Local Midrand Gauteng news, South Africa
ROLE OF FINANCIAL STATEMENTS IN THE CIDB REGISTRATION PROCESS
The NHBRC carries out 4 to 8 home inspections at each phase of the home building process.The whole objective of the home inspections, is to ensure that the home is built in line with its minimum building standards.These building standards can be found in references found within the home building manual that applicants receive when registering the National Home Builders Registration Council.
The manual references center around the SANS series, most importantly, the SANS Manual 10400, 10082, 10137 as well as 2001. These manuals go into deep details with each topic of the home building process such as floor spaces, roof angles, concrete mixes etc. Usually, the inspections are carried out by a home inspector, supervised by a quality assurer. The quality assurer is there to conduct an audit on the work performed by the home inspector.
Usually, before the initial visit, the quality assurer together with the home inspector, will load the approved municipal building plans together with the home inspections checklist loaded onto the NHBRC’s mobile app. They will also familiarize themselves with the site address before making their way. It is usually advisable for the home builder to be on site with the initial visit, however, it is not compulsory, as some home builders manage multiple building sites.
None the less, it is always advisable, to leave someone competent who will greet and introduce the NHBRC inspectors to the building site and show them around. It is usually advisable, never to start building prior to the initial site visit. However, the only site preparation that you can do, is to excavate the trenches, however, do not pour concrete as yet into the trenches. Some of the home inspections procedures included on the home inspector’s checklist, is the checking of the adopted mix ratios of the different uses of concrete mix. For example, your technical manager might need to explain the water ratio that is going to be used for mixing concrete before it gets poured into the trenches.
Each phase of the home inspection process can go either way. If you pass the first phase and the secondary phases, chances, there are going to be fewer home inspections coupled with less delays for the completion of your home building. However, if you fail, the initial home inspections, then expect to spend more money and time, busy correcting your failures to meet the minimum home building standards.
Usually, if there is a failure in your home building process, the NHBRC shall give you 7 working days in which to rectify the short coming. On the secondary follow up process, you must make sure that all practical evidence is available such as engineering drawings etc. If the NHBRC inspector is happy with the corrections, you can then move onto the next phase. However, if you do not meet the requirements on a subsequent visit, your building plans will be halted by the NHBRC. Your file shall be sent to the legal department, disciplinary hearings shall be scheduled and multiple penalties and lawsuits from various parties will ensue.
It is advisable that you thoroughly develop a checklist of the minimum requirements to be observed when building a home. Most home builders do not know the minimum standards. You can consult the SANS 10400, 10137, 10082, 2001 as well as the home building manuals issued by the NHBRC to ensure that you maintain the minimum standards prescribed by the National Home Builders Registration Council.
The NHBRC is a statutory body recognized by the South African Courts and have far reaching powers. Any disobedience of the act can see you thrown in jail. Especially, the part of conducting the home building process without being registered with their body. Builders must remember, the National Home Builder’s Registration, only prescribes the minimum as well as the maximum standards to be adhered to when building a home. One such standard requirement is the minimum and maximum diameters of a cavity wall.
Please take care & make sure that you use NHBRC accredited architectural and engineering firms when coming up & executing your house plans. It can prove to be quite too costly not to comply with the NHBRC’s minimum & maximum building standards requirements. For more articles visit https://fixonate.co.za.
CIDB FINANCIAL CAPABILITY
When registering for the CIDB grades 2 & higher, the CIDB starts introducing terms such as financial capability, works capability as well as available capital. If you are an engineer by trade, this can be daunting as these terms belong more the accounting lingual.
In this article, I will try to explain what financial capability means in as lay man’s terms as possible without confusing you with the accounting lingual. Financial capability simply refers to 3 measurement items that are to be found within your company’s financial statements.
Those terms are Revenue, Assets & Liabilities.
As I said, I do not want to use the accountant’s language and I will be breaking these into your everyday language use. Revenue refers to how much money your engineering firm made within the past 12 months of a financial year.
But before I lose here, accountants do not refer to Revenue as the actual money received in your bank but rather, the actual sales that you made within that particular financial year. Let me illustrate this with an example, Let’s say you scored one contract for the whole year with a contract value of R1 Million. And let’s assume that within that year, you only completed 80% of that project, the accountant will only recognize R800,000 as your revenue. They are not interested in whether that money came into your bank or not, as long as there is satisfactory proof that 80% of the project was completed and that you submitted an enforceable invoice.
