(a) that the employee participated in or supported, or indicated an intention to

participate in or support, a strike or protest action that complies with the
provisions of Chapter IV;

(b) that the employee refused, or indicated an intention to refuse, to do any

work normally done by an employee who at the time was taking part in a
strike that complies with the provisions of Chapter IV or was locked out,
unless that work is necessary to prevent an actual danger to life, personal
safety or health;

(c) to compel the employee to accept a demand in respect of any matter of

mutual interest between the employer and employee;

(d) that the employee took action, or indicated an intention to take action,
against the employer by –

(i) exercising any right conferred by this Act; or

(ii) participating in any proceedings in terms of this Act;

(e) the employee’s pregnancy, intended pregnancy, or any reason related to

her pregnancy;

(f) that the employer unfairly discriminated against an employee, directly

or indirectly, on any arbitrary ground, including, but not limited to race,
gender, sex, ethnic or social origin, colour, sexual orientation, age,
disability, religion, conscience, belief, political opinion, culture, language,
marital status or family responsibility.

(3) Despite subsection (1)(f)-

(a) a dismissal may be fair if the reason for dismissal is based on an inherent
requirement of the particular job;

(b) a dismissal based on age is fair if the employee has reached the normal or

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 agreed retirement age for persons employed in that capacity.

Other unfair dismissals

(1) A dismissal that is not automatically unfair, is unfair if the employer fails to
prove-

(a) that the reason for dismissal is a fair reason-

(i) related to the employee’s conduct or capacity; or

(ii) based on the employer’s operational requirements; and

(b) that the dismissal was effected in accordance with a fair procedure.

(2) Any person considering whether or not the reason for dismissal is a fair reason or
whether or not the dismissal was effected in accordance with a fair procedure
must take into account any relevant code of good practice issued in terms of this
Act.

Dismissals based on operational requirements

(1) When an employer contemplates dismissing one or more employees for reasons
based on the employer’s operational requirements, the employer must consult-

(a) any person whom the employer is required to consult in terms of a

collective agreement

(b) if there is no collective agreement that requires consultation, a workplace

forum, if the employees likely to be affected by the proposed dismissals
are employed in a workplace forum;

(c) if there is no workplace forum in the workplace in which the employees

likely to be effected by the proposed dismissals are employed, any
registered trade union whose members are likely to be affected by the
proposed dismissals;

(d) if there is no such trade union, the employees likely to be affected by the
proposed dismissals or their representatives nominated for that purpose.

(2) The consulting parties must attempt to reach consensus on

(a) appropriate measures-

(i) to avoid the dismissals;

(ii) to minimize the number of dismissals;

(iii) to change the timing of the dismissals; and

(iv) to mitigate the adverse effects of the dismissals;

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 (b) the method for selecting the employees to be dismissed and

(c) the severance pay for dismissed employees.

(3) the employer must disclose in writing to the other consulting party all relevant
information, including, but not limited to-

(a) the reason for the proposed dismissals;

(b) the alternatives that the employer considered before proposing the
dismissals, and the reasons for rejecting each of those alternatives;

(c) the number of employees likely to be affected and the job categories in
which they are employed;

(d) the proposed method for selecting which employees to dismiss;

(e) the time when, or the period during which, the dismissals are likely to
take effect;

(f) the severance pay proposed;

(g) any assistance that the employer proposes to offer to the employees likely
to be dismissed; and

(h) the possibility of the future re-employment of the employees who are
dismissed.

(4) The employer must allow the other consulting party an opportunity during
consultation to make representations about any matter on which they are
consulting.

(5) The employer must consider and respond to the representations made by the other
consulting party and, if the employer does not agree with them, the employer
must state the reasons for disagreeing.

(6) The employer must select the employees to be dismissed according to selection
criteria-

(a) that have been agreed to by the consulting parties; or

(b) if no criteria have been agreed, criteria that are fair and objective.

Date of dismissal

(1) The date of dismissal is the earlier of –

(a) the date on which the contract of employment terminated; or

(b) the date on which the employee left the service of the employer.

(2) Despite subsection (1)

(a) if an employer has offered to renew on less favourable terms, or has failed
to renew, a fixed-term contract of employment, the date of dismissal is the

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 date on which the employer offered the less favourable terms or the date
the employer notified the employee of the intention not to renew the
contract;

(b) if the employer refused to allow an employee to resume work, the date
of dismissal is the date on which the employer first refused to allow the
employee to resume work

(c) if an employer refused to reinstate or re-employ the employee, the date of

dismissal is the date on which the employer first refused to reinstate or re-
employ that employee.

Disputes about unfair dismissals

If there is a dispute about the fairness of a dismissal, the dismissed employee may
refer the dispute in writing within 30 days of the date of dismissal to-

(a) a council, if the parties to the dispute fall within the registered scope
of that council; or

(b) the Commission, if no council has jurisdiction.

(2) If the employee shows good cause at any time, the council or the Commission
may permit the employee to refer the employee to refer the dispute after the
30-day time limit has expired.

(3) The employee must satisfy the council or the Commission that a copy of the
referral has been served on the employer.

(4) The council or the Commission must attempt to resolve the dispute through
conciliation.

(5) If a council or a commissioner has certified that the dispute remains unresolved,
or if 30 days have expired since the council or the Commission received the
referral and the dispute remains unresolved-

(a) the council or the Commission must arbitrate the dispute at the request
of the employee if-

(i) the employee has alleged that the reason for dismissal is related to
the employee’s conduct or capacity, unless paragraph (b)(iii)
applies;

(ii) the employee has alleged that the reason for dismissal is that the
employer made continued employment intolerable; or

(iii) the employee does not know the reason for dismissal; or

(b) the employee may refer the dispute to the Labour Court for adjudication
if the employee has alleged that the reason for dismissal is-

(i) automatically unfair;

(ii) based on the employer’s operational requirements;

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 (iii) the employee’s participation in a strike that does not comply with
the provisions of Chapter IV (strikes and lockouts); or

(iv) because the employee refused to join, was refused membership of

or was expelled from a trade union party to a closed shop
agreement.

(6) Despite subsection (5)(a), the director must refer the dispute to the Labour Court,
if the director decides, on application by any party to the dispute, that to be
appropriate after considering-

(a) the reason for dismissal;

(b) the complexity of the dispute;

(c) whether there are conflicting arbitration awards that need to be resolved;

(d) the public interest.

(7) When considering whether the dispute should be referred to the Labour Court, the
director must give the parties to the dispute and the commissioner who attempted
to conciliate the dispute, an opportunity to make representations.

(8) The director must notify the parties of the decision and refer the dispute-

(a) to the Commission for arbitration; or

(b) to the Labour Court for adjudication,

(9) The director’s decision is final and binding.

(10) No person may apply to any court of law to review the director’s decision until
the dispute has been arbitrated or adjudicated, as the case may be.

Onus of dismissal disputes

(1) In any proceedings concerning any dismissal, the employee must establish the
existence of the dismissal.

(2) If the existence of the dismissal is established, the employer must prove that the
dismissal is fair.

Remedies for unfair dismissal

(1) If the Labour Court or an arbitrator appointed in terms of this Act finds that a
dismissal is unfair, the Court or the arbitrator may-

(a) order the employer to reinstate the employee from any date not earlier that
the date of dismissal;

(b) order the employer to re-employ the employee, either in the work in which
the employee was employed before the dismissal or in other reasonably

115
 suitable work on any terms and from any date not earlier than the date of
dismissal; or

(c) order the employer to pay compensation to the employee.

(2) The Labour Court or the arbitrator must require the employer to reinstate or
re-employ the employee unless-

(a) the employee does not wish to be reinstated or re-employed;

(b) the circumstances surrounding the dismissal are such that a continued
employment relationship would be intolerable;

(c) it is not reasonably practicable for the employer to reinstate or re-employ

the employee; or

(d) the dismissal is unfair only because the employer did not follow a fair
procedure.

(3) If a dismissal is automatically unfair or, if a dismissal based on the employer’s

operational requirements is found to be unfair, the Labour Court in addition may
make any other order that it considers appropriate in the circumstances.

Limits on compensation

(1) If a dismissal is unfair only because the employer did not follow a fair procedure,
compensation must be equal to the remuneration that the employee would have
been paid between the date of dismissal and the last day of the hearing of the
arbitration or adjudication, as the case may be, calculated at the employee’s rate of
remuneration on the date of dismissal. Compensation may however not be
awarded in respect of any unreasonable period of delay that was caused by the
employee in initiating or prosecuting a claim.

(2) The compensation awarded to an employee whose dismissal is found to be unfair

because the employer did not prove that the reason for dismissal was a fair reason
related to the employee’s conduct, capacity or based on the employer’s
operational requirements, must be just and equitable in all the circumstances, but
not less than the amount specified in subsection (1), and not more that the
equivalent of 24 months’ remuneration calculated at the employee’s rate of
remuneration on the date of dismissal.

(3) The compensation awarded to an employee whose dismissal is automatically

unfair must be just and equitable in all circumstances, but not more than the
equivalent of 24 month’s remuneration calculated at the employee’s rate on the
date of dismissal.

Compensation is in addition to any other amount

An order or award of compensation made in terms of this Chapter is in addition to, and not a
substitute for, any other amount to which the employee is entitled in terms of any law,
collective agreement or contract of employment.

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Severance pay

(1) An employer must pay an employee who is dismissed for reasons based on the
employer’s operational requirements severance pay equal to at least one week’s
remuneration for each completed year of continuous service with that employer,
unless the employer has been exempted from the provisions of this subsection.

(2) The Minister, after consulting NEDLAC and the Public Service Co-ordinating
Bargaining Council, may vary the amount of severance pay in terms of subsection
(1) by notice in the Government Gazette.

(3) An employee who unreasonably refuses to accept the employer’s offer of

alternative employment with that employer or any other employer is not entitled
to severance pay in terms of subsection (1).

(4) The payment of severance pay in compliance with this section does not affect an
employee’s right to any other amount payable according to law.

(5) An employer or a category of employers may apply to the Minister for

exemptions from the provisions of subsection (1) as if the application is one in
terms of the Basic Conditions of Employment Act and the Minister may grant an
exemption as if it were an exemption granted in terms of that Act.

(6) If there is a dispute only about the entitlement to severance pay in terms of this
section, the employee may refer the dispute in writing to-

(a) a council, if the parties to the dispute fall within the registered scope of
that council; or

(b) the Commission, if no council has jurisdiction.

(7) The employee who refers the dispute to the council or the Commission must
satisfy it that a copy of the referral has been served on all other parties to the
dispute.

(8) The council or the Commission must attempt to resolve the dispute through
conciliation.

(9) If the dispute remains unresolved, the employee may refer it to arbitration.

(10) If the Labour Court is adjudicating a dispute about a dismissal based on the
employer’s operational requirements, the Court may inquire into and determine
the amount of any severance pay to which the dismissed employee may be entitled
and the Court may make an order directing the employer to pay that amount.

UNFAIR LABOUR PRACTICE (7.2.7) P253 - 254

Residual unfair labour practices

(1) For the purposes of his item, an unfair labour practice means any unfair act or
omission that arises between an employer and an employee, involving-

(a) the unfair discrimination, either directly or indirectly, against an

employee on any arbitrary ground, including, but not limited to race,
gender, sex, ethnic or social origin, colour, sexual orientation, age,

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 disability, religion, conscience, belief, political opinion, culture, language,
marital status or family responsibility.

(b) the unfair conduct of the employer relating to the promotion, demotion or
training of an employee or relating to the provision of benefits to an
employee;

(c) the unfair suspension of an employee or any other disciplinary action short
of dismissal in respect of any agreement.

(d) the failure or refusal of an employer to reinstate or re-employ a former

employee in terms of any agreement.

2. For the purpose of sub-item (1)(a)-

(a) “employee” includes an applicant for employment;

(b) an employer is not prevented from adopting or implementing employment

policies and practices that are designed to achieve the adequate protection
and advancement of persons or groups or categories of persons
disadvantaged by unfair discrimination, in order to enable their full and
equal enjoyment of all rights and freedoms; and

(c) any discrimination based on an inherent requirement of the particular job

does not constitute unfair discrimination.

Disputes about unfair labour practices

(1) Any party may refer a dispute about an alleged unfair labour practice in
writing to-

(a) a council, if the parties to the dispute fall within the registered scope
of that council; or

(b) the Commission, if no council has jurisdiction.

(2) The party who refers the dispute must satisfy the council or the Commission that
a copy of the referral has been served on all other parties to the dispute.

(3) The council or the Commission must attempt to resolve the dispute through
conciliation.

(4) If the dispute remains unresolved-

(a) any party to the dispute, if the dispute is about an act or omission referred
to in item 2(1)(a), may refer the dispute to the Labour Court for
adjudication;

(b) any party to the dispute, if the dispute is about an act or omission referred
to in item 2(1)(b), (c) or (d), may request that the dispute be resolved
through arbitration.

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 EMPLOYMENT CONTRACT (7.3.2) P199, 203

Transfer of contract of employment

(1) A contract of employment may not be transferred from one employer (referred to
as “the old employer”) to another employer (referred to as “the new employer”)
without the employee’s consent, unless –

(a) the whole or any part of a business, trade or undertaking is transferred by

the old employer as a going concern; or

(b) the whole or a part of a business, trade or undertaking is transferred as a

going concern-

(i) if the old employer is insolvent and being wound up or is being

sequestrated; or

(ii) because a scheme of arrangement or compromise is being entered

into to avoid winding-up or sequestration for reasons of
insolvency.

(2) (a) If a business, trade or undertaking is transferred in the circumstances

referred to in subsection (1)(a), unless otherwise agreed, all the rights and
obligations between the old employer and each employee at the time of the
transfer continue in force as if they were rights and obligations between the new
employer and each employee and, anything done before the transfer by or in
relation to the new employer.

(b) If a business is transferred in the circumstances envisaged by subsection

(1)(b), unless otherwise agreed, the contracts of all employees that were in
existence immediately before the old employer’s winding-up or
sequestration transfer automatically to the new employer, but all the rights
and obligations between the old employer and each employee at the time
of the transfer remain rights and obligations between the old employer and
each employee, and anything done before the transfer by the old employer
in respect of each employee will be considered to have been done by the
old employer.

(3) An agreement contemplated in subsection (2) must be concluded with the

appropriate person or body referred to in section 189(1).

(4) A transfer referred to in subsection (1) does not interrupt the employee’s
continuity of employment. That employment continues with the new employer as
if with the old employer.

(5) The provisions of this section do not transfer or otherwise affect the liability of
any person to be prosecuted for, convicted of, and sentenced for, any offence.

Contracts of employment may not disregard or waive collective agreements or

arbitration awards

(1) A contract of employment, whether concluded before or after the coming into
operation of any applicable collective agreement or arbitration award, may not-

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 (a) permit an employee to be paid remuneration that is less than that
prescribed by that collective agreement or arbitration award;

(b) permit an employee to be treated in a manner, or to be granted any benefit,

that is less favourable than that prescribed by that collective agreement or
arbitration award; or

(c) waive the applicant of any provision of that collective agreement or

arbitration award.

(2) A provision in any contract that purports to permit or grant any payment,
treatment, benefit, waiver or exclusion prohibited by subsection (1) is invalid.

BASIC CONDITIONS OF EMPLOYMENT

The following is a summary of the provisions of the most important sections of the Basic
Conditions of Employment Act, 1997.

1. APPLICATION OF THE ACT: SECTION 3

The Act applies to all employees and employers except members of the National
Defense Force, National Intelligence Agency, South African Secret Service and
unpaid volunteers working for an organization with a charitable purpose.

The Act takes precedence over any agreement.

2. REGULATION OF WORKING TIME: CHAPTER TWO

2.1 Application

This chapter does not apply to senior managerial employees, employees

engaged as sales staff who travel and those employees who work less than
24 hours a month.

2.2 Ordinary hours of work: Section 9

No employer shall require or permit an employee to work for five days or

less in a week; or

(a) 45 hours in any week;

(b) nine hours in any day if an employee works for five days or less in
a week; or
(c) eight hours in any day if an employee works on more than five
days in a week.

2.3 Overtime: Section 10

2.3.1 An employer may not require or permit an employee-

(a) to work overtime except by an agreement;|
(b) to work more than-
(i) three hours overtime a day; or
(ii) ten hours’ overtime a week.

2.3.2 Overtime must be paid at 1.5 times the employee’s normal wage or
an employee may agree to receive paid time off.

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 2.4 Compressed working week: Section 11

2.4.1 An employee may agree in writing to work up to 12 hours in a day without

receiving overtime pay.

2.4.2 This agreement may not require or permit an employee to work-

(a) more than 45 ordinary hours in any week;
(b) more than ten hours’ overtime in any week; or
(c) more than five days in any week.

2.5 Averaging of hours of work: Section 12

2.5.1 A collective agreement may permit the hours of work to be

averaged over a period of up to four months.

2.5.2 An employee who is bound by a collective agreement may not

work more than-
(a) an average of 45 ordinary hours in a week over the agreed
period;
(b) an average of five hours overtime in a week over the agreed
period.

2.6 Meal intervals: Section 14

2.6.1 An employee must have a meal interval of 60 minutes after

five hours work.

2.6.2 A written agreement may-

(a) reduce the meal interval to 30 minutes;

(b) dispense with the meal interval if worked fewer
than six hours on a day.

2.7 Daily and weekly rest period: Section 15

An employee must have a daily rest period of 12 consecutive hours and a weekly
rest period of 36 consecutive hours, which unless otherwise agreed, must include
Sunday.

2.8 Pay for work on Sundays: Section 16

2.8.1 An employee who occasionally works on a Sunday must receive
double pay.
2.8.2 An employee who ordinarily works on a Sunday must be paid at 1.5 times
the normal wage.
2.8.3 Paid time off in return for working on a Sunday may be agreed upon.

2.9 Night work: Section 17

2.9.1 Employees who work at night between 18:00 and 06:00 must be
compensated by payment of an allowance or by a reduction of working
hours and transport must be available.
2.9.2 Employees who work regularly after 23:00 and before 06h00 the next day
must be informed
(a) of any health and safety hazards
(b) the right to undergo a medical examination.

