5December2023**

IN THE NEC3 DISPUTE ADJUDICATION

between

ESKOM HOLDINGS SOC LTD Employer

SOUTHEY CONTRACTING (PTY) LTD Contractor

ADJUDICATION DECISION: ON THREE DISPUTES

[Note: A reference to page numbers in bold format is a reference to the relevant page

in the dispute referral documents of the parties. Page numbers commencing

with C is a reference to the Contractor’s dispute referral. Page numbers

commencing with E is a reference to the Employer’s further information forming

part of the dispute referral. Words underlined are for the purpose of emphasis

and elucidation.]

1. Adjudicator has considered Contractor’s dispute referral, in respect of dispute 1 in

volume 1 composed of pages C1 to C17, with annexures of pages C18 to C159; dispute

2 in volume 2 composed of pages C1 to C24, with annexures of pages C25 to C103;

dispute 3 in volume 3 composed of pages C1 to C26 with annexures C27 to C69, and

Employer’s further information in respect of dispute 1 composed of pages E1 to E7;

dispute 2 composed of pages E1 to E69; dispute 3 composed of pages E1 to E11. The

fact that adjudicator does not make reference to all the parties’ representations and
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allegations contained in the documents must not be construed as adjudicator not having

taken these representations and allegations into account when making his decision.

2. Contractor and Employer concluded their contract in or about 28 June 2010 for

the provision of the services set out the Employer’s service information, which

contract terminated after twelve years on 30 June 2022.

3. The contract is the NEC3 Term Service Contract June 2005 (TSC3) Option A

(Priced Contract with Price List) including inter alia Option W1 (Dispute

Resolution Proceedings).

JURISDICTION

4. The dispute resolution procedure set out in Option W1 envisages four types of

dispute arising under or in connection with the contract, being a dispute about:

1) an action of the service manager, 2) the service manager not having taken an

action, 3) a quotation for a compensation event being treated as having been

accepted, and 4) any other matter.

5. The actions of the service manager in the first two categories of dispute, are those

actions stated in the contract (core clause 10.1), which includes the action of the

service manager to assess amounts due to Contractor at the end each monthly

assessment interval (core clause 50.1). The amount due is inter alia the price for

monthly services provided (core clause 50.2). The price for services provided to

date is the total of the price for each lump sum in the price list, which Contractor

has completed and where a quantity is stated for an item in the price list, the price

is calculated by multiplying the quantity that contractor has completed by rate

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[core clause 11.2[17]]. The prices are the amounts stated in the price column of

the price list [core clause11.2[19].

6. Contractor, in notifying three disputes under the contract, relating to the amount

due to Contractor in terms of core clause 50.2 is not disputing the service

manager’s action in making his assessment of the amount due, but is claiming

that the amount due is more than the amount assessed by the service manager.

7. The dispute about whether an incorrect amount was paid to Contractor in terms

of core clause 50.2 is a dispute about ‘Any other matter’ in terms of Option

W1.3(1).

8. In the circumstances adjudicator has jurisdiction to make a decision on the three

disputes which exist between the parties concerning the computation of the

amount due as specified in core clause 50.2.

9. Adjudication is not an arbitration (clause Option W1.3(10)); it is a means by which

adjudicator is called upon to make a quick decision in a dispute which the parties

themselves are unable to settle, and to assess the financial effect of his decision.

THE CONTRACT

10. The clauses of the TSC relevant to the dispute are as follows [the emphases of
underlining are provided as assistance to the parties in reading the clauses in
relation to this decision]:

10.1 The Employer, the Contractor, and the Service Manager shall act as
stated in this contract and in a spirit of mutual trust and co-operation.

11.1 In these conditions of contract, terms identified in the Contract Data

are in italics and defined terms have capital initials.
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11.2 (12) T h e Price List is the p r i c e l i s t unless later changed in

accordance with this contract.

11.2 (13) To Provide the Service means to do the work necessary to

provide the service in accordance with this contract and all
incidental work, services and actions which this contract
requires.

11.2 (17) The Price for Services Provided to Date is the total of
• the Price for each lump sum item in the Price List
which the Contractor has completed and
• where a quantity is stated for an item in the Price List,
an amount calculated by multiplying the quantity which
the Contractor has completed by the rate.