So, what does this mean for the CIDB is that the CIDB will take into consideration your revenue figure in conjunction with other factors when deciding to upgrade you for any grade higher than 2. The higher your revenue figure, the higher the CIDB grade you might qualify for as this demonstrates your financial capability to put financial resources together to carry out and finish future larger construction projects.
The second measurement item refers to your asset structure. Assets according to accountants include items such as building plant such as excavators, graders, water tanks, bomags, computer equipment, furniture, office fittings, office accessories, inventory such as cement & bricks on hand, invoices issued but not yet paid by your customers etc. The more of these assets you have, the greater your financial capacity score.
However, a third measurement factor comes into play here. There is no point in having engineering equipment but you owe a lot of money on it, and for this reason, the CIDB takes into consideration, the total amount of funds owed by your business in order to arrive at your net assets value. This amount is what the CIDB refers to as your equity within the business. In other words, if your business had to be sequestrated, how much of those assets would you remain with.
Now, since you are an engineer and not an accountant, this information might sound all too complicated to present to the CIDB, however, the CIDB does not need evidentiary proof of it. All this information is found in the balance sheet presented within your financial statements when applying for an upgrade.
Therefore, to wrap it up, your financial capability score will be measured solely on the financial statements presented to the CIDB by a qualified registered chartered accountant or another accountant in good standing with any of the accounting professionals controlling body.
If the CIDB doubts the information presented by the accountant in terms of your financial capability score, they might request for supplementary information, such as two year bank statements, statement of VAT submissions to the South African Revenue Services or financial reports issued by the governments basic accounting system for projects carried out in the public sector.
CIDB grades are awarded best on how well you score on the CIDB’s financial capabilities scale. The higher the score, the higher the CIDB grade. Contractors must not confuse financial capability score together with works capability.
The two are totally different items however, the main difference between the two, is that financial capability is used to measure your future financial capabilities whether works capability measures your past capabilities by looking at the actual highest project successfully completed by your firm within the past 5 financial years.
Take care and wishing you the best with your CIDB registration & Upgrade. For more information about CIDB registration and upgrades visit https://fixonate.co.za/services/cidb-registration/.
NHBRC HOME INSPECTIONS
The NHBRC carries out 4 to 8 home inspections at each phase of the home building process.The whole objective of the home inspections, is to ensure that the home is built in line with its minimum building standards.These building standards can be found in references found within the home building manual that applicants receive when registering the National Home Builders Registration Council.
The manual references center around the SANS series, most importantly, the SANS Manual 10400, 10082, 10137 as well as 2001. These manuals go into deep details with each topic of the home building process such as floor spaces, roof angles, concrete mixes etc. Usually, the inspections are carried out by a home inspector, supervised by a quality assurer. The quality assurer is there to conduct an audit on the work performed by the home inspector.
Usually, before the initial visit, the quality assurer together with the home inspector, will load the approved municipal building plans together with the home inspections checklist loaded onto the NHBRC’s mobile app. They will also familiarize themselves with the site address before making their way. It is usually advisable for the home builder to be on site with the initial visit, however, it is not compulsory, as some home builders manage multiple building sites.
None the less, it is always advisable, to leave someone competent who will greet and introduce the NHBRC inspectors to the building site and show them around. It is usually advisable, never to start building prior to the initial site visit. However, the only site preparation that you can do, is to excavate the trenches, however, do not pour concrete as yet into the trenches. Some of the home inspections procedures included on the home inspector’s checklist, is the checking of the adopted mix ratios of the different uses of concrete mix. For example, your technical manager might need to explain the water ratio that is going to be used for mixing concrete before it gets poured into the trenches.
Each phase of the home inspection process can go either way. If you pass the first phase and the secondary phases, chances, there are going to be fewer home inspections coupled with less delays for the completion of your home building. However, if you fail, the initial home inspections, then expect to spend more money and time, busy correcting your failures to meet the minimum home building standards.
Usually, if there is a failure in your home building process, the NHBRC shall give you 7 working days in which to rectify the short coming. On the secondary follow up process, you must make sure that all practical evidence is available such as engineering drawings etc. If the NHBRC inspector is happy with the corrections, you can then move onto the next phase. However, if you do not meet the requirements on a subsequent visit, your building plans will be halted by the NHBRC. Your file shall be sent to the legal department, disciplinary hearings shall be scheduled and multiple penalties and lawsuits from various parties will ensue.