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2.10 Public holidays: Section 18

2.10.1 Employees must be paid for any public holiday that falls on a working
day.
2.10.2 Work on a public holiday is by agreement and paid at double the rate.
2.10.3 A public holiday is exchangeable by agreement.

3. LEAVE: CHAPTER THREE

3.1 Application
The chapter on leave does not apply to an employee who works less than 24 hours
a month for an employer and if an agreement provides for leave in excess of the
leave entitlement under this chapter.

3.2 Annual leave: Section 20 & 21

3.2.1 Employees are entitled to 21 consecutive days’ annual leave or by

agreement, one day for every 17 days worked or one hour for every 17
hours worked.
3.2.2 Leave must be granted not later than six months after the end of the leave
cycle.
3.2.3 An employer must not pay an employee instead of granting leave except
on termination of employment.

3.3 Sick Leave: Sections 22 – 24

3.3.1 An employee is entitled to six week’s paid sick leave in a period of
36 months.
3.3.2 During the first six months an employee is entitled to one day’s paid sick
leave for every 26 days worked.
3.3.3 An employer may require a medical certificate before paying an employee
who is absent for more than two consecutive days or who is frequently
absent.

3.4 Maternity leave: Sections 25 & 26

3.4.1 A pregnant employee is entitled to four consecutive month’s maternity
leave.
3.4.2 A pregnant employee or employee nursing her child is not allowed to
perform work that is hazardous to her or her child.

3.5 Family responsibility leave: Section 27

3.5.1 Full time employees are entitled to three days paid family responsibility
leave per year, on request, when the employee’s child is born or sick, or in
the event of the death of the employee’s spouse or life partner, or the
employee’s parent, adoptive parent, grandparent, child, adopted child,
grandchild or sibling.
3.5.2 An employer may require reasonable proof.

4. PARTICULARS OF EMPLOYMENT AND REMUNERATION: CHAPTER

FOUR

4.1 Application
This chapter does not apply to an employee who works less than 24 hours
a month for an employer.

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 4.2 Written particulars of employment: Section 29
4.2.1 An employer must supply an employee when the employee
commences employment, with the following particulars in writing:
(a) full name and address of the employer,
(b) name and occupation of the employee, or a brief
description of the work;
(c) various places of work;
(d) date of employment;
(e) ordinary hours of work and days of work;
(f) wage or the rate and method of calculating;
(g) rate of overtime work;
(h) any other cash payments;
(i) any payment in kind and the value thereof;
(j) frequency of remuneration
(k) any deductions;
(l) leave entitlement;
(m) period of notice or period of contract;
(n) description of any council or sectoral determination which
covers the employer’s business;
(o) period of employment with a previous employer that counts
towards the period of employment;
(p) list of any other documents that form part of the contract,
indicating a place where a copy of each may be obtained.
4.2.2 Particulars must be revised in terms of employment change.

4.3 Informing employees of their rights: Section 30

A statement of employee’s rights must be displayed at the workplace in official

languages used at the workplace.

4.4 Keeping of records: Section 31

Every employer must keep a record containing the following information:

(a) employee’s name and occupation;
(b) time worked;
(c) remuneration paid;
(d) date of birth if under 18 years of age; and
(e) any other prescribed information.

4.5 Information about remuneration: Section 33

The following information must be given in writing when the employee is paid:
(a) employer’s name and address;
(b) employee’s name and occupation;
(c) period of payment;
(d) remuneration money;
(f) any deduction made from the remuneration;
(g) the actual amount paid;
(g) if relevant to the calculation of that employee’s remuneration;
(i) employee’s rate of remuneration and overtime rate;
(ii) number of ordinary and overtime hours worked during the period
of payment;
(iii) number of hours worked on a Sunday or public holiday during the
period; and

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 (iv) if an agreement to average working time has been concluded, the
total number of ordinary and overtime worked in the period of
averaging.

4.6 Deductions and other acts concerning remuneration: Section 34

No unlawful deductions may be made unless agreed to in writing.

4.7 Calculation of remuneration and wages: Section 35

4.7.1 Wages are calculated by the number of hours ordinarily worked.
4.7.2 Monthly remuneration or wage is four and one-third times the weekly
wage.
4.7.3 If calculated on a basis other than time, or if the employee’s remuneration
or wage fluctuates significantly from period to period, any payment must
be calculated by reference to remuneration or wage during-
(a) the preceding 13 weeks; or
(b) if employed for a shorter period, that period.

5. TERMINATION OF EMPLOYMENT: CHAPTER FIVE

5.1 Application
This chapter does not apply to an employee who works less than 24 hours in a
month for an employer.

5.2.1 A contract of employment may be terminated only on notice of not

less than –

(a) one week, if employed for four weeks or less;

(b) two weeks, if employed for more than four weeks but not more
than one year;
(c) four weeks, if employed for one year or more, or is a farm worker
or a domestic worker who has been employed for more than four
weeks.
5.2.2 Notice must be given in writing except when it is given by an illiterate
employee.
5.2.3 The notice on termination of employment by an employer in terms of the
Act does not prevent the employee challenging the fairness or lawfulness
of the dismissal in terms of the Labour Relations Act 1995 or any other
law.

5.3 Severence pay: Section 41

An employee, dismissed for operational requirements is entitled to one week’s
severance pay for every year of service.

5.4 Certificate of service: Section 42

On termination of employment an employee is entitled to a certificate of service.

6. PROHIBITION OF EMPLOYMENT OF CHILDREN AND FORCED

LABOUR: SECTIONS 43 – 48

6.1 It is a criminal offence to employ a child under 15 years of age.

6.2 Children under 18 may not be employed to do work inappropriate for their age or
that places them at risk.

6.3 Forced labour is a criminal offence.

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7. VARIATION OF BASIC CONDITIONS OF EMPLOYMENT:
SECTION 49 – 50

7.1 A collective agreement concluded by a bargaining council may replace or exclude

any basic condition of employment except the following:
(a) the duty to arrange working time with regard to the health and safety and
family responsibility of employees (S.7,9 and 13);
(b) reduce the protection afforded to employees who perform night work
(S. 17(3) and (4);
(c) reduce annual leave to less than two weeks (S. 20);
(d) reduce entitlement to maternity leave (S 25);
(e) reduce entitlement to sick leave to the extent permitted (S. 22-24); and
(f) prohibition of child and forced labour (S.48).

7.2 Collective agreements and individual agreements may only replace or exclude
basic conditions of employment to the extent permitted by the Act or a sectoral
determination (S.49).

7.3 The Minister of Labour may make a determination to vary or exclude a basic
condition of employment. This can also be done by application of an employer or
employer organization (S.50).

7.4 A determination may not be granted unless a trade union representing the
employees has consented to the variation or has the opportunity to make
representations to the Minister. A copy of any determination must be displayed
by the employer at the work place and must be made available to employee’s
(S.50).

8. SECTORAL DETERMINATIONS: SECTION 51

Sectoral determinations may be made to establish basic conditions for employees
in a sector and area.

9. MONITORING, ENFORCEMENT AND LEGAL PROCEEDINGS:

SECTIONS 63 – 81

9.1 Labour inspectors must advise employees and employers on their rights and
obligations in terms of employment laws. They conduct inspections, investigate
complaints and may question persons and inspect, copy and remove records and
other relevant documents (S. 64 – 66).

9.2 An inspector may serve a compliance order on an employer who is not complying
with provision of the Act. The employer may object against the order to the
Director-General Labour, who after receiving representations, may confirm,
modify or set aside an order. The decision is subject to appeal to the Labour
Court (S.68 – 73).

9.3 Employees may not be discriminated against for exercising their rights in terms of
the Act (S.78 – 81).

10. GENERAL
It is an offence to –

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(a) obstruct or attempt to influence improperly a person who is performing a
function in terms of the Act;
(b) obtain or attempt to obtain any prescribed document by means of fraud,
false pretences, or by presenting or submitting a false or forged document;
(c) pretend to be a labour inspector or any other person performing a function
in terms of the Act;
(d) refuse to fail to answer fully any lawful question put by a labour inspector
or any other person performing a function in terms of the Act;
(e) refuse or fail to comply with any lawful request of, or lawful order by, a
labour inspector or any other person performing a function in terms of the
Act;
(f) hinder or obstruct a labour inspector or any other person performing a
function in terms of the Act (S.92).

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 CHAPTER 2

SKILLS DEVELOPMENT

Purposes of Act

(1) The purposes of this Act are-

(a) to develop the skills of the South African workforce-

(i) to improve the quality of the South African workers, their
prospects of work and labour mobility;
(ii) to improve productivity in the workplace and the competitiveness
of employees;
(iii) to promote self-employment; and
(iv) to improve the delivery of social services;
(b) to increase the levels of investment in education and training in the
labour market and to improve the return on that investment;
(c) to encourage employers-

(i) to use the workplace as an active learning environment;

(ii) to provide employees with the opportunities to acquire
new skills;
(iii) to provide opportunities for new entrants to the labour
market to gain work experience; and
(iv) to employ persons who find it difficult to be employed;
(d) to encourage workers to participate in learnership and other training
programmes;
(e) to improve the employment prospects of persons previously
disadvantaged
by unfair discrimination and to redress those disadvantages through
training and education;
(f) to ensure the quality of education and training in and for the
workplace;
(g) to assist-
(i) work-seekers to re-enter the labour market;
(ii) employers to find qualified employees; and
(h) to provide and regulate employment services.

Establishment of Sector Education Training Authority (SETA)

(1) The Minister may, in the prescribed manner, establish a sector education and training
authority with a constitution for any national economic sector.
(2) The Minister must determine a discrete sector for the purposes of subsection (1)
by reference to categories of employers and for the purposes of that determination take into
account-
(a) the education and training needs of employers and employees that-
(i) use similar materials, processes and technologies;
(ii) make similar products; or
(iii) render similar services;

(b) the potential of the proposed sector for coherent occupational structures
and career pathing;
(c) the scope of any national strategies for economic growth and
development;
(d) the organizational structures of the trade unions, employer organizations

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 and government in closely related sectors;
(e) any consensus that there may be between organized labour, organized
employers and relevant government departments to the definition of any
sector; and
(f) the financial and organizational ability of the proposed sector to support
a SETA.

(3) On the establishment of a SETA, the Minister may provide assistance to the
SETA to enable it to perform its functions.

Functions of SETA
(1) A SETA must-
(a) develop a sector skills plan within the framework of the national skills
development strategy;
(b) implement its sector skills plan by-
(i) establishing learnerships;
(ii) approving workplace skills plans;
(iii) allocating grants in the prescribed manner to employers,
education and training providers and workers; and
(iv) monitoring education and training in the sector;
(c) promote learnerships by-
(i) identifying workplaces for practical work experience;
(ii) supporting the development of learning materials;
(iii) improving the facilitation of learning; and
(iv) assisting in the conclusion of learnership agreements;
(d) register learnership agreements;
(e) within a week from its establishment, apply to the South African
Qualifications Authority for accreditation as a body contemplated in
section 5(1)(a)(ii)(bb) and must, within 18 months from the date of that
application, be so accredited;
(f) collect and disburse the skills development levies in its sector;
(g) liaise with the National Skills Authority on-
(i) the national skills development policy;
(ii) the national skills development strategy; and
(iii) its sector skills plan;
(h) report to the Director-General on-
(i) its income and expenditure; and
(ii) the implementation of its sector skills plan;
(i) liaise with the employment services of the Department and any education
body established under any law regulating education in the Republic to
improve information-
(i) about employment opportunities; and
(ii) between education and training providers and the labour market;
(j) appoint staff necessary for the performance of its functions; and
(k) perform any other duties imposed by this Act or consistent with the
purposes of this Act.
(2) A SETA has-
(a) all such powers as are necessary to enable it to perform its duties referred
to in subsection (1); and
(b) the other powers conferred on the SETA by this Act.
(3) A SETA must perform its functions in accordance with this Act and its constitution.

Composition of SETA

A SETA may consists only of members representing-

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 (a) organized labour;
(b) organized employers, including small business;
(h) relevant government departments; and
(i) if the Minister, after consultation with the members referred to in
paragraph (a), (b) and (c), considers it appropriate for the
sector-
(i) any interested professional body;
(ii) any bargaining council with jurisdiction in the sector.

Finances of SETA
(1) A SETA is financed from-

(a) the skills development levies collected in its sector;

(b) money paid to it from the National Skills fund;
(c) grants, donations and bequests made to it;
(d) income earned on surplus moneys deposited or invested;
(e) income earned on services rendered in the prescribed manner; and
(f) money received from any other source.

LEARNERSHIPS

Learnerships
A SETA may establish a learnership if –

(a) the learnership consists of a structured learning component;

(b) the learnership includes practical work experience of a specified
nature and duration;
(c) the learnership would lead to a qualification registered by the
South African Qualifications Authority and related to an occupation; and
(d) the intended learnership is registered with the Director-General in the
prescribed manner.

Learnership agreements
(1) For the purposes of this Chapter, a “learnership agreement” means an agreement
entered
into for a specific period between-

(a) a learner;
(b) an employer or a group of employers (in this section referred to as
“the employer”); and
(c) a training provider accredited by a body contemplated in section
5(1)(a)(ii)(b) of the South African Qualifications Authority Act or group
of such training providers.

(2) The terms of a learnership agreement must oblige-

(a) the employer to-

(i) employ the learner for the period specified in the agreement;
(ii) provide the learner with the specified practical work
experience; and
(iii) release the learner to attend the education and training
specified in the agreement;

(b) the learner to-

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 (i) work for the employer; and
(ii) attend the specified education and training; and

(c) the training provider to provide-

(i) the education and training specified in the agreement; and

(ii) the learner support specified in the agreement.

(3) A learnership agreement must be in the prescribed form and registered with a
SETA in the prescribed manner.

(4) A learnership agreement may not be terminated before the expiry of the period
of duration specified in the agreement unless-
(a) the learner meets the requirements for the successful completion of the
learnership;
(b) the SETA which registered the agreement approves of such termination; or
(c) the learner is fairly dismissed for a reason related to the learner’s conduct
or capacity as an employee.
(5) The employer or training provider that is party to a learnership agreement may be
substituted with-
(a) the consent of the learner; and
(b) the approval of the SETA which registered the agreement.
(6) A SETA must, in the prescribed manner, provide the Director-General with a
record of learnership agreements registered by the SETA.

Contract of employment with learner

(1) If a learner was in the employment of the employer party to the learnership agreement
concerned when the agreement was concluded, the learner’s contract of employment is not
affected by the agreement.
(2) If the learner was not in the employment of the employer party to the learnership
agreement concerned when the agreement was concluded, the employer and learner must
enter into a contract of employment.
(3) The contract of employment with a learner contemplated in subsection (2) is subject
to any terms and conditions that may be determined by the Minister on the recommendation
of the Employment Conditions Commission established by section 59(1) of the Basic
Conditions of Employment Act.
(4) Chapters Eight and Nine of the Basic Conditions of Employment Act apply, with the
changes required by the context, to a determination made in terms of subsection (3) except
that-
(a) for the purposes of section 54(3) of that Act, the Employment Conditions
Commission must also consider the likely impact that any proposed
condition of employment of learners and the achievement of the purposes
of this Act; and
(b) section 55(7) of that Act does not apply.

(5) The contract of employment of a learner may not be terminated before the expiry of
the period of duration specified in the learnership agreement unless the learnership agreement
is terminated in terms of section 17(4).
(6) The contract of employment of a learner terminates at the expiry of the period of
duration specified in the learnership agreement unless the agreement was concluded with a
person who was already in the employment of the employer party to the agreement when the
agreement was concluded.

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(6) The law that applies to the lawfulness and fairness of a dismissal for a reason related
to an employee’s capacity of conduct applies to a dispute contemplated in subsection
(1)(c)(ii).

Skills programmes

(1) For the purposes of this Chapter, a “skills programme” means a skills programme
that-
(a) is occupationally based;
(b) when completed, will constitute a credit towards a qualification registered
in terms of the National Qualifications Framework as defined in section 1
of the South African Qualifications Authority Act;
(c) uses training providers referred to in section 17(1)(c); or
(d) complies with the prescribed requirements.
(2) any person that has developed a skills programme may apply to-
(a) a SETA with jurisdiction for a grant; or
(b) the Director-General for a subsidy.
(3) The SETA or the Director-General may find the skills programme if-
(a) it complies with-

(i) subsection (1);

(ii) any requirements imposed by the SETA or the Director-General;
and
(iii) any prescribed requirements; and

(b) it is in accordance with-

(i) the sector skills development plan of the SETA; or

(ii) the national skills development strategy; and
(c) there are funds available.

(4) A SETA or the Director-General may set any terms and conditions for funding in
terms of subsection (3) that the SETA or the Director-General, as the case may be, considers
necessary.
(5) The SETA or the Director-General must monitor the skills programmes funded by the
SETA or the Director-General, as the case may be.
(6) A SETA or the Director-General that has made funds available for a skills
programme may withhold funds or recover any funds paid if the SETA or the Director-
General, as the case may be, is of the opinion that-

(a) the funds are not being used for the purpose for which they were made
available;
(b) any term or condition of the funding is not complied with; or
(c) the SETA or the Director-General, as the case may be, is not satisfied that
the training is up to standard.

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 CHAPTER 3

COMPENSATION FOR INJURIES AND OCCUPATIONAL DISEAESES

Compensation Commissioner and staff

(1) the Minister shall appoint, on the conditions as he may determine and subject to the
laws governing the public service, an officer to be called the Compensation Commissioner.
(2) The Minister or an officer designated by him shall appoint, subject to the laws
governing the public service, such officers and employees as he may consider necessary to
assist the commissioner in the performance of the functions which in terms of this Act are
required to be performed by him.
(3) The commissioner, and the officers and employees referred to in subsection (2), shall
be remunerated out of the State Revenue Fund, which shall be reimbursed out of the
compensation fund for the expenditure concerned.