11.2(19) The Prices are the amounts stated in the Price column of
the Price List. Where a quantity is stated for an item in
the Price List, the Price is calculated by multiplying the
quantity by the rate.
12.3 No change to this contract, unless provided for by the
conditions of contract, has effect unless it has been agreed,
confirmed in writing and signed by the Parties.
Any extension, concession, waiver or relaxation of any action
stated in this contract by the Parties, the Service Manager, or
the Adjudicator does not constitute a waiver of rights, and does
not give rise to an estoppel unless the Parties agree otherwise
and confirm such agreement in writing. [Z6].

12.4 This contract is the entire agreement between the Parties.

17.1 The Service Manager or the Contractor notifies the other as soon as
either becomes aware of an ambiguity or inconsistency in or between
the documents which are part of this contract. The Service Manager
gives an instruction resolving the ambiguity or inconsistency.

25.2 The Employer and the Contractor provide facilities and other things
as stated in the Service Information. Any cost incurred by the
Employer as a result of the Contractor not providing the facilities and
other things he is to provide is assessed by the Service Manager and
paid by the Contractor.
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50.1 The Service Manager assesses the amount due at each assessment
date. The first assessment date is decided by the Service Manager to
suit the procedures of the Parties and is not later than the assessment
interval after the starting date. Later assessment dates occur at the end
of each assessment interval until four weeks after the end of the service
period.

50.2 The amount due is

• the Price for Services Provided to Date,
• plus other amounts to be paid to the Contractor,
• less amounts to be paid by or retained from the Contractor.
Any tax which the law requires the Employer to pay to the Contractor is
included in the amount due.

50.4 In assessing the amount due, the Service Manager considers any
application for payment the Contractor has submitted on or before the
assessment date. The Service Manager gives the Contractor details of
how the amount due has been assessed.

50.5 The Service Manager corrects any wrongly assessed amount due in a
later payment certificate.

51.1 The Service Manager certifies a payment within one week of each
assessment date. The first payment is the amount due. Other payments
are the change in the amount due since the last payment certificate. A
payment is made by the Contractor to the Employer if the change
reduces the amount due. Other payments are made by the Employer to
the Contractor. Payments are in the currency of this contract unless
otherwise stated in this contract.

51.2 Each certified payment is made within three weeks of the assessment
date or, if a different period is stated in the Contract Data, within the
period stated. If a certified payment is late, or if a payment is late
because the Service Manager does not issue a certificate which he
should issue, interest is paid on the late payment. Interest is assessed
from the date by which the late payment should have been made until
the date when the late payment is made, and is included in the first
assessment after the late payment is made.

51.3 If an amount due is corrected in the later certificate either

• by the Service Manager in relation to a mistake or to a
compensation event or
• following a decision of the Adjudicator or the tribunal,
interest on the correcting amount is paid. Interest is assessed from the
date when the incorrect amount was certified until the date when the
correcting amount is certified and is included in the assessment which
includes the correcting amount.
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51.4 Interest is calculated on a daily basis at the interest rate and is

compounded annually.

61.3 The Contractor notifies the Service Manager of an event which has
happened or which he expects to happen as a compensation event if
• the Contractor believes the event is a compensation event
and
• the Service Manager has not notified the event to the
Contractor.
If the Contractor does not notify a compensation event within 8 weeks of
becoming aware of the event, he is not entitled to a change in the Prices
[Z9].

61.7 A compensation event is not notified after the end of the service period.

W1.1 Any dispute arising under or in connection with this contract is referred
to and decided by the Adjudicator.

W1.3 (1) Disputes are notified and referred to the Adjudicator in

accordance with the Adjudication Table (which provides that a
dispute about “any other matter” is referred by either party)
between two and four weeks after notification of the dispute to
the other Party and the Service Manager.
(3) The Party referring the dispute to the Adjudicator includes with
his referral information to be considered by the Adjudicator.
Any more information from a Party to be considered by the
Adjudicator is provided within four weeks of the referral. This
period may be extended if the Adjudicator and the Parties
agree.
(5) The Adjudicator may
• review and revise any action or inaction of the
Service Manager related to the dispute and alter a
quotation which has been treated as having been
accepted,
• take the initiative in ascertaining the facts and the
law related to the dispute,
• instruct a Party to provide further information related
to the dispute within a stated time and
• instruct a Party to take any other action which he
considers necessary to reach his decision and to do
so within a stated time.

