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CONSTRUCTION WORLD
MAY
2016
The South African Competition Commission
recently ruled that the practice of using fee
guidelines within the Built Environment
Industry is non-competitive and effectively
results in price-fixing.
ARE FEE GUIDELINES A
THING OF THE PAST?
Managing director, Terry Brown.
costly and least adversarial means to resolve their dispute. If under-
taken by a suitably experienced and qualified construction professional,
mediation can be just that,” adds Brown.
Like many emerging markets, South Africa is experiencing difficult
economic conditions which are forecast continue for the foreseeable
future. “What we are experiencing in financial markets, not only in
South Africa but internationally, is unprecedented. Uncertainly and
volatility are set to be the order of the day. In these turbulent times
many investors are looking for ‘bricks and mortar’ as a secure invest-
ment option and I believe that that this trend will be sufficient to ensure
that the South African property industry will not only endure, but thrive.
Positive outlooks such as this are needed if the industry is to shake
off the recent downturn. Construction confidence indexes have shown
a negative sentiment in the past two quarters, but output and order
books appear to have shrugged off this downbeat outlook. We asked
Terry Brown for a final comment on this.
“When reviewing the scale of ongoing development in areas such
as Gauteng and the Western Cape, it does not tally with the high levels
of pessimism in the local construction industry. Africa is a wakening
economic giant. We need to embrace this going forward, and adopt the
more positive outlook seen other growing markets on the continent.”
This follows an application, in 2014, by the Council for the Built
Environment to have the practice of Fee Guidelines exempted
from the Competition Act. Simon Berry, director, Fresh Projects,
an online business platform tailor made for South African built environ-
ment professionals, says the rejection of fee guidelines could potentially
be positive move for the local industry.
“South Africa is more than two decades behind international markets
in terms of its use of fee guidelines. A decision to move away from using
them could be good news for the local industry, although it will prob-
ably take a decade to fully eradicate the practice in totality,” says Berry.
The Competition Commission claims that the use of fee guide-
lines reduces price competition and could also result in prices within
the built environment being set above the competitive level to the
detriment of consumers.
“If we had to follow international practice then we should have
scrapped this approach a long time ago. There have been too many
guessing games within the industry, with so many professionals relying
too heavily on fee scales and not understanding the true cost of a
project,” says Berry.
He says that this results in a bidding frenzy on discount percentages
and bidders who are not even aware of what amount will result in a
profitable job.
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