Functions of commissioner
(1) Subject to the provisions of this Act, the commissioner shall-
(a) receive notices of accidents and occupational diseases and claims for
compensation;
(b) inquire into accidents and occupational diseases;
(c) adjudicate on claims and other matters coming before him for decision;
(d) issue an order for the payment of compensation in respect of an award
made by him;
(e) decide whether a person is an employee, an employer, a mandatory or a
contractor for the purposes of this Act;
(f) decide any question relating to-

(i) a right compensation;

(ii) the submission, consideration and adjudication of claims for
compensation;
(iii) the calculation of earnings;
(iv) the degree of disablement of any employee;
(v) the amount and manner of payment of compensation;
(vi) the award, withholding, review, discontinuance, suspension, increase
or
reduction of compensation;
(vii) the ability for payment of compensation as contemplated in section
29;
(g) decide whether a person is a dependant of an employee and, if so, the
extent of dependency upon the employee, and, in the case where there is
more than one dependant, which shall receive compensation and the
allocation of compensation and the allocation of compensation among
them;
(h) consider and adjudicate upon claims in terms of section 62;
(i) decide upon-
(i) the need for, and the nature and sufficiency of, medical aid;
(ii) the reasonableness of the cost of medical aid, an the amount and
manner of payment of assessments and related matters;
(j) decide upon the liability for assessment, tariffs of assessment, the
amounts of assessments, the manner of payment of assessments and
related matters;
(k) decide upon any other question falling within his functions in connection
with the administration of this Act.
(l) administer the compensation fund and the reserve fund;
(m) recover amounts due to the compensation fund, including amounts which

132
 should not have been paid out in terms of this Act, or write off such
amounts if, in his opinion, they cannot be recovered;
(n) after the conclusion of each financial year submit a report to the Minister
regarding the administration of this Act during that year;
(o) record statistics and information regarding the occurrence and causes of
accidents and occupational diseases, and the award of benefits in terms of
this Act;
(p) institute such inquiries and perform such other functions as may be
prescribed, or as he may deem necessary for the administration of this Act.

Compensation Board
There is hereby established a board to be known as the Compensation Board.

Constitution of Board
(1) The Board shall consist of-
(a) the commissioner or an officer designated by him, who shall act as
chairman;
(b) two persons nominated by the Minister, one of whom shall be nominated
after consultation with the Minister of National Health and Welfare;
(c) the Chief Inspector of Occupational Health and Safety;
(d) one person appointed by the Minister from a list of names of not more
than three persons nominated by The Rand Mutual Assurance Company
Limited;
(e) one person appointed by the Minister from a list of the names of no more
than three persons nominated by the Federated Employers’ Mutual
Assurance Company Limited;
(f) two persons appointed by the Minister from a list of names of not more
than six persons nominated by the South African Medical and Dental
Council;
(g) three persons appointed by the Minister to represent the interests of all
employees from a list of the names of not more than then persons
nominated by the employees’ organizations.
(2) An assessor shall not be eligible for appointment as a member of the Board.

Functions of the Board

(1) The Board shall advise the Minister regarding-
(a) matters of policy arising out of or in connection with the application
of this Act;
(b) the nature and extent of the benefits that shall be payable to employees
or dependants of employees, including the adjustment of existing
pensions;
(c) the appointment of assessors;
(d) the amendment of this Act.
(2) The Board may at the request of the commissioner advise him regarding the
performance of a particular aspect of his functions.

Compensation fund
(1) There is hereby established a fund to be known as the compensation fund.
(2) The compensation fund shall consist of-
(a) any moneys vested in the compensation fund in terms of subsection (3);
(b) the assessments paid by employers in terms of this Act;
(c) any amounts paid by employers to the commissioner in terms of this Act;
(d) any penalties and fines imposed in terms of this Act other than by a court
of law;
(e) any interest on investments of the compensation fund and the reserve

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 fund;
(f) any amounts transferred from the reserve fund;
(g) the payments made to the commissioner in terms of section 88;
(h) any other amounts to which the compensation fund may become
entitled.
(3) (a) the accident fund established by section 64 of the Workmen’s
Compensation Act shall, as from the commencement of this Act, cease to
exist, and all amounts credited to the accident fund immediately before
such commencement, shall as from such commencement vest in the
compensation fund.
(b) All liabilities and rights, existing as well as accruing, of the accident fund
shall devolve upon the compensation fund as from the commencement of
this Act.

COMPENSATION FOR OCCUPATIONAL INJURIES

Right of employee to compensation

(1) If an employee meets with an accident resulting in his disablement or death such
employee or the dependents of such employee shall, subject to the provisions of this Act, be
entitled to the benefits provided for and prescribed in this Act.
(2) No periodical payments shall be made in respect of temporary total disablement or
temporary partial disablement, which lasts for three days or less.
(3) (a) If an accident is attributable to the serious and wilful misconduct of the
employee, no compensation shall be payable in terms of this Act, unless-
(i) the accident results in serious disablement; or
(ii) the employee dies in consequence thereof leaving a dependant
wholly financially dependent upon him.
(b) Notwithstanding paragraph (a) the commissioner may, and the employer
individually liable or mutual association concerned, as the case may be,
shall, if ordered thereto by the commissioner, pay the cost of medical aid
or such portion thereof as the commissioner may determine.
(4) For the purposes of this Act an accident shall be deemed to have arisen out of and in
course of the employment of an employee notwithstanding that the employee was at the time
of the accident acting contrary to any law applicable to his employment or to do any order by
or on behalf of his employer, or that he was acting without any order of his employer, if the
employee was, in the opinion of the commissioner, so acting for the purposes of or in the
interest of or in connection with the business of his employer.
(5) For the purposes of this Act the conveyance of an employee free of charge to or from
his place of employment for the purposes of his employment by means of a vehicle driven by
the employer himself or one of his employees and specially provided by his employer for the
purpose of such conveyance, shall be deemed to take place in the course of such employee’s
employment.

Accidents outside Republic

(1) (a) If an employer carries on business chiefly in the Republic and an
employee of his ordinarily employed in the Republic, meets with an
accident while temporarily employed outside the Republic, such employee
shall, subject to paragraph (c), be entitled to compensation as if the
accident happened in the Republic.
(b) The amount of compensation contemplated in paragraph (a) shall be
determined on the basis of the earnings, which the employee, in the opinion
of the commissioner, would have received if he had remained in the
Republic.
(c) This subsection shall cease to apply to an employee after he has been
employed outside the Republic for a continuous period of 12 months, save by

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 agreement between the commissioner, the employee and the employer
concerned, and subject to such conditions as the commissioner may
determine.
(2) If an employee resident in the Republic meets with an accident while employed
in, on or above the continental shelf, such employee shall be entitled to
compensation as if the accident had happened in the Republic.

(3) (a) If an employer carries on business chiefly outside the Republic and an
employee of his ordinarily employed outside the Republic, meets with an
accident while temporarily employed in the Republic, such employee shall
not be entitled to compensation unless the employer has previously agreed
with the commissioner that such employee shall be entitled to
compensation and, where applicable, has paid the necessary assessments
in respect of him.

(b) An employee referred to in paragraph (a) who is so temporarily employed

in the Republic for a continuous period of more than 12 months, shall be
deemed to be ordinarily employed by such employer in the Republic.
(4) If, in terms of the law of the state in which an accident happens, an employee, in the
circumstances referred to in subsection (1), is entitled to compensation or if an employee
meets with an accident in the circumstances referred to in subsection (2) or in the Republic
and he would be entitled to compensation in terms of the law of any other state as well as in
terms of this Act, he shall by written notice to the commissioner elect to claim compensation
either in terms of this Act or in terms of the law of the other state.

Accidents during training for or performance of emergency services

If an employer meets with an accident-
(a) While he is, with the consent of his employer, being trained in organized
first aid, ambulance or rescue work, fire-fighting or any other emergency
service;
(b) while he is engaged in or about his employer’s mine, works or premises in
organized first aid, ambulance or rescue work, fire0fightung or any other
emergency service;
(c) while he is, with the consent of his employer, engaged in any organized
first aid, ambulance or rescue work, fire-fighting or other emergency
service on any mine, works or premises other than his employer’s, such
accident shall, for the purposes of this Act, be deemed to have arisen out
of and in the course of his employment.

Security for payment of compensation and cost of medical aid by employers individual
liable
(1) The commissioner may order an employer individually liable to deposit such
securities as in the opinion of the commissioner are sufficient to cover the liabilities of the
employer in terms of this Act.

(2) If an employer has deposited with the commissioner any such security and thereafter
fails to meet in full his liabilities in terms of this Act, the commissioner may apply such
security to pay those liabilities, and he may deposit any unused balance in the compensation
fund and apply it for the payment of future liabilities of that employer in terms of this Act.

Compensation may not be alienated or reduced

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(1) Notwithstanding anything to the contrary in any other law contained, compensation
shall not-
(a) be ceded or pledged;
(b) be capable of attachment or any form of execution under a judgment or
order of a court of law;
(c) be subject to income tax;
(d) be set off against any debt of the person entitled to the compensation.

(2) Notwithstanding subsection (1), the commissioner or the mutual association

concerned, as the case may be, may pay compensation payable to an employee in whole or in
part to the employer to the extent to which such employer has made payments to the
employee in respect of disablement arising out of an occupational injury or disease.

Cession or relinquishment of benefits void

Any provision of an agreement existing at the commencement of this Act or concluded
thereafter in terms of which an employee cedes or purports to cede or relinquishes or purports
to relinquish any right to benefits in terms of this Act, shall be void.

Compensation not to form part of deceased employee’s estate

Compensation in terms of this Act owing to the death of an employee shall not form part of
his estate.

CLAIMS FOR COMPENSATION

Notice of accident by employee to employer

(1) Written or verbal notice of an accident shall, as soon as possible after such accident
happened, be given by or on behalf of the employee concerned to the employer, and notice of
the accident may also be given as soon as possible to the commissioner in the prescribed
manner.
(2) Failure to give notice to an employer as required in subsection (1) shall not bar a right
to compensation if it is proved that the employer had knowledge of the accident from any
other source at or about the time of the accident.
(3) Subject to section 43, failure to give notice to an employer as required in subsection
(1), or any other error or inaccuracy in such notice, shall not bar a right to compensation if in
the opinion of the commissioner-

(a) the compensation fund or the employer or mutual association concerned,

as the case may be, is not or would not be seriously prejudiced by such
failure, error or inaccuracy if notice is then given or the error or
inaccuracy is corrected;

(b) such failure, error or inaccuracy was caused by an oversight, absence from
the Republic or other reasonable case.

(4) If a seaman or airman meets with an accident, the person in command or the owner of
the ship or aircraft, as the case may be, shall for the purposes of this section and sections
39,40, 41 and 43 be deemed to be the employer.

Claims for compensation

(1) (a) A claim for compensation in terms of this Act shall be lodged by or on
behalf of the claimant in the prescribed manner with the commissioner or
the employer or the mutual association concerned, as the case may be,
within 12 months after the date of the accident or, in the case of death,
within 12 months after the date of death.
(b) If a claim for compensation I not lodged as prescribed in paragraph (a),

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 such claim for compensation shall not be considered in terms of this Act,
except where the accident concerned has been reported in terms of section
39.
(2) Notwithstanding subsection (1)(a) a claim for compensation by any seaman or airman
may be lodged with the person in command of the ship or aircraft concerned, as the case may
be, except if such seaman or airman is himself the person in command.
(3) If any seaman or airman meets with an accident outside the Republic resulting in
death, a claim for compensation shall be instituted within 12 months after news of the death
has been received by any dependent claiming compensation.
(4) The provisions of section 38 shall apply mutatis mutandis in respect of any failure to
institute a claim or in respect of any error or inaccuracy in a claim instituted in terms of this
section.

OCCUPATIONAL DISEASES

Compensation for occupational diseases

(1) Subject to the provisions of this Chapter, an employee shall be entitled to the
compensation provided for and prescribed in this Act if it is proved to the satisfaction of the
commissioner-
(a) that an employee has contracted an occupational disease; or
(b) that an employee has contracted other than an occupational disease and
such disease has arisen out of and in the course of his employment.
(2) If an employee has contracted a disease referred to in subsection (1) and the
commissioner is of the opinion that the recovery of the employee is being delayed or that his
temporary total disablement is being prolonged by reason of some other disease of which the
employee is suffering, he may approve medical aid also for such other disease for so long as
he may deem it necessary.
(3) If an employee has contracted a disease referred to in subsection (1) resulting in
permanent disablement and that disease is aggravated by some other disease, the
commissioner may in determining the degree of permanent disablement have regard to the
effect of such other disease.
(4) Subject to section 66, a right to benefits in terms of this Chapter shall lapse if any
disease referred to in subsection (1) is not brought to the attention of the commissioner or the
employer or mutual association concerned, as the case may be, within 12 months from the
commencement of that disease.
(5) For the purposes of this Act the commencement of a disease referred to in subsection
(1) shall be deemed to be the date on which a medical practitioner diagnosed that disease for
the first time or such earlier date as the commissioner may determine if it is more favourable
to the employee.
(6) Subject to the provisions of this Chapter, the provisions of this Act regarding
compensation in respect of an accident shall apply mutatis mutandis to a claim for
compensation for a disease referred to in subsection (1), except where such provisions are
clearly inappropriate.

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 CHAPTER 4

INDUSTRIAL PSYCHOLOGY

THE NATURE OF MOTIVATION

(Motivation is a set of forces that cause people to behave in certain ways.)

Motivation is the set of forces that cause people to behave in certain ways. On any given day,
an employee may choose to work as hard as possible at a job, to work just hard enough to
avoid a reprimand, or to do as little as possible. The goal for the manager is to maximize the
occurrence of the first incident and minimize the occurrence of the last one. The goal
becomes all the more important when we understand how important motivation is in the
workplace.

The importance of Employee Motivation

In most instances the performance of an employee will be determined by

 Motivation (the desire to do the job),
 Ability (the capability to do the job), and
 The work environment (the tools, materials, and information needed to do the
job).

If an employee lacks the ability, the manager knows what to do – either provide training or
replace the worker. If there is an environmental problem, the manager again knows what to
do – alter the environment to promote higher performance. If motivation is the problem, the
task for the manager is more challenging. Individual behaviour is a complex phenomenon,
and the manager may be hard-pressed to figure out the precise nature of the problem and how
to solve it. Thus, motivation is important because of its significance as a determinant of
performance and because of its intangible character.

The motivation framework in Figure below is a good starting point for understanding how
motivated behaviour occurs. The motivation process begins with needs that reflect a
deficiency within the individual. For example, a worker may feel that she is underpaid, and
this deficiency results in a need. In response to this need, the worker searches for ways to
satisfy it. She may ask for a raise, work harder to try to earn a raise, or seek a new job. Next,
she chooses an option to pursue (of course, a person may pursue multiple options at the same
time – working harder while simultaneously looking for a new jib, for example). After
carrying out the chosen option – working harder and putting in more hours for a reasonable
period of time, for example – she then evaluates her success. If her hard work resulted in a
pay raise, she probably feels good about things and will continue to work hard. If no raise has
been provided, she is likely to try another option.

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 Need
(deficiency)

Determination of future needs Search for ways to satisfy

and search/choice for needs
satisfaction

Evaluation of Choice of
need behavior to
satisfaction satisfy need

Historical Perspectives on Motivation

To appreciate what we know about employee motivation, it is helpful to review earlier

approaches. In general, motivation theory has evolved through three different eras: the
traditional approach, the human relations approach, and the human resource approach.

The Traditional Approach The traditional approach to understanding employee motivation

is best represented by the work of Frederick W Taylor. Taylor suggested the use of an
incentive pay system. He believed that management knew more about the jobs being
performed than the workers did, and he assumed that economic gain was the primary thing
that motivated everyone. Other assumptions of the traditional approach were that work is
inherently unpleasant for most people and that the money they earn is more important to
employees than the nature of the job they are performing. Hence, people could be expected
to perform any kind of job if they were paid enough. Although the role of money as a
motivating factor cannot be dismissed, proponents of the traditional approach took too narrow
a view of the role of monetary compensation and also failed to consider other motivational
factors.

The Human Relations Approach The human relations approach grew out of the work at
Western Electric of Elton Mayo and his associates. The human relation emphasizes the role
of social processes in the workplace. Their basic assumptions were that employees want to
feel useful and important, that employees want to belong to a social group and that these
needs are more important than money in motivating employees. Advocates of the human
relations approach advised managers to make workers feel important, keep them informed,
and allow them a modicum of self-direction and self-control in carrying out routine activities.
The illusion of involvement and importance were expected to satisfy workers’ basic social
needs and result in higher motivation to perform. For example, a manager might allow a
work group to participate in making a decision, even though he or she had already determined
what the decision would be. The symbolic gesture of seeming to allow participation was
expected to enhance motivation, even though no real participation took place.

The Human Resource Approach The human resource approach to motivation carries the
concepts of human needs and motivation one step further. Whereas the human relationists
believed that the illusion of contribution and participation would enhance motivation, the
human resource view assumes that the contributions themselves are valuable to both
individuals and organizations. It assumes that people want to contribute and are able to make
genuine contributions. Management’s task, then, is to encourage participation and to create a
work environment that makes full use of the human resources available. This philosophy
guides most contemporary thinking about employee motivation. At Ford, Westinghouse,

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Texas Instruments, and Hewlett-Packard, for example, work teams are being called upon to
solve a variety of problems and to make substantive contributions to organizational
effectiveness. Lincoln Electric’s philosophy has passed through all three eras as well.

CONTENT PERSPECTIVES ON MOTIVATION

(Content perspectives is an approach to motivation that try to answer the question “what
factor or factors motivate people?”)

Content perspectives on motivation deal with the first part of the motivation process – needs
and need deficiencies. More specially, content perspectives try to answer the question
“What factor or factors motivate people?” Labour leaders often argue that workers can be
motivated by more pay, shorter working hours, and improved working conditions.
Meanwhile, some behavioural scientists have suggested that providing employees with more
autonomy and greater responsibility can enhance motivation, both of these views represent
content views of motivation. The former asserts that motivation is a function of pay, working
hours, and working conditions; the latter suggests that autonomy and responsibility are the
causes of motivation. Two widely known content perspectives on motivation are the need
hierarchy and the two-factor theory.

The Need Hierarchy

The concept of needs hierarchies have been advanced by many theorists, but the version most
popular in the management field is the one developed by Abraham Maslow in the 1940’s.
Maslow assumed that people are motivated to satisfy various needs and that these needs can
be arranged in a hierarchy of importance. As described below Maslow’s hierarchy of needs
assumes five need levels.

The physiological needs for such things as food, sex, and air represent basic issues of survival
and biological function. In any organizational setting physiological needs are generally
satisfied by adequate wages and the work environment itself, which provides restrooms,
adequate lighting, comfortable temperatures and ventilation.