(10) The Adjudicator’s decision is binding on the Parties unless and

until revised by the tribunal and is enforceable as a matter of
contractual obligation between the Parties and not as an arbitral
award. The Adjudicator’s decision is final and binding if neither
Party has notified the other within the times required by this contract
that he is dissatisfied with a decision of the Adjudicator and intends
to refer the matter to the tribunal.
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W1.4(4) The tribunal settles the dispute referred to it. The tribunal has the
powers to reconsider any decision of the Adjudicator and review
and revise any action or inaction of the Service Manager related to
the dispute. A Party is not limited in the tribunal proceedings to the
information, evidence or arguments put to the Adjudicator.

DISPUTE 1;
PAYMENT PAYMENT OF INTEREST AND CONTRACT PRICE ADJUSTMENT

11. The contract between Contractor and Employer is composed of two discrete

bargains: the first being the payment bargain dictating what must be paid after

each monthly assessment date, and the second being the valuation bargain,

which sets out the price for services done and the process for reviewing and

adjusting the payments, which have been made under the payment bargain, to

comply with the value bargain.

12. The service manager has very little time in which to carry out, on a monthly basis,

accurate, complex and precise valuations in terms of core clause 50.2 to

determine the price for services done, and this is not required by the contract. In

terms of core clause 50.1 the service manager is called upon to make an

assessment of the monthly amount due to Contractor after considering

Contractor’s application for payment in terms of core clause 50.4.

13. The concept of an assessment does not connote a precise and true measurement

that would be made by a person, who is an independent qualified quantity

surveyor or similarly qualified professional. An assessment of the amount due is

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an estimate of the amount due. The payment mechanism in core clauses 50.1

and 50.4 generates a provisional figure to facilitate the monthly payment to

Contractor in terms of the payment bargain. The valuation bargain remains

unaffected by the assessment of the service manager.

14. The service manager’s assessment of the amount due is not final and binding on

the parties. Core clause 50.5 provides that the service manager corrects any

wrongly assessed amount due in a later payment certificate. The purpose of the

service manager’s assessment is to facilitate the payment bargain and does not

affect the valuation bargain which is the price for services done and is to be

valued precisely and accurately in terms core clause 50.2.

15. A dispute concerning the valuation bargain requires the adjudicator to ascertain

the exact value of the amount due in terms of core clause 50.2. The amount due

must be calculated precisely down to the very last cent. It is incumbent upon the

party disputing the amount due in terms of the valuation bargain to furnish the

adjudicator with the precise and true measurement of the services provided so

that the adjudicator can be satisfied that the amount due has been calculated

accurately in terms of the price list. The adjudicator cannot rely on either the

Contractor’s or Employer's assessment of the amount due, which is only an

estimate of the amount due.

16. The dispute between the parties is whether Contractor has received the amount due to

Contractor for the price for services provided. It is this, that the adjudicator is required

to determine. The adjudicator must make a determination according to the terms of

core clause 50.2 of the exact underpayment which has been made to Contractor.
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17. The Contractor has not provided the adjudicator with evidence of the exact valuation of

the price for services provided [as opposed to providing the adjudicator with

Contractor’s mere assessment / estimate of the price for services done]. Contractor is

required to provide the adjudicator with sufficient information to enable the adjudicator

to make a decision on the exact value of the relevant work provided by Contractor. This,

the Contractor did not do, with the consequence that the adjudicator is unable to make

a decision on the exact value of the services provided. In terms of clause W1.3(3) the

party referring the dispute to the adjudicator is obliged to include with his referral the

information that must be considered by the adjudicator, and any more information which

a party requires the adjudicator to consider must be provided to the adjudicator within

four weeks of the date of the referral.

18. If Contractor is dissatisfied with the adjudicator’s decision, Contractor may refer the

dispute to the review tribunal where the exact value of the amount due may be

established with the benefit of oral evidence being led and cross examined together

with the possible benefit of expert testimony being heard. “A Party is not limited in the

tribunal proceedings to the information, evidence or arguments put to the Adjudicator“

[clause W1.4(4)]. The exact value of the amount due, calculated accurately down to

the last cent, cannot be made in this current adjudication, as sufficient detailed

information required for such calculation has not been supplied to the adjudicator by

either of the parties. Further it would be outside the scope of the adjudicator’s

jurisdiction to convert the adjudication process into an arbitration; the preparation

required for an adjudication is not the same as the preparation required for an
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arbitration, which is more elaborate than an adjudication, and affords the parties the

right to test and validate all the evidence presented by a party to the arbitrator.