It is advisable that you thoroughly develop a checklist of the minimum requirements to be observed when building a home. Most home builders do not know the minimum standards. You can consult the SANS 10400, 10137, 10082, 2001 as well as the home building manuals issued by the NHBRC to ensure that you maintain the minimum standards prescribed by the National Home Builders Registration Council.
The NHBRC is a statutory body recognized by the South African Courts and have far reaching powers. Any disobedience of the act can see you thrown in jail. Especially, the part of conducting the home building process without being registered with their body. Builders must remember, the National Home Builder’s Registration, only prescribes the minimum as well as the maximum standards to be adhered to when building a home. One such standard requirement is the minimum and maximum diameters of a cavity wall.
Please take care & make sure that you use NHBRC accredited architectural and engineering firms when coming up & executing your house plans. It can prove to be quite too costly not to comply with the NHBRC’s minimum & maximum building standards requirements. Visithttp://fixonate.co.za/nhbrc-home-inspections/ for more information.
HOW TO SCORE A CONSTRUCTION CONTRACT ONE NOTCH ABOVE YOUR EXISTING CIDB GRADE
The National Contractor Development Program was developed by the government to promote capacity, equity ownership, skills as well as performance across the various CIDB grade levels.
This task was given to the CIDB, and as such, the CIDB had to develop mechanisms for cross-pollination among the different CIDB levels.
One of these mechanisms is the recognition of joint ventures as well as sub-contract agreements within the public sector.
For this reason, companies that have a lower CIDB level can actually qualify for CIDB grade higher than one notch, by getting into a joint venture agreement with one or more other contractors registered on the CIDB’s database.
The CIDB even recommends companies to use the standard joint venture agreements published on most construction body websites.
One of these is the South African Federation of Constructions Engineering Contracts as well as the Joint Buildings Contracts Committee. The standard terms on these contract templates are designed to contain clauses that will ensure equitable share of managerial, skills share as well as contributions by the various parties.
More companies are encouraged to join joint ventures, especially at lower levels. Joint contracts start at level 3. What this means is that there are no joint venture combinations available at the CIDB entry level 1, however, 3 grade 2 companies can enter into a joint venture, to be recognized at a CIDB level 3 whereas 2 grade 8 can join to form a grade 9.
There are various combinations that can be made which can be found on the CIDB’s website however, the CIDB also offers what they call the electronic grading calculator, which can be used to determine the joint venture CIDB level agreement that can be achieved simply by entering the CRS numbers of active CIDB contractors. Getting a company to partner up on a joint venture is one of the quickest & effective ways of securing a government construction tender, one level above your engineering firms notch.
The arrangements for a joint venture, are quite easy. All it takes is for the combined companies to be in good standing at the CIDB at the time of the application as well as a joint venture agreement signed amongst the parties.
As I said before, joint venture agreement templates approved by the CIDB can be found easily on the CIDB’s website in PDF format, converted into word documents, and customized according to the party’s requirements.
They do not cost a cent and you do not have to involve lawyers as long as the terms are fair & equitable to both parties.
One rule that is important when forming a joint venture, is that there has to be a lead contractor. The lead contractor is more like the principal contractor of the project and the lead contractor has to be at least one notch below the required CIDB level.
For example, if the lead contractor, is aiming for a grade 9, that lead contractor must already be registered in grade 8.
The great thing about Joint venture agreements is that the awarding departments are not normally too concerned with the detailed terms of the joint agreement unless of course, the tender was advertised in terms of what they call a targeted group or preferential procurement requirement.
For example, if the targeted group is black women, then the joint venture would be best formed by companies that have a majority shareholding of black women.
Ownership, managerial as well as skills transfer must be equitably demonstrated in such a joint venture.
These kinds of joint venture agreements are specifically governed by the South African National Standards manual referred to as the SANS1914. If a construction contract calls for such an undertaking, it would be best to get hold of this manual in order to develop a joint venture agreement that is aligned to the minimum requirements contained within this manual.
Please do not waste your resources trying to obtain a lawyer to draft a contract for you in this regard without following the requirements of the SANS1914 unless you want to reduce the chances of your joint venture bid from succeeding.
To conclude in this article, a joint venture agreement is a good way to secure a construction contract one notch above your current existing CIDB grade. For more construction related articles visit https://fixonate.co.za