Next are the security needs – the needs for a secure physical and emotional environment.
Examples include the desire for adequate housing and clothing and the need to be free from
worry about money and job security. Security needs are satisfied for many people in the
workplace by job continuity (no layoffs), a grievance system (to protect against arbitrary
supervisory actions), and an adequate insurance and retirement benefit package (for security
against illness and provision of income in later life). Even today, however, depressed
industries and general economic decline can put people out of work and restore the primacy
of security needs.

Belongingness needs are related to social processes. They include the need for love and
affection and the need to be accepted by one’s peers. These needs are satisfied for most
people by a combination of family and community relationships outside of work and
friendships on the job. A manager can help the satisfaction of these needs by allowing social
interaction and by making employees feel like part of a team or work group. The manager
can also be sensitive to the probable effects (such as absenteeism) or loss performance) when
an employee has family problems.

Esteem needs actually comprise two different sets of needs; the need for a positive self-image
and self-respect and the need for recognition and respect from others. A manager can help
address esteem needs by providing a variety of extrinsic symbols of accomplishment such as
job titles, spacious offices, and similar rewards as appropriate. At a more intrinsic level, the

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manager can provide challenging job assignments and opportunities for the employee to feel a
sense of accomplishment.

At the top of the hierarchy is what Maslow calls self-actualization needs. These involve
realizing one’s potential for continued growth and individual development. The self-
actualization needs are perhaps the most difficult for a manager to address. In fact, it can be
argued that these needs must be met entirely from within the individual. But a manager can
help by promoting a climate wherein self-actualization is possible. For instance, a manager
could give employees a change to participate in making decisions about their work and the
opportunity to learn new things about their jobs and the organization.

Maslow suggests that the five need categories constitute a hierarchy. At the foundation of the
hierarchy are physiological needs. An individual is motivated first and foremost to satisfy
physiological needs. As long as they remain unsatisfied, the individual is motivated only to
fulfil them. When satisfaction of physiological needs is achieved they cease to act as primary
motivational factors and the individual moves “up” the hierarchy and becomes concerned
with security needs. This process continues until the individual reaches the self-actualization
level.

Maslow’s concept of the need hierarchy has a certain intuitive logic and has been accepted by
many managers. But research has revealed certain shortcomings and defects in the theory.
Some research has found that five levels of need are not always present and that the order of
the levels is not always the same as postulated by Maslow.

LEADERSHIP

THE NATURE OF LEADERSHIP

From a manager’s standpoint, trying to motivate is an attempt to influence once behaviour. In

many ways, leadership is the opposite side of the same coin – that is, it is an attempt to
influence the behaviour of others. In this section, we first define leadership, then differentiate
it from management, and conclude by relating it to power.

The Meaning of Leadership

(Leadership is the use of non-coercive influence to shape the groups or organization’s goals,
motivate behaviour toward the achievement of those goals, and help define group or
organization culture, the set of characteristics attributed to individuals who are perceived to
be leaders)

Leadership can be defined as either a process or a property. As a process, leadership is the

use of non-coercive influence to shape the groups or organization’s goals, motivate behaviour
reward the achievement of those goals, and help define group or organization culture. As a
property, leadership is the set of characteristics attributed to individuals who are perceived to
be leaders. Thus, leaders are people who can influence the behaviours of others without
having to rely on force, and leaders are people whom others accept as leaders.

Leadership Versus Management

(Leaders are people who can influence the behaviours of others without having to rely on
force; those accepted by others as leaders)

From these definitions, it should be clear that leadership and management are related, but it
should be equally clear that they are also different. Thus, a person can be a manager, a leader,
both, or neither. This view is illustrated in Figure 13.2. Steven Jobs had charisma and could

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inspire motivation and loyalty, but he eventually failed as a manager at Apple because he
lacked managerial ability. Similarly, Billy Martin can inspire baseball players to new heights,
but he eventually fails because he too lacks managerial ability.

James Dutt, former CEO of Beatrice, and Harold Geneen, former CEO of ITT, were very
good managers. They made effective decisions,

Effective Effective leaders Effective

Leaders and managers managers

* Steven Jobs * John Scully * Jane Dutt

* Billy Martin * Jack Welch * Harold
* John Reed
* Lee Iacocca

guided the fortunes of their respective companies admirably, and achieved financial success.
They also alienated their subordinates and lost their positions permanently because of a lack
of leadership.

John Sculley (Apple), Jack Welch (GE), John Reed (Citicorp), and Lee Iacocca (Chrysler).
These individuals possess an abundant supply of what it takes to be a manager and to be a
leader. Scully, for example, knew nothing about the computer business when he took over at
Apple, but he worked hard to learn it and is today a fine technical manager. He is also able to
inspire his followers and seldom has to rely on formal authority to get things done.
“Management Practice” provides additional insights into the importance of John Reed to
Citicorp. These individuals possess an abundant supply of what it takes to be a manager and
to be a leader. Sculley, for example, knew nothing about the computer business when he took
over at Apple, but he worked hard to learn it and is today a fine technical manager. He is also
able to get things done. “Management in Practice” provides additional insights into the
importance of John Reed to Citicorp.

Organizations around the world are putting a premium on the importance of leadership.
CEOs like Welch and Iacocca make millions of dollars each year, and companies like General
Foods, General Electric, Johnson & Johnson, and Apple spend millions more each year trying
to identify potential leaders and hone their skills. On the other hand many critics argue that
leadership cannot be developed in people in a systematic fashion. Their position is that
leaders are born or that they emerge through some random series of events. The truth
probably lies somewhere in between. There are no magical formulas that transform non-
leaders into leaders, but it is possible, as demonstrated by Polaroid’s Booth, for a person to
change his or her approach to things and assume the leadership mantle. It is also possible for
leadership skills and abilities to be improved with education and practice.

MANAGEMENT IN PRACTICE
Then, after three years on the job, Reed
JOHN REED LEADS CITICORP clearly became a leader in the banking
community. He became more visible, and
When John S Reed took over as chairman of new labels were attached to his style. He was
Citicorp in 1984, it appeared that his style called bold and brash when he announced
was quite different from that of his that Citicorp was setting up a $3 billion
predecessor, Walter B. Wriston. Reed reserve to cushion itself against bad loans,
seemed to be more of a manager. He was particularly loans to Third World Countries.
accommodative, seemed concerned with the This action was dictated by sound

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details of execution and cost control, and management practices, according to Reed,
tended to avoid publicity and meetings with and was necessary to bolster Citicorp’s
business analyst. ability to withstand Japanese competition in
the future. Everyone in the industry knew
Citicorp faced intense Japanese competition, that many of the loans were bad, but no one
as Reed became chairman. For that reason, had been sufficiently strong to take such
he moved to alter its direction somewhat. He decisive action.
improved communication among officers and
trading rooms around the globe. He trimmed Although it took a few years for Reed’s
the work force and cleaned up Citicorp’s loan leadership style to be recognized by those
portfolio. He encouraged the growth of outside of Citicorp, insiders had been aware
Citicorp overseas and the development of of it for a while. Reed’s immediate
new products. The initial impact of these subordinates have clear goals and are
changes was to reduce profitability and committed to accomplishing them. Reed has
thereby worry analysts. Reed’s low profile developed a highly motivated executive work
did not help. He rarely met with analysts to group. So vigorous are the group’s efforts
explain his strategy, and when he did meet that it has been referred to as Reed’s “A-
with them, they typically raised short-term team”. The executive work group is
issues while he discussed long-term dedicated to making Citicorp the best
prospects. financial institution in the world and, under
Reed’s leadership and management, may do
just that.

Power and Leadership

(Power is the ability to affect the behavior of others)

In order to fully understand leadership, it is necessary to understand power. Power is the

ability to affect the behavior of others. One can have power without actually using it. For
example, a football coach has the power to bench a player who is not performing up to par.
The coach seldom has to use this power, because players recognize that the power exists and
work hard to keep their starting positions. In organizational settings, there are usually five
kinds of power: legitimate, reward, coercive, referent, and expert power?

Legitimate Power
(Legitimate power is power granted through the organizational hierarchy; power defined by
the organization that is to be accorded people occupying particular positions)

Legitimate power is power granted through the organizational hierarchy; it is the power
granted through the organization that is to be accorded people occupying a particular position.
A boss can tell a subordinate to do something, and a subordinate who refuses can be
reprimanded or even fired. Such outcomes stem from the boss’s legitimate power as defined
and vested in her or him by the organization. Legitimate power, then, is the same as
authority. All managers have legitimate power over their subordinates. The mere possession
of legitimate power, however, does not by itself make someone a leader.

In many cases, subordinates follow only orders that are strictly within the letter of
organizational rules and policies. If asked to do something outside their defined domain, they
refuse or do a slipshod job. In such cases, their manager is exercising authority but not
leadership.

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CONFLICT

INTERPERSONAL AND INTERGROUP CONFLICT

(Conflict is a disagreement between two or more individuals or groups)

Throughout this chapter, we have addressed a variety of interpersonal relationships that

transpire in organizations. Another important type of relationship is conflict. Conflict is a
disagreement between two or more individuals or groups. Organizational conflict results
from disagreement between individual employees, work groups, or departments. The
management of conflict is of considerable importance to all organizations. Union Carbide,
for example, once sent 200 of its managers to a three-day workshop on conflict management.
The managers engaged in a variety of exercises and discussions to learn whom they were
most likely to have conflict with and how they should try to resolve it.

The Nature of Conflict

Most people assume that conflict is something to be avoided because it connotes antagonism,
hostility, unpleasantness, and dissension. Indeed, managers and management theorists have
traditionally viewed conflict as a problem to be avoided. In recent years, however, we have
come to recognize that although conflict can be a major problem, certain kinds of conflict
may be beneficial. Consider the example of two hospitals that disagree over how best to
provide healthcare or two manufacturing plants that disagree over how best to provide
healthcare or two manufacturing plants that disagree over how to improve efficiency. As
each hospital strives to demonstrate the value of its own approach, the community may realize
an overall increase in the quality of healthcare. Or the manufacturer may discover numerous
techniques for improving efficiency.

A general relationship between conflict and performance is suggested in Figure 14.6. If there
is no conflict, complacency and stagnation may set in, and performance may suffer as a result.
A moderate level of conflict can spark motivation, creativity, innovation and initiative. Too
much conflict can produce such undesirable results as hostility and lack of co-operation. The
key is to find and maintain the optimal level of conflict that fosters the highest level of
performance. This, managers need to be concerned with the management of conflict within
their organizations. The starting point for management is an understanding of the causes of
conflict.

Causes of Conflict

Many factors cause conflict in organizations. Some of those factors are the result of
organizational design; others are individual or social in nature.

Group Interdependence may be described in three forms; pooled, sequential, and reciprocal.
Just as increased interdependence increases co-ordination problems, it also increases the
potential for conflict. For example, recall that in sequential interdependence work is passed
from one unit to another. Conflict may arise if the first group is turning out too much work
(the second group will get behind), too little work (the second group cannot meet its goals), or
work of poor quality. At a Penney’s department store, conflict arose because stockroom
employees were slow in delivering merchandise to the sales floor so that it could be priced
and shelved.

Differences in Goals: Just like different people, different departments have different goals,
and these goals may be incompatible. A marketing goal of maximizing sales, achieved
partially by offering a wide variety of sizes, shapes, colours, and models, may conflict with a

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production of a limited number of items. We noted earlier the problems at Reebok when
some people wanted to introduce the new sportswear line as quickly as possible, while others
wanted to be more deliberate.

Recourse competition Most organizations – especially universities, hospitals, government

agencies, and business in depressed industries – do not have unlimited resources. Hence
conflict may arise from competition for limited resources. In one New England town, the
public works department and the library recently battled over funds from a federal
construction grant.

Interpersonal Dynamics Conflict may arise from interpersonal dynamics. The most general
situation is the so-called personality clash – when two people distrust each other’s motives,
dislike one another, or for some other reason simply can’t get along. New management
trainees may resent having to learn routine administrative duties, whereas senior managers
may believe it is necessary for them to learn the business from the ground up. Some people
are extremely competitive, so conflict may arise when two managers are vying for a
promotion. There is an ongoing high level of conflict between H. Ross Perot and his old
friends at EDS. After Perot sold EDS to General Motors, he eventually resigned and started a
new company to compare with his old firm. When he left EDS, he signed a contract agreeing
not to compete for a specified time and in specified areas. Perot contends that his new
company lives up to that agreement; EDS maintains otherwise. The result has been name-
calling, insults, and counter-suits – with the end nowhere in sight. The strong personalities of
the pants have played a major role in their battles.

Managing Conflict

How does a manager best cope with conflict? There are ways to stimulate it in constructive
ways, to avoid it before it arises, and to resolve it if it does happen. “Management in
Practice” provides a good example of conflict management at Community Benefits
Corporation.

Encouraging Conflict: Conflict can be stimulated by placing individuals or groups in

competitive situations, recall for example, the number of “disagreements” you have observed
between two football, baseball, basketball or hockey teams. Managers can establish sales
contests, bonuses, or other competitive stimuli to spark competition.

Another useful method for stimulating conflict is to bring in outsiders. Such outsiders can
shake things up and stimulate a certain level of conflict. Example Beecham Group, a British
company, hired an American for its CEO position expressly to change how the company did
business.

Finally, a manager can stimulate conflict by changing established procedures, especially

procedures that have outlived their usefulness. For example, a university president
announced that all vacant staff positions could be filled only after written justification had
been received and approved. Most requests were okayed, but department heads had to think
through their staffing needs and a few positions were eliminated.

Reducing Conflict: There are also several methods for reducing or avoiding conflicts. One is
to expand the resource base. Suppose that a top manager receives two budget requests for
R100000 each. If she has only R180 000 to distribute, the stage is set for conflict. If both
proposals are worthwhile, it may be possible for the manager to come up with the extra R20
000 from some other source and thereby avoid difficulty.

Pooled, sequential, and reciprocal interdependencies can all result in conflict, so the manager
should use an appropriate technique for enhancing co-ordination and reducing the probability

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that conflict will arise. Techniques for co-ordination include making use of the managerial
hierarchy; relying on rules and procedures; and enlisting liaison persons, task forces, and
integrating departments. At the Penney store mentioned earlier, the conflict was addressed by
providing salespeople with clearer forms on which to specify what merchandise they needed
and in what sequence.

Differences in goals can also be a potential source of conflict. Managers can sometimes focus
the employees’ attention on higher-level, or subordinate, goals as a way of eliminating lower-
level conflict. When labour unions recognize that they must make wage concessions to
ensure survival of the industry, industry survival is considered a subordinate goal. The
immediate goal may be higher wages for union members, but the members realize that
without the automobile industry they would not even have jobs.

Another way to avoid conflict is through the management of interpersonal dynamics. A

manager who has two valuable subordinates, one a chain smoker and the other a vehement
anti-smoker, should avoid requiring them to work together in a confined space. In general,
managers should try to match the personalities and work habits of employees in order to avoid
conflict between individuals.

MANAGEMENT IN PRACTICE
Counselling improves community benefits
corporation
For much of this century, psychologists have Each man agreed to meet individually with
consulted with business organizations on the therapist and then meet together to see if
problems with the organization’s human their differences could be resolved, the
resources. Recently, such consultation has individual meetings lasted about five hours
often been akin more to family or marriage each, and the joint meetings were at the
counselling than to traditional problem therapist’s office around a circular table so
solving approaches. Therapists are that no one would occupy a prominent “head
increasingly being used by organizations to of the table” position. The joint meetings
help resolve conflicts. began with the therapist summarizing what
each had indicated in the private meetings.
The president of Community Benefits The therapist then got the two managers
Corporation of Richmond, Virginia, and his talking about their concerns and asked
top branch manager were having problems. probing questions designed to force them to
They were avoiding each other and face the issues.
harbouring secret resentments about one
another. When they were forced to interact In this way, each of the executives came to
because of the nature of their work, the understand better the other’s point of view.
interaction was strained and distorted. As a The president came to realize that he was not
result, the branch manager eventually reinforcing desired behaviour but only
resigned. The president, however, knew that attempting to punish undesired behaviour and
the organization needed him and so called in was constantly raising standards. The branch
a psychiatrist to deal with them both in an manager recognized that he constantly
effort to uncover their problems and resolve resisted authority and even ignored or played
their differences. games with those over him as a way of
rebelling. The president and branch manager
The president did not want to lose the also began to reach agreements on business
valuable experience and talent of his top issues.
branch manager, but he was also sure that the
manager was not pursuing customers as REFERENCES: “Battling Executives Seek
aggressively as he should have been. The Out Therapists”, The Wall Street Journal,
branch manager felt that he was not getting November 7, 1988, p. B1;
credit for the business he did bring in and ”the GM System is like a Blanket of Fog,”
was constantly being pressured to do more. Fortune, February 15, 1988, pp 48-49;

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 Monika Henderson and Michael Argyle,
“The Informal Rules of Working
Relationships”, Journal of Occupational
Behaviour, Vol. 7, pp 259 – 275.

Resolving Conflict Despite everyone’s best intentions, conflict is still inevitable in any
organization. If it is harming the firm, attempts must be made to resolve it. The avoidance
approach is simply to ignore the conflict and hope it will go away. Some managers adopt
avoidance because they are uncomfortable when dealing with conflict. Avoidance is
sometimes effective in the short run, but it does little to resolve long run or acute conflict.
Smoothing is minimizing the conflict6 and telling everyone that things will “get better”. In
many cases though, the conflict gets worse as people continue to think about it. Smoothing is
generally not advisable.

Compromise can work if it is used with care, but in most compromise situations someone
wins and someone loses. Budget problems may be amendable to compromise because of
their objective nature may be amendable to compromise because of their objective nature.
Assume, for example, the additional resources are not available, there is R180 000 to divide,
and each of two groups claims to need R100, 000. If the manager believes that, both projects
warrant funding she can allocate R90 000 to each and the fact that the two groups have at
least been treated equally may they may still have conflicts.

The confrontation approach to conflict resolution – also called interpersonal problem solving
– involves bringing the parties together to confront the conflict. The parties discuss the
nature of their conflict and attempt to reach an agreement or a solution. Confrontation
requires a reasonable degree of maturity on the part of the participants, and the manager must
structure the situation carefully. If handled well, this approach can be an effective means of
resolving conflict.

Some techniques for avoiding conflict may be used to resolve conflict. If conflict arises from
incompatible personalities, the manager might transfer one or both parties to other units. If
conflict stems from group interdependence, the manager might realize that he is using an
inappropriate co-ordination technique and shift to another,

COMMUNICATION

COMMUNICATION AND THE MANAGER’S JOB

A typical day for a manager includes doing de4sk work, attending scheduled meetings,
placing and receiving telephone calls, reading correspondence, answering correspondence,
attending unscheduled meetings and tours. Most of these activities involve communication.
In fact, managers usually spend over half of their time on some form of communication.
Communication always involves two or more people, so behavioural processes such as
motivation, leadership, and group dynamics all come into play.

A Definition of Communication

Imagine three managers working in an office building. The first is all, alone but is
nevertheless yelling for a subordinate to come help. No one appears, but he continues to yell.
The second is talking on the telephone to a subordinate, but static on the line causes the
subordinate to misunderstand some important numbers being provided by the manager. As a
result, the subordinate sends 1,500 crates of eggs to 150 Fifth Street, when he should have
sent 150 crates of eggs to 1500 Fifteenth Street. The third manager is talking in her office
with a subordinate who clearly hears and understands what is being said. What do these three
managers have in common? Each is in a building, and has at least one subordinate. How do

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these three managers differ? Each is attempting to communicate but is achieving different
levels of success.

(Communication is the process of transmitting information from one person to another)

Communication is the process of transmitting information from one person to another. Did
any of our three managers communicate? The last did and the first did not. How about the
second? In fact, she did communicate. She transmitted information and information was
received. The problem was that the message transmitted and the message received, were not
the same. The words spoken by the manager were distorted by static and noise.

(Effective communication is the process of sending a message in such a way that the
message received is as close in meaning as possible to the message intended)

Effective communication, then, is the process of sending a message in such a way that the
message received is as close in meaning as possible to the message intended. Although the
second manager engaged in communication, she did not engage in effective communication.

Three conditions are necessary for communication to take place. First, at least two people
must be involved. However, the relationship between these two people can vary significantly
in terms of proximity, intensity, and time. Two managers having a discussion in an office
engage in communication. So do a student reading a book written 500 years ago and the
Renaissance philosopher who wrote it. Of course, many more than two people can also be
involved in communication. Second, there must be information to be communicated. And
third, some attempt must be made to transmit this information.

Our definition of effective communication incorporates the ideas of meaning and consistency
of meaning. Meaning is the idea that the individual who initiates the communication
exchange wishes to convey. In effective communication, the meaning is transmitted in such a
way that the receiving person understands it. For example, consider the following messages:

1. The high today will only be 40 degrees.

2. It will be cold today.
3. Ceteris paribus.
4. Xn1gp bo5cz4ik ab19.

You probably understand the meaning of the first statement. The second statement may seem
cleat at first, but it is somewhat less clear than the first statement because cold is a relative
condition and the word can mean different things to different people. Fewer still understand
the third statement, because it is written in Latin. None of you understands the last statement,
because it is written in a secret code that your author developed as a child.

The Role of Communication in Management

We noted earlier the variety of activities that fill a manager’s day. Meetings, telephone calls,
and correspondence are all a necessary part of every manager’s job – and all clearly involve
communication. On a typical Monday, Nolan Archibald, CEO of Black & Decker, attended
five scheduled meetings and two unscheduled meetings, had fifteen telephone conversations,
received 29 letters, memos, and reports, and dictated ten letters. The opening incident
provides a sober reminder of how important such communication can be.

As a starting point for understanding the importance of communication in management, recall

the variety of roles that managers must fill. Each of the ten basic managerial roles discussed
Chapter 1 (see Table 1.2) would be impossible to fill without communication. Interpersonal
roles involve interacting with supervisors, subordinates, peers and other outside the

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organization. Decisional roles require managers to seek out information to use in making
decisions and then communicate those decisions to others. Informational roles focus
specifically on the acquiring and disseminating of information.

Communication also relates directly to the basic management functions of planning,

organizing, leading and controlling. Environmental scanning, integrating planning-time
horizons, and decision making, for example, all necessitate communication. Delegation, co-
ordination, and organization change and development also entail communication. Developing
reward systems and interacting with subordinates as a part of the leading function would be
impossible without some form of communication. And communication is essential to
establishing standards, monitoring performance, and taking corrective actions as a part of
control. Clearly, communication is a pervasive part of virtually all-managerial activities.
“Management in Practice” provides another important perspective on the importance of
communication and how AT&T is working to cope with it.

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 CHAPTER 5

PERSONNEL MANAGEMENT

Introduction

Despite the great advances made in the utilization of mechanical plant, building seems certain
to remain a high labour-content industry, is that the personnel function is of necessity a most
important factor in construction management. This is even more obvious in the case of staff
or key personnel, for a contractor’s business consisting solely of the experience and skill of
his executive technical and supervisory employees. With no permanent factory, materials
bought specifically for each contract and both labour and plant taken on or hired, as required,
contented and loyal staffs are the essential nucleus without which no contracting firm exists
for very long.

A personnel policy must be the responsibility of the highest authority, and for this reason
many enlightened Chief Executives reserve personnel questions to themselves. Such a policy
should be founded on the following principles:

(i) Justice must be given, and be seen to be given to all,

(ii) Basic remuneration must be adequate, with prompt and suitable adjustments for
merit and service,
(iii) Every employee must be given the opportunity and encouragement to develop his
capabilities to their limit.

The scope of the personnel function is naturally related to the size and operating policy of a
company, but many leading builders are now following what is common practice in
manufacturing industry, and developing full-time personnel officers or specialist departments.
The service provided by a personnel department to general management can greatly assist in
securing better utilization of scarce and expensive labour, and it is to be hoped that many
more of the techniques accepted by manufacturing industries will sooner than later be applied
to the construction industry.

Personnel activities are generally classified under the following broad divisions:

(a) Manpower planning.

(b) Recruitment and selection.
(c) Education and training.
(d) Health and Safety.
(e) Employee services or welfare.
(f) Union negotiations and joint consultation.
(g) Wages.

Manpower planning: Manpower planning is an integral part of the overall corporate planning
process, and is in no way independent. The corporate plan will establish the direction of the
organization over a specific period of time into the future, usually five years. This corporate
plan will involve manpower considerations. The manpower plan will seek to address these
issues. The manpower plan involves the following stages:
(a) Establishment of the corporate objectives into a manpower plan.
(b) Manpower audit (external) – an assessment of the external environment with
regard to labour markets, competition, economy, etc.
(c) Manpower audit (internal) – a survey of present employees, age profiles,
productivity, wastage, etc.

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 (d) Supply forecasting – forecasting the needs of products over the life of the
corporate plan.
(e) Demand forecasting – manpower demand based upon activity levels indicated in
the corporate plan as well as shortage indicated by the audits. From this a
forecast of the numbers and types of staff required by various departments should
be possible.

The objectives, information and forecasts that have contributed to the manpower plan can
now be converted into policies that should produce concrete program of action, such as:

Recruitment and selection;

Training;
Employee development;
Productivity;
Redundancy; and
Accommodation.

RECRUITMENT AND SELECTION

Consideration of the following headings will readily indicate the more obvious advantages of
a centralized personnel department, i.e. greater efficiency, the application of specialist
knowledge and up-to-date methods, and disinterested judgment.

Recruitment

In order to attract applicants who are experienced and trained to do the work, and to eliminate
the possibility of receiving applications from the wrong type of applicants, a supervisor must
undertake the following, albeit subconsciously:

(a) Job analysis;

(b) Job evaluation;
(c) Job specification.

The above are really more specialized problems, which the personnel officer is best trained to
do. However, supervisors should have some ideas regarding them to appreciate recruitment
difficulties, and expenses, so that where possible every endeavour should be made to retain
the work force under his/her charge to help keep recruitment costs to a minimum.

1. JOB ANALYSIS

This entails discovering if a job really exists, and if so, to observe the particulars about
the job, and to discuss details about the job with those who are doing similar work.

By studying the job certain factors may be highlighted to show what characteristics a
person have to be gifted with (if they have to be gifted at all) to make them suitable for
the job, e.g. intelligence, etc., or physically string. It may be a dirty, noisy job, which
requires a special person to do it. On the other hand, it may require a self- disciplined
person who may have to work alone without supervision.

A universally recognized questioning technique which managers/supervisors are advised

to adopt should therefore be used to determine most facets relating to the work.

(a) What has to be done?

(b) Where is it to be done?

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 (c) How is it to be done?
(d) When does it need to be done?

By adhering to this analytical approach one can sometimes arrive at a better

understanding of the work/problem in hand which helps in finding a solution.

2. JOB EVALUATION

This means looking at the job to be done which has been determined by job analysis; and
by studying the degree of skill, mental effort, physical effort, responsibility and working
conditions required to undertake the job a picture emerges so that a job specification can
be prepared and from it an advertisement to obtain the right personnel/operatives.

3. JOB SPECIFICATION

This includes details gleaned from the job analysis and evaluation about the vacancy and
the expected qualities of an individual to do the job. Additional benefits and fringe
benefits as well as pay/salary, holidays and promotion prospects or other gains would be
stated.

Naturally, if the job to be offered is standard, there should already be a job description in
existence, which could be used when preparing a recruiting advertisement, which could
be retrieved by the personnel officer for use when required.

Usually, if the job is of an unusual nature the procedure recommended previously could
be adopted.

Recruitment of personnel may be from a variety of sources, depending upon local conditions
and the class of labour required, e.g.:

(a) Casual enquiries at the site are common for labourers.

(b) Skilled operatives may, be transferred by the contractor from one site to another.

(c) Personal contacts by foremen may often succeed when all else has failed.

(d) Introductions from friends or relatives already employed are of great importance from the
point of view of company morale and goodwill.

(e) Close contact with local grammar schools and colleges is necessary to attract young
technical trainees.

(f) The local Youth Employment Officer can be of great assistance in filling juvenile posts.

(g) Advertisements in the local press for scarce tradesmen, or in the national newspapers and
periodicals for staff and executive appointments will require particular attention. An
attractive company image is most helpful; very careful wording is necessary and guaranteed
confidence essential for all staff vacancies.

(h) Institutions and Professional Registers are useful for finding qualified technical and
commercial staff.

(i) The main source of supply, however, is usually the local Department of Employment’s Job
Centre where details of vacancies are filed in occupational order. A worker calling for a job
is first interviewed and classified by the counter clerk, and passed on to the placement officer

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for a confidential talk. The Ministry issues an introduction card addressed to the firm
notifying a vacancy, and n applicant is usually offered two or three jobs before he is
registered as unemployed. Technical or managerial grades are referred to the Appointments
Department, which maintains a Professional and Executive register, pre-selects suitable
applicants and arranges for interviews by appointment.

Selection procedures comprise a variety of techniques to help select the most suitable
candidate for a particular position. These include the following:

(a) Interviewing either by an individual or a panel, chiefly for executive and staff
appointments. The need here for methodical procedure I self-evident when it is
realized that the cost of recruiting and selecting a management trainee may be R2000
or more. Foolproof routines should be designed for each stage, in order to minimize
delays or confusion and hence maintain the Company’s reputation e.g.:

(i) A job specification is necessary to determine the minimum qualifications, experience,

etc., and personal attributes needed.

(ii) A method of recording and classifying written applications is desirable for

effective control.

(iii) Standard application forms simplify the comparison of applications, and

prevent relevant details being overlooked.

FORM OF APPLICATION FOR TECHNICAL STAFF

Surname Christian names
Address Nationality
Age years Date of birth Place of birth
Any physical disability
Are you prepared to travel?

GENERAL EDUCATION
Primary school
Secondary school
Certificates & Subjects
College or University
Qualifications other than technical
National Service
TECHNICAL QUALIFICATIONS
RECORD OF EMPLOYMENT
From To Employer Name & Address Business Position
TECHNICAL EXPERIENCE
Any other information that you consider relevant
Position applied for
Present salary Notice period

(iv) Applicants graded as possible should be invited for early interview, those living
locally first, at times convenient to their circumstances. Rejected candidates
should be courteously notified.

(v) Throughout any interview the roles of most (employer) and guest (applicant)
should be strictly respected.

Interview assessment forms are most helpful, particularly in conjunction with some type

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of interview rating scale, which describes typical grades under the various headings.
Assessments must then be carefully compared with the job specification.

INTERVIEW ASSESSMENT
Applicant: _D F Green Appointment: Buyer
Attribute Satisfactory Doubtful Inadequate
Manner and appearance 
Self confidence 
Verbal expression 
Comprehension 
Response
Native intelligence 
Resourcefulness 
Initiative 
Co-operation
Stability 
Technical ability 
Executive experience
Sense of humour 
General impression: A good salesman!

Interviewed by: __J Smith___________________ Date:____5 May_____

(vi) Two or three interviews may be necessary, possibly culminating in a short list.
The eventual letter of appointment should fully specify all the terms and
conditions of engagement. This is a suitable opportunity to fulfill the
requirements of the Contracts of Employment Act, and the Employment
Protection (Consolidation) Act, which obliges an employer to provide a written
statement covering remuneration, hours of work, holidays, sick pay, pension and
length of notice. As with all methods of selection it is impossible to sum up
human individuals within fine limits of accuracy, and the effectiveness of any
interview will depend upon the competence of the interviewer.

(b) Group exercises under observation are another form of interview, but both more
extended in time and exhaustive in its demands. Candidates perform tasks, take tests
and conduct discussions within a group, whilst being rated by skilled observers. This
type of technique, developed by certain government departments, selection boards
and others, can be particularly useful when considering applicants for supervisory or
junior executive posts abroad where social acumen and temperament may be
important.

(c) Formal tests of both mental and physical abilities, which have been designed as
supplements to the previous procedures. Such tests are limited in objectives but are
well justified if thoroughly understood, the main categories being:

(i) Intelligence tests. These are intended to measure the level of inherited intelligence or
the ability to apply knowledge. Two main types are in general use, one involving the use
of words and/or reasoning from given facts, and the other using patterns or figures. In
both, instructions are given and questions asked together with a number of alternative
answers from which the correct one must be selected. Time limits are imposed and the
score, depending upon the number of correct answers given, is an indication of the
individual’s mental age. Up to the age of adolescence, beyond which basic intelligence is

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assumed not to develop further, a comparative Intelligence Quotient is often calculated by
expressing mental age as a percentage of actual age.

(ii) Aptitude tests. These include tests for manual dexterity and precision, co-ordination
of hand and eye, mental concentration and memory, estimation of speed and distance,
visual recognition of shape, size and spatial relationship, and understanding of
mechanical assemblies and transmission systems, etc. Performance tests which may be
either analogous, e.g. typing a set piece, or analytic when based upon an analysis of the
separate activities involved, have been used upon an analysis of the separate activities
involved, have been used successfully in suiting round pegs for round holes’. In addition,
observation of a candidate’s method and approach may reveal qualities of intellect and
character.

(iii) Psychological tests. Although there is a good deal of skepticism regarding the
practical value of both Personality and Projection tests, it is claimed that under the control
of a qualified psychologist personality factors can be identified by examination. The
former consist of questionnaires which must be answered ‘Yes”, ‘No’ or ‘Uncertain’,
within a time limit. Scores are marked by means of a template, and indicate character
traits such as self-assurance or enthusiasm. The other variant may be either the
Rorschach Ink Blot or a Thematic Apperception Test. A standardized ‘inkblot’ is
presented, and questions are asked concerning the mental image produced. Alternatively
a picture is shown and the subject is asked to tell a spontaneous story inspired by it. In
both cases the interpretations claim to reveal both conscious and subconscious emotions.

Placement is the opposite of selection, being the placing of a particular individual in the
most suitable employment. Employment Exchange methods of finding vacancies for
unemployed operatives and/or qualified specialists looking for more senior appointments
have already been described under Recruitment above. A more particular aspect is that of
vocational guidance, which although it has no age barrier, is especially suitable for
helping the young person to choose the career for which he is best fitted. ‘Once and for
all’ scientific tests measure interests, aptitudes and facts about personality, which are then
‘scored’ and analyzed by industrial psychologists. Combined with personal interviews,
the information is used to advise students to qualify or apply for the occupation, which
best suits, their individual personality.

Induction or the introduction of new entrants to an organization is often a haphazard

affair, and some proper reception procedure is essential if the newcomer is to become an
effective member of the working force. Methods, of course, vary with age and grade of
the employee, but every worker must first know what the Company does, where he fits in,
and what are the general rules and working conditions. It is a good practice to present
this information, together with details of employee services, social activities, etc., in a
company handbook. The next step is to introduce the employee to his supervisor who in
turn will instruct him in his job and its environment. Special care should be taken with
juveniles, and older men of mature character should be encouraged to sponsor youngsters
and act as mentors, philosophers and friends in the master and apprentice tradition.
During the critical first few weeks the personnel department should ‘follow-up’ the
introduction, to gain the confidence of the new man and promote a true sense of co-
operation. Since construction is Britain’s most dangerous industry, it follows that Health
and Safety must feature high on induction courses for new recruits.

Records of personnel histories and movements are essential for management information
and the smooth working of the complex personnel function. Individual data, details of
further education and training, apprenticeship indentures and student agreements, medical
reports on young persons, and wage/salary changes are obvious examples. Statistical
returns of time lost through absence, injury and sickness can be investigated to find

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remedies, resulting in reduced time list to production. Movements of labour are
sufficiently important to warrant separate consideration under each heading.

(a) Transfer within the construction industry is both inevitable and frequent for staff and
key workmen, and the recording of movements between various contracts is usually a
fundamental task of the wages department.

Management however, must also be appraised of this migration in order to staff new
contracts economically, and, more importantly, to look ahead and foresee the need for
future work to maintain full employment. Monthly returns from sites and a wall chart are
a convenient means of fulfilling this need.

Ideally, as high a proportion as possible of the hourly paid operatives should also be
employed on a regular and continuous basis, and certain companies have organized
registers or central records offices in an effort to attain this desirable objective by
transferring workmen from site to site wherever practicable. Regrettably the problem of
wasteful and dispiriting labour turnover remains the greatest obstacle to real progress by
the industry.

(b) Promotion opportunities should be related as closely as possible to individual merit,

and it is important for morale that there should be a known and regular scheme for staff
assessment. The underlying principles of such a policy would be to fill all appointments
from within the organization whenever there is a suitably qualified candidate, and
prepared to study and develop to the full potential of every individual. A system of
measurement is thus necessary to assess capabilities for promotion, involving two distinct
procedures.

(i) Job grading or evaluation sets out to compare differing jobs on a common basis, by
grading them according to the difficulties, responsibilities, and experience that each
entails. In this way the caliber and experience of available personnel can be matched to
the requirements of a task, and the various grades also provide a convenient basis for
salary scales.

(ii) Merit rating analyses the quality of performance of a worker on a given task,
suggested ratings being novice, qualified, experienced, superior, superlative. From
‘experienced’ onwards, an individual might be promoted to the next higher grade as a
‘novice’.

Such a system requires the fullest possible co-operation from every supervisor, but is an
essential factor in a successful personnel policy.

(c) Withdrawal by an employee may be natural on reaching retiring age, or due to a

variety of unsatisfactory causes.

(i) Retirement should be an important and pleasant occasion, perhaps marked by a

souvenir presentation. Thanks to National Insurance developments the financial problem
has been largely removed, and the more important aspect is perhaps a moral one. After
legal obligations have ceased, an attitude of consideration and a willingness to extend a
helping hand to faithful servant contributes greatly to the morale of the company.

(ii) Other causes should be carefully investigated, either to reduce the potential labour
turnover or remove any underlying disgruntlement. Dissatisfaction with conditions,
progress, or treatment may reflect upon the morale within the organization.

(d) Dismissal by the employer may be for a variety of reasons but the employee must

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 always leave with a sense of justice in the decision so that even his former colleagues
bear no resentment.

(i) With the skilled man-power shortage, wastage of workmen can be a source of serious
loss and management must therefore continually watch the percentage labour turnover,
both at company level and on individual contracts.

(ii) When the conclusion of a contract brings redundancy, it is usual for ‘last to come first
to go’, although credit must be given to those workers with a good record. But the basic
problem of casual employment is an evil that must be eliminated, if the building and civil
engineering industries are to recruit the quality of workmen necessary to achieve greatest
productivity. At company level also it is short sighted to invest heavily in better
management techniques, greater mechanization, etc., when the hoped-for results depend
upon skill, training, co-operation and loyalty of workers who can be dismissed at short
notice of termination required of an employer by the Contracts of Employment Act, and
the terms of Redundancy Payments Act, recognized by the Employment Protection
(Consolidation) Act, both help to foster more continuous employment; but cannot give a
complete answer to the employer’s discrete and fluctuating level of activity, and the
employee’s traditional independence in migrating to the highest bidder. Although a few
progressive firms have introduced policies aimed at minimizing the worst effects of a
nomadic occupation, an industrial solution must be found at national level in order to
meet the rising demands of scientific advancer and the higher standard of living.

EDUCATION AND TRAINING

After the quality of personnel, nothing is more important for the future of the construction
industries, including the professions, than their education and training at all levels. If
contracting is to gain prestige and build up a properly trained labour force, then certain
aspects must be developed more closely along the lines already adopted by manufacturing
industries. This is important regardless of the size of the building concern, and a full training
programme might include any of the following procedures:

(a) Introductory courses for new employees need not be lengthy, but should cover
background information referred to under Induction.
(b) Further education is considered to be necessary for all juveniles in order to increase
their later usefulness. Because evening classes after working all day may impair their
working efficiency, many firms prefer to send their youngsters to school for a full day
a week, despite the obvious disadvantages.
(c) Part training of semi-skilled workers could be a valuable advantage in the building
industry where an increased proficiency of only 10 per cent would mean a
considerable gain in productivity. Traditionally, semi-skilled jobs are ‘picked-up’
from others, including of course any bad habits and their rate of working. The part
method analyses an operation into its component parts, then each element is taught in
graded stages. Instruction includes both general knowledge concerning the work, and
specific tuition in performance. Formal training, in all it forms, should be planned
and controlled in the following sequence:

(i) explanation to the learner,

(ii) demonstration by the instructor,
(iii) practice by the learner with correction from his tutor,
(iv) repletion to establish correct performance,
(v) testing to ensure success.

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(d) Practical training in clerical work should not be underestimated, for accurate paper
work is necessary to support maximum production. Skilled instruction in operating
office machinery is also essential.

(e) Apprenticeship schemes for traditional crafts are well developed within the building
industry, but the high proportion of non-indentured learners has prompted the
National Joint Council to review the normal period of apprenticeship.

Furthermore, developments in building techniques ad the introduction of new

materials, appear to call for radical reappraisal of the whole system. The civil
engineering industry has its separate training schemes for plant and maintenance
mechanics; these two complementary arrangements for engineering tradesmen and
building craftsmen, could be interpreted as a sign of the need for rationalization
within one national construction industry. Each firm should contribute its fair
proportion of skilled operatives.

The prolonged recession in the industry prompted the Manpower Services Agency in the
past to sponsor additional trainees under the Youth Training Scheme, in the hope that
employers will be able to take them on as second-year apprentices once they are capable
of contributing more on site.

(f) Technical education and training for students under sponsorship agreements is readily
available for architects, civil engineers and quantity surveyors. A wide range of
degree/diploma/certificate courses is available for all the industry’s professions.

(g) Supervisor training is an integral part of industrial progress, and there is still a great
need in the construction industries for adequately trained foremen.
In the Federation of Civil Engineering Contractors training schemes, a system of ‘job
training’ is designed to enable mechanics to advance to supervisory grades. The
overall conclusion to be drawn is that although the present leaders of both industries
are aware of the need for further training, and are taking action, many firms have still
to be convinced of the benefits to be derived from the technical education of their
foremen.

(h) Executive development must be more widely practiced if the general efficiency of the
industry is to be improved by more competent management. In the long run, the
progress of any organization depends upon the quality of its leaders, and it should
therefore be a prime responsibility of top management to pick and train its own
potential successors. Confidential assessments by direct seniors should be
periodically appraised and rated for performance, character, initiative, co-operation
and ability to communicate. Suitable encouragement to study part-time for a
professional qualification should improve performance, and job rotation,
interdepartmental transfers; special assignments, conferences and courses may give
opportunities for individual development.
(i) Continuing Professional Development (CPD) is an accepted phrase in the UK,
covering the activities of both professional development and involvement in public or
community service. Following formal education and training, continued competence
relies upon the professional’s voluntary acceptance of his duty to keep abreast of new
developments in his profession, and to widen his general knowledge by a conscious
mix of work experience and continuing education and training. We are never too old
to learn, and in our rapidly changing world we must respond in order that we may
better serve consumers and clients. Society also expects professional people to
demonstrate a strong sense of public duty, and the range of activities available is
sufficiently wide to cater for an individual’s personal preference, personality,
available time and work situation.

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HEALTH

Health services should be concerned more with preventive than curative medicine, and a
personnel department must therefore be able to advise on the following matters:

(a) Medical examinations. These are becoming an integral part of selection procedure,
since they prevent people from attempting to do work for which they are physical
unsuited. Juveniles are required by law to be examined periodically; it is wise to
check employees reporting back after illness, to ensure their recovery and prevent
possible spread of infection. Co-operation with local mass radiography projects and
blood transfusion centres are particularly worthwhile.
(b) Personal hygiene. The importance of cleanliness, particularly in the handling of food
and the treatment of sanitary accommodation, must be stressed at every opportunity,
and the improvement of personal habits must be encouraged by example and
education.
(c) Disabled persons. Many contactors employ the standard 3 per cent of disabled
persons as a condition of executing Government contracts, and particular attention
needs to be paid to their effective and possible greater accident proneness.
(d) First Aid. The Construction (Health and Welfare) demand provision of First Aid
equipment for the treatment of minor injuries and attendance to accidents, but there is
a need for many more trained first aiders. On larger sites, moreover, there is ample
scope for the introduction of clinical services such as dentistry, chiropody,
inoculation, etc. on the lines of many factories.
(e) Alcohol and drug abuse. The increasing consumption of alcohol nationally has led to
industrial absenteeism, reduced productivity and lowered quality. With the growing
mechanization of construction sites, this has also become a factor in accidents.
Although the problem is still not taken seriously enough, the need for properly
developed and implemented alcohol policies by companies has to be adhered to.

Although not yet as large problem a problem as alcohol, the abuse of drugs on site has
been acknowledged, particularly on some prestigious developments. The sale and use of
‘soft’ drugs like cannabis and Ecstasy is becoming a stark reality on a few large projects
in Johannesburg and other big provincial cities. Empty syringes are found near huts and
toilets suggest that ‘hard’ drugs like heroin are also appearing. Crime prevention units
may be called in for advice, although the police have discretionary powers under the
Misuse of Drugs Act, to enter and search private property if illegal activity is suspected.

WELFARE

Welfare provisions must necessarily be on a different scale from factories and offices, but the
standard of mess rooms and toilet facilities on many building sites is primitive compared with
other industries.

(a) Canteens. Regulations demand a supply of drinking water and covered

accommodation with furniture for taking meals. The normal contract may only
require a ‘tea-boy’ and facilities for boiling water, but on many there are
opportunities for the supply of hot meals with or without the help of professional
catering contractors.

(b) Amenities. Adequate arrangements should be made for:

(i) Suitable shelter during bad weather.
(ii) Cloakrooms or kit lockers and means of drying wet garments.
(iii) Washing facilities before meals, with special provision for painters,
fitters, etc.

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 (iv) Hygienic lavatories are important to both health and morale, and this aspect
often reflects the attitude of management to personnel policy in general
(v) Protective clothing is particular necessary on construction sites, because of
weather conditions and prevailing accident hazards.

(c) Hostels. Accommodation is frequently required on large or remote sites,

and these need specialized supervision.

(d) Transport. For out-of-town jobs either travel allowance or conveyance is

essential these days, for safety and status reasons a comfortable minibus is
obvious.

(e) Sports and social clubs. These are rare in the building industry, but have an
influence on recruitment and fostering of good team spirit.

SAFETY

Safety at work is the concern of all ranks in industry, management, supervision and labour,
but, as in other fields, the lead, example and drive for greater safety must come from the top.
Despite the sincerity and enthusiasm of many Accident Prevention Groups, the disturbing fact
remains that the number of reported accidents on building operations has increased steadily
over the last decade, with appalling costs to the victims, the firms and the nation. Analysis of
the causes of accidents has shown that they do not just happen – they are caused, usually by
the coincidence of human faults with unsafe actions or conditions. Despite the inherently
hazardous nature of many construction operations, no management can remain complacent in
the face of the realities of human suffering, which lie behind the annual statistics.
(a) Accident prevention. The first steps towards reducing the accident rate down to the
average for manufacturing industry, are the realization that company policy to ensure
that as much attention is paid to safety as to other factors of production.

Practical effect must then be given to this policy by an active consideration of regular
reports on safety measures, the encouragement of safe working methods, plant safety
devices, and safety education, and above all by personal example.

(b) Statutory safeguards. The safety, health and welfare legislation detailed in the
section on Safety, health and welfare legislation applies to both the building and civil
engineering industries, and provides adequate legislation for safeguarding working
places and the conduct of work. If full compliance with these legal obligations is
regarded as a minimum requirement by every contracting firm, then the challenge of
making and keeping building work safe will have been accepted.

(c) Safety supervision. The appointment of experienced persons as safety officers or

safety supervisors to supervise conduct of work is now obligatory to check the
adequacy of safety arrangements and to ensure compliance with the Statutory
Regulations. Both co-operative schemes and the employment of safety consultants
are practical alternatives, and on larger contracts safety committees can aid
efficiency. A safety officer’s duties should also include the introduction of
protective clothing and propaganda and education by posters, lectures, and films.

(d) Accident proneness. Human fallibility is one of the main factors of industrial
accidents, and consequently solutions must be devised which compensate and allow
for human error and failure. New workers are more prone to accidents, and training
in tested safe methods, and improving the skills of operatives are a second line of
defense. However, it is now known that some people are exceedingly accident-prone
and such persons must be removed to less dangerous situations, for the safety of both

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 themselves and their fellow-workers. Selection tests of temperament and speed of
reaction, etc., can avoid the engagement of the accident-prone, and so reduce the
average number of accidents per man.

(e) Determination. Accident prevention is good business practice, and all operatives must
be made aware of the firm’s determination to prevent accidents. Above all it is a
positive and continuing process, and everyone must be taught to cultivate an
awareness of the potential hazards in work, to spot the dangers and to use their
common sense.

INDUSTRIAL RELATIONS/ LABOUR RELATIONS

The responsibility for the conduct of relationships between employers and workers rests
equally on both sides of industry, but the creation of conditions in which good relationships
can be developed is recognized as a major function of management. An atmosphere of
mutual trust and understanding has more influence on smooth labour relations than any legal
system. Larger firms have a specialized branch concerned with industrial relations as a
distinct aspect of personnel work.

Just consultation schemes seek to bring employees into full and responsible participation in
the activities of an enterprise. These arrangements often take the form of advisory
committees, usually with fewer management than employee representatives. The object of
Joint Committees or Works Councils is to weld both sides into a team, with a common
purpose; and to provide a means of exchanging views and information between the various
functions of the organization. Subjects usually covered by consultative committees include:

Remuneration is the most obvious factor governing industrial relations although,

subconsciously, security of employment may be a more powerful motivation. The normal
individual seeks to be rewarded fairly on his merits; this implies that there should be a fair
and logical structure both for wages and salaries. Of course a wage structure must have
regard not only to the conditions in a particular firm, but to the relative productivity of the
industry, and the national economic position. A number of industries have revised their wage
structures within recent years; but the present pattern of building wages cannot be described
as rational when tradesmen can receive over 100 per cent more than the national agreed rate.
Particular features of such a structure warrant individual consideration.

(a) Basic rates. Minimum wage and salary scales are necessary for different grades,
properly based upon the current cost of living, with due regard to the criteria
mentioned earlier, and ideally in conformity with a national wage policy.
(b) Differentials. In addition to the previous minima, ‘plus’ rates are required for specific
jobs, dependent upon both the required qualities of the operative and the inherent
conditions of the operation. Special attention must be given to the differences
between craftsmen, tradesmen and labourers, if recruits are to be encouraged to apply
themselves to the training disciplines necessary for upgrading.
(c) Allowances. Appropriate recognition should be arranged on a systematic basis for
shift work, overtime, long service, special part-time responsibilities, etc.
(d) Incentives. Whilst it must always be remembered that with good leadership and
worthwhile objectives, men can be effectively motivated by incentives other than
financial reward, nevertheless a scheme of scientifically based bonus payments is the
only sure way of keeping productivity and earnings in step. For more senior
supervisory staff a system of merit payments may be more practicable than measured
‘payments by results’.
(e) Assurances. Monetary rewards include pension and life insurance arrangements,
which appeal directly to the innate human desire for security. Accepting the aim that

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 building should be a pensionable career. Sick pay arrangements, holidays with pay,
the guaranteed week and redundancy policy may all be included under this heading.

THE HUMAN FACTOR

Despite the increasing rate of the discovery and spread of knowledge, little practical
application appears to have resulted from the torrent of literature on management, to judge by
the present day industrial unrest and the unsolved problem of how to expand productivity
adequately. This has mainly been because ‘scientific’ managers failed to show sufficient
regard for the human factor in industrial relationships; this is borne out by the prevalent
arguments as to whether management is an art of a science, and whether managers are born or
made.

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CHAPTER 6

PUBLIC RELATIONS

DEFINITION OF PUBLIC RELATIONS

At the First World Assembly of Public relations Associations held in Mexico City in
December 1978, the following definition of the nature and purpose of public relations was
unanimously adopted:

Public relations practice is the art and social science of analyzing

trends, predicting their consequences, counseling organizations’
leaders and implementing planned programmes of action, which
will serve both the organization and the public interest.

Later, the Public Relations Society of America (PRSA) launched two other official attempts
in order to provide the basis for a consensus terminology. The latest attempt, by the Special
Committee on Terminology in 1987, recommended the following two definitions because
they are regarded as establishing a perception of the role of public relations:

Public relations are an organization’s efforts to win the

co-operation of groups of people (Lesley, 1987).
The definition adapted by the Public Relations Institute of Southern Africa (PRISA)
resembles the above two definitions in that it describes the role of public relations:

Public relations are the deliberate, planned and sustained effort

to establish and maintain mutual understanding between the
organization and its various publics – both internal and external.

KEY CONCEPTS

This definition, according to Honiball and Krause, contains the following key terms or
concepts: deliberate, planned, sustained, establish, maintain, mutual understanding, publics,
internal and external. Each of these concepts or terms will be discussed below.

DELIBERATE

Every activity is aimed at achieving a very definite set of aims in very clearly defined fields
and target publics. It aims to reach these targets individually, at the same time, with messages
tailored specifically to each one. The individual messages are carefully evaluated in terms of
the overall aims of the organization.
It is also deliberate in the sense that public relations is a process of communication whereby
the organization consciously makes contact with and seeks to receive feedback from its target
publics. The relationship does not exist of its own accord, but must be created deliberately.
Should an organization fail to create such a relationship, the target publics could create it for
the organization and the resulting relationship might not be a desirable one.

Activities are based on meticulous planning and strategy, taking careful account of specific
problems and detailed steps to solve them. Planning is based on carefully determined
priorities and aims. It must involve a conscious evaluation of all spheres of the organization’s
activities, which may have a bearing on its reputation. Various short-, medium- and long-
term objectives need to be considered.

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SUSTAINED

Public relations involve an ongoing analysis of both sides of the communication picture.
Public relations cannot afford to relinquish its ole as a sensor if it is to maintain its function.
Once the communication process has been initiated between an organization and its publics, it
must be continued, since the initial attempt is not always successful.
ESTABLISH

The primary aim of public relations is to establish a climate of mutual understanding between
an organization and each of its existing or new publics.

MAINTAIN

Once the basic aims have been achieved, public relations must strive to maintain the climate
of understanding and acceptance in the face of an ever-changing environment. It is therefore
important to nurture the relationship, failing which it will die. Maintaining the relationship
thus also implies that we must listen to the feedback received from target publics and act upon
it.

MUTUAL UNDERSTANDING

Both parties – the organization and the target public – must understand each other and the
communication in the way it was intended to be understood. Only if both parties
Understand each other, can agreement and harmony be reached and a positive relationship be
built.

PUBLICS

Each organization has internal as well as external publics. A public is a specific group that
influences the organization and its operations in some way.

INTETNAL AND EXTERNAL

The internal publics of an organization are usually its employees. The external publics are
groups outside the organization, e.g., the media, pressure groups, the community, potential
and existing customers, the government, shareholders, distributors and suppliers.
Owing to the varied and diverse number of definitions of public relations, it would be very
difficult to single out one of these as being the most descriptive or the most suitable. It must
always be understood that the practitioners and authors responsible for the existing definitions
have each denied public relations from a different perspective and against a different
background. A more meaningful approach to the description of the true nature of public
relations would be to identify its characteristics.

THE DEVELOPMENT OF PUBLIC RELATIONS

EARLY HISTORY

We are inclined to think of public relations as a “20th century phenomenon”, but effort to
communicate with others and to deal with the force of opinion goes back to antiquity. For
example, in ancient Egypt the Pharaohs proclaimed their achievements through word-pictures
on impressive monuments, and at certain times of the year staged elaborate festival parades.
While these actions mainly had a religious significance, the served, at the same time, to
impress and entertain the people and so win their support for the ruling class.

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The leaders of Greece showed a thorough understanding of the value of word-of-mouth
communication to persuade people to adopt a certain line of action. In their city-states
political democracy was born and the male population fiercely debated matters of the day.

In the Roman Empire, with its slogan of “Vox populi, vox dei”, orators such as Cicero and
Cato continued this form of persuasion. The Romans went further, and some tyrants laid on
free shows and parades to win support.
During early Christianity, St Paul was one of the apostles to communicate successfully
through the written word. However, it was only the invention of the printing press by
Gutenberg and; later, the use of steam printing presses that turned the written word into a
medium for communicating news.

THE 20TH CENTURY

Modern-day public relations, as we know it, originated in the United States, and the history of
public relations in America has to a large extent determined its history in other countries.

While American politicians had been using press-agentry and other publicity methods for
some time, at the turn of the century the great showman, P.T. Barnum, started doing the same.
Not only did he buy advertising space, but he also knew how to exploit the news value of his
attractions. Barnum, started the trend, followed by many of the early film and press agents of
“manufacturing news” and using stunts and gimmicks to get attention.

Public relations were later employed to defend powerful United State business interests
against muckraking journalism and government regulation. The emphasis was on “telling our
story” counter-attacks designed to influence public opinion and fend off changes in public
policy that would affect the content of business.

For this purpose more and more companies began hiring journalists in order to obtain positive
publicity, and it is for this reason that public relations is regarded as having evolved from
press-agentry.

The concept of public relations as one-way persuasive communication continued to dominate

as the United States entered World War 1 and created the Committee on Public Information.
Headed by George Creel, the Committee was responsible for uniting public opinion behind
the war effort through an extensive, nationwide propaganda campaign. During these early
years, public relations was viewed as a publicity effort to influence others. Various media of
communication, such as advertising, films and exhibitions, were used to such extend that
people eventually talked of “the words that won the war”.

This concept of public relations as “persuasive publicity” still lingers on so that even present-
day public relations practitioners find themselves dealing with managers and clients holding
this concept of the public relations function.

Professional bodies

With regard to the development of professional bodies in America, the Public Relations
society of America (PRSA) came into being in 1947 after the merger of two other bodies. In
1964 the PRSA approved a voluntary accreditation scheme whereby it accredited all new
members, who had to pass a series of written tests in order to become members of the
association and use the designation APR (Accredited in Public Relations) after their name.
This was the first initiative to control entrance to the practice and implement standards of
conduct among practitioners.

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The PRSA has a Code of Professional Standards for the Practice of Public Relations, which
was adopted in 1954. A grievance board and a judicial panel enforce the Code. The PRSA
also publishes its own monthly magazine, Public Relations Journal, which is the oldest
publication in the field and was started by a notable American public relations practitioner,
Rex Harlow, in 1944.

Apart from PRSA, there are a number of o the professional bodies, the most notable being the
Public Relations Student Society of America (PRSSA), established in 1970, and founded in
1970, In addition, there are a number of specialized public relations associations, which
include the National Association of Government Communicators, the National School
{Public Relations Association, the Academy of Hospital Public Relations, and Agricultural
Communicators in Education.

Europe and the international scene

The route of public relations in America created the trend for the post-war development of
public relations in Europe. The period 1955 to 1980 is described as a “remarkable period of
transformation” in the history of European public relations. At its commencement
comparatively few pioneers were practicing public relations and the profession was still
heavily indebted to American know-how. By the 1980s, almost every country of modern
Western Europe had an established public relations body.

The profession began organizing itself into associations at approximately the same time in
most Western European countries – in the late 1940s and early 1950s – e.g. the Institute of
Public Relations (IPR), which was established in England in 1948. In 1959 a regional
confederation, Center (now Confederation) Européenne des Relations Publiques (CERP) was
founded.

This body established a European code of professional conduct, the Code of Athens, compiled
by Lucien Matrat and named after the country where it was adopted in 1965. This is often
referred to as the moral Magna Carta of public relations.

The most important international organization ion public relations are the International Public
Relations Association (IPRA), which was founded in London in 1955. It is a worldwide
professional and fraternal organization, which furthers the continuing development of “the
highest possible standards of public relations ethics, practice and performance”. The OPRA
Code of Conduct was accepted in Venice in 1961, and in 1965 IPRA accepted the Code of
Athens, which was compiled by CERP and is based upon the principles of the UN
Declaration of Human Rights. IPRA also publishes the International Public Relations
Review.

Major international public relations federations, apart from (CERP) (based in Belgium) and
IPRTA (based in Geneva), include the Federation of African Public Relations Associations
(FAPRA), based in Nigeria; the Federation of Asian Public Relations Organizations
(FAPRO), based in Philippines; the Inter-American Federation of Public Relations
Associations (FIARP) in Venezuela; and the Pan-Pacific Public Relations Federation
(PPPRF) in Thailand.

PUBLIC RELATIONS IN SOUTH AFRICA

Public relations in South Africa today are a sophisticated, multifaceted discipline, able to help
forge effective two-way communication between an organization and its various publics.

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In commerce, industry, politics, the arts, education, religion and charities, public relations is
playing an effective management role in its own right. South Africa has a first to its credit in
being the first country to research and evolve a body of knowledge on public relations. Rapid
strides continue to be made in the educational field to provide both theoretical and practical
knowledge for those wishing to enter the public relations profession.

Public relations in the true sense of the word came into being in South Africa after World War
II. Government in 1937, when an Information Bureau was founded, with the purpose of
spreading official information took the first step toward the establishment of a public relations
function.

The South African Railways appointed the first practitioner in South Africa, in 1943, while
the first public relations consultancy opened in Johannesburg in 1948. Large companies
created internal public relations departments.

The Public Relations Institute of Southern Africa (PRISA) was established in Johannesburg in
1957 and today has more than 4 000 members.

PRISA’s vision is “to be the professional body for the practice and development of public
relations in Southern Africa” and its mission is “to serve the interests of the public relations
profession”.

PRISA REGISTRATION

Until May 1993, PRISA recognized the following four categories of membership:

 Fellows (who were permitted to use the appellant FPRISA);

 Full members (who were allowed to use the appellant MPRISA);
 Associate members in two categories, namely voting and non-voting; and
 Affiliates (which included students).

At PRISA’s May 1994 Annual General Meeting, a new system of registration was announced.
This represented a development considerable significance in the affairs of PRISA, especially
with regard to ensuring and safeguarding the professional integrity of the Institute and its
members.

The acceptance by PRISA’s National Executive of the revised system for membership
registration also brought to an end more than two years of deliberations – first by a
subcommittee constituted by former president Dr Kobus Nel. It was subsequently (since May
1993) fine-tuned by an Executive Committee Registration Task Group.

From 1 June 1993 all new applications for registration with PRISA fell under the new system.
Existing members had a six-month window period to upgrade the membership status they
enjoyed under the old system. Thereafter they were transferred automatically to the
appropriate level, i.e. existing full members were registered as Chartered Public Relations
Practitioners and voting associates as Public Relations Practitioners. APRs remained
Accredited in Public Relations.

Two key principles – academic qualifications and experiences – now provide the basis for the
new registration system, and points (to a maximum of 100) are allocated as appropriate. A
sub minimum of 20 points in each category is required for registration at voting level.

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ACADEMIC QUALIFICATIONS

A predetermined number of points are allocated on the basis of the applicant’s academic
qualifications. Qualifications recognized range from any university degree or three-year
diploma recognized by the Human Sciences Research Council, to PRISA’s own approved
short courses in public relations.

EXPERIENCE

The registration committee for tasks within the different functions allocates points. Within all
functions there are also a maximum number of points to be accumulated through tasks. Proof
of experience is normally required.

Since some candidates have performed public relations tasks in other capacities over a
number of years, the sub minimum of 20 points for experience should include at least one
year of full time public relations for Public Relations Practitioner and two years for Chartered
Public Relations Practitioner. The registration committee, however, exercises discretion in
considering weight and point allocations.

The minimum requirements for voting level are as follows:

 two years’ experience in five functions;

 three years’ experience in four functions; or
 four years’ experience in three functions.
(Three functions are the minimum for voting level.)

The levels of registration and minimum points required for each are as follows:

 Affiliate 2
 Associate 20
 Public Relations Practitioner (PRP) 50
 Chartered Public Relations Practitioner (CPRP) 60
 APR (Accredited in Public Relations) 70

THE ACCREDITATION AND ETHICS COUNCIL OF PRISA

A major step in the professionalism of the public relations industry in South Africa (PRCSA)
was in Johannesburg in 1985. The PRCSA, which previously operated independently of
PRISA, served as a self-regulatory control for the profession, i.e. it guarded the interests of
both the general public and the ethical members of the public relations profession.

At the annual general meeting of the PRCSA held in May 1992, it was decided to rename the
Council as the Accreditation and Ethics Council of PRISA.

The objectives of the Accreditation and Ethics Council of PRISA are:

 to set standards for the professional registration of public relations practitioners,

these being a combination of appropriate academic qualifications, plus relevant
practical public relations experience, which may include the teaching of public
relations;
 to examine applicants who meet these requirements, by way of written and oral
examinations, based upon the Council’s own published standards;
 to maintain an enforceable code if professional conduct and apply this code;
 to award the right to use the tile “Accredited in Public Relations (APR)”;

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  to create an awareness and positive perception among opinion leaders of the role
and value of the accredited public relations practitioner.

As part of its objectives, the Council initiated a process of formalized accreditation in 1986.
This process took place in two phases. Phase 1, the so-called grandfather phase, lasted until
the end of May 1987 and its purpose was to enable practitioners to apply for accreditation
without undergoing formal examinations. Phase 2, which commenced in June 1987, required
applicants to undergo the accreditation examination.

Accreditation enables a practitioner to use the designation APR (Accredited in Public

Relations) as a symbol of professional status. The Council has a Code of Professional
Standards for the Practice of Public Relations (the same as PRISA’s code) and, in the event of
a breach of this code; it implements a particular disciplinary procedure. In short, this involves
a process whereby the alleged incident is referred to a disciplinary committee, which refers it
back to the Council with recommendation regarding the action to be taken.

CONCLUSION

Although modern public relations initially developed as a tool used in power struggles in
America, its role in present-day society is vastly different. Because we are living in a
complex society and confronted by a knowledge explosion, which is fuelled by advancing
technology, the role of public relations is changing.

The official Public Relations Society of America (PRSA) statement on public relations,
adopted at the Society’s National Assembly in November 1982, now reads as follows:
“Public relations helps our complex, pluralistic society to reach decisions and function more
effectively by contributing to mutual understanding among groups and institutions. It serves
to bring private and public policies into harmony”.

In short, as institutions have grown larger, they have been forced to refine their methods of
communicating with their publics and this is the role of public relations practitioners today –
to interpret institutions to the publics they serve.

THE NATURE OF PUBLIC RELATIONS

BASIC ASSUMPTIONS

Public relations are based on the following premises:

 In a modern democracy every organization survives ultimately only by public

consent.
 The consent of the public cannot exist in a communication vacuum (PRISA,
1993).

Thus, fundamental to public relations is the establishment of mutual understanding between

different parties, i.e. an organization on the one hand and special publics and/or the
community at large on the other hand. Ideally, mutual understanding should form the basis of
a sound relationship between the different parties, a relationship based on open, two-way
communication which enables the organization to explain its policies and procedures, while
enabling it to monitor feedback. Even more important is for this relationship – because of its
accessible nature – to enable the organization to influence public opinion, public judgment
and public behavior, which has the obvious implication that the organization is dependent on
the moral and financial support of its various publics in order to survive.

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CHARACTERISTICS OF PUBLIC RELATIONS

Viewed in the above manner, public relations exhibit the following characteristics:

 It is dynamic. The public relations process is one of continuous and constant

change and adjustment in order to maintain old relationships and build new ones.
 It is analytical. It is a process of determining and analyzing a situation and of the
factors influencing it, as well as one of evaluating the progress of any remedial or
other action.
 It is planned. Aims set and priorities are determined in accordance with the
problem or situation analysis and within the constraints of time and budget.
 It implies action. The execution of planned strategies, and the implementation of
alternative strategies in order to cope with the publics’ changing needs and
demands. In this sense public relations, in its purest and most effective form,
should be proactive and not reactive.
 It requires evaluation. Performance is evaluated in terms of the achievement of
aims.
 It demands adjustment. Public relations should be executed in a flexible manner
in order to adjust to aims altered as a result of, for example, underachievement or
the changing needs of the publics.

All of this can be summarized in the following steps: analyzing societal opinions and trends,
processing these with regard to their possible effect on the organization and planning, and
executing a course of action aimed at ensuring the organization’s survival and success within
the parameters of societal well being and socially responsible behaviour.

PUBLIC RELATIONS: AN ART AND A SCIENCE

In view of the nature of public relations it becomes obvious why two labels, in particular, are
attached to the term public relations. In the first place, public relations are described as an art
and a science. It is an art, because the selection and application of appropriate techniques
require judgment from the practitioner, as well as attainment to both the organization and its
publics. It is also a science because of the identification of an organization’s target publics
and their needs, and the evaluation of the impact of its actions, to name but two functions, call
for the application of scientific principles.

PUBLIC RELATIONS: A MANAGEMENT FUNCTION

In the second place, public relations are regarded as, and should of necessity be, a
management function. This obviously refers to public relations practiced at an advanced level
by experienced practitioners. Execution of public relations at this level has the following
beneficial results: A management position affords the public relations practitioner the
opportunity of being sensitive to and coming into contact with both internal and external
publics, whose collective views constitute public opinion. This enables the public relations
practitioner to evaluate internal and external opinions, attitudes and needs on an ongoing
basis, to advise management regarding their possible effect, and to act as an instrument in
bringing about policy changes and directing new courses of action – all aimed at maintaining
a harmonious and balanced relationship between the organization and its different target
publics and, ultimately, between the organization and its environment.

In short, from the organization’s business plan and subsequent marketing plan, the public
relations practitioner devises the communication plan to support the corporate mission, policy

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and aims. In order to become involved in strategic planning, the public relations practitioner
should operate at the highest level of organizational management systems (PRISA, 1993).

The following three examples of corporate management organization show the important
position occupied by public relations:

Chief Public
Executive Relations

Production Accounting Personnel Sales

Chief
Executive

General Manager

Personnel Public Marketing Legal

Relations

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 Chief
Executive

General Manager General Manager General Manager

Production Legal Public Relations

Inventory Personnel Advertising
Engineering Sales Marketing
Payroll Employee
communications

Respected international public relations practitioner, Sam Black, has the following to say
about the subject:

WHAT PUBLIC RELATIONS PRACTICE INCLUDES

 Everything that is calculated to improve mutual understanding between an

organization and all with whom it comes into contact, both within and outside the
organization.
 Advice on the presentation of the “public image” of an organization.
 Action to discover and eliminate sources of misunderstanding.
 Action to broaden the sphere of influence of an organization by appropriate
publicity, advertising, exhibitions, films, etc.
 Everything directed towards improving communication between people or
organizations.

WHAT PUBLIC RELATIONS IS NOT

 It is not a barrier between the truth and the public.

 It is not propaganda to impose a point of view regardless of truth, ethics and the
public good.
 It is not publicity aimed directly at achieving sales, although public relations
activities can be very beneficial to sales and marketing efforts.
 It is not composed of stunts or gimmicks. These may be useful at times to put
across ideas, but fail completely if used often or in isolation.
 It is not free advertising.
 It is not merely press relations, although press work is a very important part of
most public relations programmes.
 Public relations in central and local government are non-political. It aims to
promote democracy through full information and not to advance the policy of any
political party.

FUNCTIONS OF THE PUBLIC RELATIONS PRACTITIONER

Public relations practitioners are involved in a variety of work assignments or functions,

which may include the following:

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PROGRAMMING AND COUSELLING/PLANNING AND ADVISING

This involves determining needs, priorities, goals, publics, objectives and categories.
Essentially it means collaborating with management or clients in a problem-solving
process.

MEDIA RELATIONS AND PLACEMENT

This is one of the key functions in which practitioners may be engaged. It involves
contacting news media, magazines, Sunday supplements, freelance writers and trade
publications with the intention of getting them to publish or broadcast news and features
about the organization. It may also involve responding to media requests for information
or spokespersons. Finally, it may mean arranging for the production, booking and
placement or broadcasting of corporate advertisements used as part of a public relations
programme.

ORGANISING

The public relations practitioner could handle a variety of functions ranging from media
conferences, conventions and exhibitions to open-house days, anniversary celebrations,
fundraising events, contests, awards programmes and sponsorships.

WRITING

The public relations practitioner should be adept at writing news releases, newsletters,
correspondence, reports, booklets, texts, radio ad television copy, film scripts, trade paper
and magazine articles, corporate advertisements, product information and technical
material.

EDITING

In addition to researching and writing special features, practitioners could be involved in

editing special publications, employee newsletters, shareholders’ reports, and other
communications directed at internal and external publics.

PRODUCTION

Production is multi-faceted and very challenging. It involves creating communications

using multi-media knowledge and skills, including art, photography and design for
brochures, booklets, reports, corporate advertisements and occasional publications;
recording and editing audio and video types; and preparing audio-visual presentations.

SPEAKING

This either involves speaking yourself or arranging for others to address meetings. The
process of gathering information enables organizations to plan programmes in response to
the public and problem situations, monitor their effectiveness during implementation and
evaluate their overall impact.

TRAINING

This involves working with executives and other organizational representatives to prepare
them for dealing with the media and for making presentations and other public
appearances. Practitioners could also assist with in-service staff development.

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 MANAGEMENT

Another very important function is the management of public relations function with
regard to personnel, budget and action programme.

What to look for in a public relations practitioner

Such diversity of functions calls for a wide range of skills and experience.

 Organizational ability and administrative talent. There are no second chances in

public relations, so any activity must be handled right the first time.
 Communication proficiency (both written and spoken). The ability to
communicate in more than one language is a major advantage.
 A lively, enquiring mind. Public relations people are essentially problem solvers.
They look for new ways of doing both conventional and unconventional things.
 Tenacity and adaptability. The ability to work long and inconvenient hours is
essential. The ability to work under pressure and to be flexible is important too.
 Moral courage and integrity. It is important for public relations people to stand
up for what they believe is right. An independent spirit and moral integrity are
essential.
 Professionalism. Ideally membership of the professional body PRISA should be
given top priority.

Ethics of public relations practitioners

Ethics is popularity described as the development of professional standards of conduct.

Ethics in public relations more specifically refers to responsible, professional conduct based
on group standards and individual norms.

Registered individuals of the Public Practitioners (APRs) base their professional principles on
the fundamental value and dignity of the individual, holding that the free exercise of human
rights, especially freedom of speech, freedom of assembly and freedom of the media, are
essential to the practice of public relations.

In serving the interest of clients and employers, practitioners dedicate themselves to the goals
of better communication, understanding and co-operation among diverse individuals, groups
and institutions of society, and of equal opportunity of employment in the public relations
profession.

Registered individuals of PRISA and/or Accredited Public Relations Practitioners (APRs)

pledge:

 to conduct themselves professionally, with truth, accuracy, fairness and

responsibility to the public and towards their colleagues;
 to improve their individual competence and advance the knowledge and
proficiency of the profession through continuing research and education; and
 to adhere to the articles of the Code of Professional Standards for the Practice of
Public Relations as adopted by the National Executive of the Public Relations
Institute of Southern Africa on 3 May 1993 in Cape Town.

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ACCREDITATION

In recognition of the profession of public relations practice, upholding the Code of

Professional Standards signifies the following:

 that the accredited practitioner is recognized publicly as a professional exponent

of the discipline of public relations;
 that accreditation provides impartial witness to the professional standing of the
accredited individual;
 that both the accredited practitioner and the public have the right of recourse to
the Accreditation and Ethics Council of PRISA;
 that the accredited practitioner may use the designation APR with his/her name;
and
 that the accredited practitioner, in upholding his/her pledge to adhere to this
Code, will continue to strive for excellence in professional conduct.

PERSONAL CONDUCT

 In the conduct of his/her professional activities, he/she shall respect public

interest and the dignity of the individual. It is his/her personal responsibility at
all times to deal fairly and honestly with his/her client or employer, past or
present, with his/her colleagues, with the media of communication and with the
public.
 He/she shall conduct his/her professional life in accordance with public interest.
He/she shall not conduct himself/herself in any manner detrimental to the
profession of public relations.
 He/she has a positive duty to maintain integrity and accuracy, as well as generally
accepted standards of good taste.
 He/she thus shall not knowingly, intentionally or recklessly communicate false or
misleading information and is obliged to use proper care to avoid doing so
inadvertently.
 He/she shall not guarantee the achievement of specified result beyond his/her
direct control. Neither shall he/she negotiate or agree terms with a prospective
employer or client on the basis of payment only contingent upon specific future
public relations achievements.
 He/she shall, when acting for a client or employer who belongs to a profession,
respect the code of ethics of that other profession and shall not knowingly be
party to any breach of such a code.

CONDUCT TOWARDS CLIENTS/EMPLOYERS

 He/she shall safeguard the confidences of both present and former clients and
employers, and shall not disclose or make use of information given or obtained in
confidence from his/her employer or client, past or present, for personal gain or
otherwise, or to the disadvantage or prejudice of such a client or employer.
 He/she shall not represent conflicting or competing interests without the express
consent of those involved, given after full disclosure of the facts; nor place
himself/herself in a position where his/her interests are or may be in conflict with
a duty to a client, without full disclosure of such interests to all involved.
 He/she shall not be party to any activity which seeks to dissemble or mislead by
promoting a disguised or undisclosed interest while appearing to further another.
It is his/her duty to ensure that the actual interest of any organization with which
he/she may be professionally concerned, is adequately declared.

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  He/she shall not in the course of his/her professional services to the employer or
client, accept payment, either in cash or in kind, in connection with these services
from another source without the express consent of his/her employer or client.

CONDUCT TOWARDS COLLEAGUES

 He/she shall not maliciously injure the professional reputation or practice of

another registered individual or accredited public relations practitioner or other
professional.
 He/she shall at times uphold this Code, shall co-operate with colleagues in doing
so and in enforcing decisions on any matter arising from its application.
 A registered individual or accredited public relations practitioner who knowingly
causes or permits another person or organization to act in a manner inconsistent
with this Code or is party to such an action himself/herself, shall himself/herself
be deemed to be in breach of it.
 If he/she has reason to believe that another colleague has been engaged in
practices, which may be in breach of this Code, or practices, which may be
unethical, unfair or illegal, it is his/her duty to promptly advise the Institute or the
Council.

CONDUCT TOWARDS THE BUSINESS ENVIRONMENT

 A registered individual or an accredited public relations practitioner having a

financial interest in an organization, shall not recommend the use of that
organization nor make use of its services on behalf of his/her client or employer,
without declaring his/her interest.
 In performing professional services for a client or employer he/she shall not
accept fees, commissions or any other consideration from anyone other than the
client or employer in connection with these services, without the express consent
of the client/employer, given after full disclosure of the facts.
 He/she shall sever relations, as soon as possible, with any organization or
individual if such a relationship requires conduct contrary to this Code.

CONDUCT TOWARDS CHANNELS OF COMMUNICATION

 He/she shall not engage in any practice, which tends to corrupt the integrity of
channels or media of communication.
 He/she shall identify publicly the name of the client or employer on whose behalf
any public communication is made.

CONDUCT TOWARDS THE STATE

 The registered individual or accredited public relations practitioner respects the

principles contained in the Constitution of the country in which he/she is resident.
 He/she shall not offer or give any reward to any person holding public office,
with intent to further his/her interest or those of his/her employer, if such action is
inconsistent with public interest.

CONDUCT TOWARS PRISA AND THE ACCREDITATION AND ETHICS COINCIL OF

PRISA

 The registered individual and accredited public relations practitioner shall at all
times respect the dignity and decisions of PRISA and the Accreditation and
Ethics Council of PRISA.

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  Registered individuals of PRISA shall be bound to uphold the annual registration
fee levied by PRISA, which fee is payable as determined by the National
Executive of PRISA.
 The individual enjoying registration as an accredited public relations practitioner,
shall be bound to uphold the annual registration fee levied by the Council/PRISA,
which fee is payable as determined by the Council/PRISA.

DISCIPLINARY RULES

A registered individual or accredited public relations practitioner who infringes the Code of
Professional Standards, in the opinion of the National Executive of PRISA or the
Accreditation and Ethics Council of PRISA, shall be informed in writing and shall be given
reasonable opportunity to state his/her defence, either in writing or by personal attendance at a
meeting of a Disciplinary Committee appointed by the National Executive or the Council and
specially convened for this purpose. If, in the opinion of the Disciplinary Committee, the
complaint has been substantiated, the Committee will report its findings to the National
Executive or the Council at its next ordinary meeting. The National Executive or the Council
shall, on a majority vote, decide on the action to be taken.

CONCLUSION

It is obvious that the adoption of a professional association’s code of ethics does not
automatically imply that all the practitioners belonging to that association will act in a moral
and ethical manner. The problem is that a public relations does not enjoy statutory protection
and public relations practitioners are not required to register with a professional council
before being allowed to practice, as is the case with for example medical practitioners. This
means that bodies such as PRISA and the Accreditation and Ethics Council of PRISA can
enforce their codes of ethics only in respect of practitioners who are member and, as a
consequence, have no jurisdiction over practitioners who are not members. Codes of ethics
are important, however, in that they reflect a concern and a willingness to raise ethical levels
and, furthermore, they serve as a yardstick of conduct.

THE PRACTICE OF PUBLIC RELATIONS

In this context, long-term success in an organization’s public relations calls for:

 Commitment and participation by management;

 Competent public relations practitioners;
 Centralized policy-making;
 Communication (two-way) with both internal and external publics; and
 Co-ordination of all efforts towards defined goals and objectives.

Public Relations is a staff function, one of several that advises and support senior
management. Thus, practitioners need to understand the staff role.

The line-staff principle of management originated in the military, but has been extended to
most organizations of the same size. In industry, for example, the product- and profit-
producing functions – engineering, production and marketing – are line functions. Staff
functions are those that advise and assist the executive – finance, legal, personnel and public
relations. These functions become more and more necessary as organizations increase in size
and complexity.

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The difference between line and staff management is important to remember. Line
management determines the ground rules and sets the course. Public relations works within
these rules and with others on matters that have an impact on the organization’s relationships
with others, inside and outside. In these matters, both line and staff managers must
participate. Once all points of view have been aired and debated, the final decisions may
result from consensus, or from choices made by line management. Final decision is the
province of senior line management.

However, since managing organizational relationships is an increasingly important function,

many public relations practitioners have moved from staff support positions to line
management. In this capacity, the public relations executive becomes part of strategy
meetings where important corporate decisions are made, and helps to make those decisions.

The public relations industry, in serving the needs of different organizations and institutions,
encompasses a number of different areas of specialization. Public relations practitioners
could specialize in terms of one of the organization’s target publics, i.e. relations with the
media or with employees. They also specialize with regard to the types of institutions, non-
profit organizations, etc.

Whatever the type of organization on whose behalf it is executed, public relations are either
practiced on a corporate or a consultancy basis. Although there are a number of variations on
these two approaches, in essence it means the following:

 An organization employs a public relations practitioner or has an internal public

relations department with a number of public relations practitioners operating at
different levels (e.g. practitioner or manager) and specializing in different public
relations functions (e.g. publications, media).
 An organization retains a public relations consultant or consultancy to handle its
public relations activities on a retainer or ad-hoc basis.

It’s not unusual for an organization to have an internal public relations practitioner or
department and to retain a consultant or consultancy.

CORPORATE PUBLIC RELATIONS

The following aspects characterize public relations in the corporate sphere:

 Most corporate practitioners fit into a well-established public relations

department within the overall structure of the organization.
 In many manufacturing and marketing organizations, public relations fall under
the marketing division.
 In service organizations, public relations may be split into product promotion and
public affairs.
 The structure of in-house departments is fairly standard and in companies with a
sophisticated approach to public relations, the practitioner is a member of the
management team. These practitioners must understand the business or industry
in which their companies operate.
 Remuneration varies from industry to industry and even from company to
company.

ADVANTAGES

Corporate practitioners have essentially four factors working in their favor:

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  Team membership;
 Knowledge of the organization;
 Economical to the organization; and
 Availability to other departments/associates.

Team membership is possibly the greatest advantage. The confidence, trust and support of
colleagues that go with it tend to overcome or to relegate to unimportance any antagonism
toward the public relations function that might exist in a company. At the same time, the
close connection between the function, the department and the CEO, provides first-team
rather than marginal membership. The price of admission is confidentiality and loyalty.

Knowledge of the organization is another important plus factor. Corporate practitioners know
their organization intimately – their history, policies, products and services but, above all, the
relationship between individuals and their functions. They can advise where needed,
reconciliate and render services from within to induce attitudes and actions that will bring
about harmonious relationships inside as well as outside.

The economical aspect simply results from residence and integration in an organization. Full-
time permanent staff is typically more cost effective than hiring outside counsel and services.

The availability of corporate practitioners has many facets: they are there when needed; they
can execute a number of tasks at short notice; they can handle emergencies; and, most
importantly, they can act as spokespersons for the organization.
They therefore have acceptability and authority, both internally and externally.

DISADVANTAGES

The factors working in favor of corporate practitioners can also work to their disadvantage.
For example, availability and loyalty can result in loss of objectivity, especially with regard to
internal conflict. There is the danger of being co-opted – becoming a “yes”-man or woman.
Such a situation can deteriorate into one of domination and subjectivity, resulting in a loss of
respect for the person and the function by colleagues and employer. Practitioners walk a
narrow line between rendering services that are valuable, helpful and appreciated, and
rendering subservience that is easily replaced. They key is team play, but while retaining
one’s individuality and objectivity.

Availability has another down side. Practitioners may find themselves in the role of stand-ins
for top executives who make commitments and is see as second choice, but provided he/she
has the authority to commit the organization to supporting a particular cause, this is often a
better arrangement, since the CEO is hard pressed to attend meetings.

CONSULTING PUBLIC RELATIONS

The following aspects characterized public relations in this sphere (PRISA 1987);

 The number of clients involved mostly determines the size of a private practice.
 The people who handle a portfolio of clients are called account executives. They
give advice to clients in shaping their public relations plans and execute them
jointly.
 Private practitioners usually base their working relationship with their clients on a
contract report.

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  The range of services offered by consultancies varies from the full-house services
of larger consultancies to a fairly narrow range of specialist services such as
promotions and media relations.
 Costs and fees are determined on a project, hourly or retainer basis.
 Incidental costs are usually charged as extras.

ADVANTAGES

Public relations consultants rank their variety of talents and skills as their greatest advantage
when compared with the internal corporate practitioner. Their objectivity, as relatively free
agents untrammelled by the politics within an organization, ranks second. Their range of
experience is third, the geographical scope of their operations fourth and the ability to
reinforce and upgrade a client’s internal staff. Fifth.

Depending on the size of the consultancy, clients can draw on the wide range of expertise of
individual consultants, who collectively are exposed to a number of clients and different
situations daily.
A number of consultants emphasize the flexibility of their staff and their operations as a prime
advantage. There large number of contacts and specialized knowledge provide immediate
input to tackle clients’ needs, whatever these may be – media relations, promotions, lobbying
or social investment.

Sometimes the consultants’ reputation is a major advantage. Outside “experts” can often
introduce ideas that internal staffers have struggled unsuccessfully to place on the agenda.
Knowing that the consultants’ reputation and subsequent referrals are on the line helps ensure
performance.

There is no doubt that the range of a successful consultant’s services is wide. In a sense, a
public relations firm is a repository of living case histories. Each project adds to its fund of
knowledge. Experience and versatility of staff makes this synergy possible. The consultant,
therefore, approaches each case holstered by familiarity with the type of situation and
knowledge of the success or failure that attended previous encounters.

DISADVANTAGES

With rare exceptions, the rendering of a consultancy service meets with some opposition
ranging from non-acceptance to antagonism. This is, at least in theory, the consultant’s most
serious handicap. Resistance to outsiders is a natural human trait.

Consultants, however, do not rank this problem at the top. They overwhelmingly cite
questions of cost as the chief stumbling block with clients. They list “threat to old guard and
set ways” as the second most persistent handicap. Resistance to “outside” advice comes in
third, and fourth is unforeseen conflicts of personality or conviction.

Other problems include a lack of understanding of public relations by clients; client’s inertia
when it comes to doing when consultants want think ought to be done; and the unavailability
of clients at times when consultants want decisions. This would suggest a problem of
priorities.

Criticism of consultants by corporate practitioners includes their lack of real understanding of

the organization and how it operates, their superficial grasp of an organization’s corporate
culture and their lack of real commitment. For them it may be just another account. They
may also have divided loyalties, not on a professional basis, but with regard to time and

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availability. Account executives may move on, so there could also be a loss of continuity
between organization and consultancy, although this is not normally a problem.

CONSULTANCY COSTS AND SELECTION CRITERIA

The services of a consultancy firm may be obtained for a specific project or for a continuing
service, review able and renewable at intervals.

 a monthly retainer (service fee);

 a retainer plus monthly billing for actual staff time on an hourly basis or per-diem
basis;
 a base free, billed monthly, to which are added increments for services performed
beyond the retainer; or
 straight hourly charges.

Out-of-pocket expenses are generally billed at cost and are exclusive of the fee.

The variations in fees charged by different consultancies reflect to a large degree the cost of
the staff used on the project, executive time and supervision, overhead costs and a reasonable
profit for doing the work. Unlike advertising agencies, who make their money on discounts
on advertisements placed in the media on clients’ behalf, plus production charges for creating
these advertisements, public relations consultants charges their time like lawyers and
accountants. To get the best results, organizations are therefore advised to look for the
following criteria when selecting a consultant:

 Experience in the fields with which the organization is concerned;

 Professional background and competence;
 Satisfactory reputation
 Current client list; and
 Facilities required (research or computer expert, etc.)

CONCLUSION

The debate about whether it is better for an organization to have its own staff, to use
consultants exclusively or to have a combination of the two, rests on the size of the
organization and its needs.

The corporate public relations practitioner, working on his or her own, will be more of a
generalist and handle a wide range of techniques. Depending on the degree of specialization
and size of operations, the corporate public relations practitioner might be involved in only
one of the techniques of public relations, e.g. media relations or public affairs.

Ideally, the bet arrangement is a compact internal public relations department, working with
outside consultants on specific assignments. This arrangement could provide outstanding
results on a cost-effective basis

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 BIBLIOGRAPHY

Labour relations act 1995, republic of South Africa

Skills development act, 1998, republic of South Africa

Compensation for occupational injuries and diseases act 1993, republic of South Africa

Skinner C and Essen Von L, 1998: The handbook of public relations 4th edition published by
international Thomson Publishing Southern Africa Pty Ltd.

Forster. G, 1989, Construction site studies production, administration and personnel, 2nd
edition published by Longman Singapore Publishers

Griffin. W.R., (1990) Management Third Edition

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