19. Adjudication is not an arbitration [clause W1.3(10)]; it is a means by which the

adjudicator is called upon to make a quick decision in a dispute which the parties

themselves were unable to settle and to assess the financial effect of his decision. The

adjudicator’s decision, unlike the arbitrator’s decision, is not final and binding on the

parties [clause W1.3(10)]. The adjudicator’s decision is required to be delivered within

a period of four weeks of the adjudicator receiving the parties’ referral information, which

period is insufficient to facilitate the parties obtaining the requisite expert testimony,

making a full discovery of all the documents they have in their possession which may

prove or disprove the exact value of the services provided, and testing the validity of

the opposing party’s evidence. Adjudication is not a mini arbitration.

THE DECISION

20. A dispute concerning the determination of the exact value of the amount due in

terms of core clause 50.2 has been submitted to the adjudicator.

21. The exact value of the amount due, calculated accurately down to the last cent,

cannot be made in this current adjudication, as the adjudicator has only been

provided with each party’s estimate of the amount due, which does not establish

the exact true value of the amount due, and which is necessary for the

adjudicator’s decision.

22. In these circumstances, I dismiss Contractor’s claim in respect of dispute 1,

except for Contractor’s application for payment of R3 203.27 being the amount
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reflected in Contractor’s tax invoice no H0104170 attached as annexure CR1.8.3

of Contractor’s dispute referral in volume 1 at page C144, which Employer does

not dispute and which is confirmed in paragraph 5 of Employer’s more information

at page E4 of 7 and reads : “The dispute is therefore confined to the Contractor’s

claim for CPA on invoice numbers H0094822 and H0094839 in the total amount

of R339 590 (CPA Invoices)”.

23. Employer is ordered to make payment of R3 203.27 to Contractor together with

interest in terms of core clauses 51.3 and 51.4.

DISPUTE 2 : PAYMENT FOR COST OF TRANSPORT

24. Contractor acknowledges that it did not claim transport costs during the entire period of

the contract starting on 1 July 2010 and it appears that Contractor did not attempt to

negotiate costs with Employer before 17 July 2019.

25. On the 17 July 2019 Contractor recorded in an email to Employer: “We do not

currently charge for Transport however I have noticed that the rates that we have

supplied to Eskom are exclusive of ‘accommodation or transport of labour and

Value Added Tax,’ [Page 17 of Part C2 : Pricing Data][C37]. We will provide you

with a price for this service and this cost will be charged as applicable.” [see

annexure ER2-E33].

26. In Part “C2.1 Pricing assumptions: Option A” of the contract at page 17 [C37]

there is a note pertaining to the price list which reads: “ All rates as per the Price
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List exclude accommodation or transport of labour and Value Added Tax.” This

implies that if the price list does not have a separate item in respect of transport,

then the cost of transport will not be paid by Employer and will be borne by

Contractor. In other words if Contractor required payment from Employer for

Contractor’s transport costs, it would have been incumbent upon Contractor to

have inserted an item for transport costs in the price list which list is completed

by Contractor.

27. In “Part C3: Scope of work: Service Information”” C59 under the heading

“Constraints on how the Contractor performs the Services” it is stated at

paragraph 3.1[10] at page C63 ‘The rates [amount] in [1] include base crew

transport, scaffold and material transport on Site, base crew Equipment,

consumables and sundries.” Further it is stated at paragraph 3.2[2]f: “In rendering

the service for this part of the contract, the Contractor makes provision for: Supply

of transport, consumables and all items necessary for the provision of the

service;”[C63]

28. At paragraph 3.4[8] [C64] it is stated “The Contractor makes provision for: The

supply of transport for the labour force”.

29. At paragraph 12,2 [C70] it is stated: “The Contractor is responsible for the

provision of accommodation, meals and transport of his own personnel. The cost

thereof is to be negotiated and agreed with the delegated SSM.”

This paragraph implies that Employer was prepared to pay a negotiated price for

transport of Contractor’s own personnel, but until such price was negotiated, the

cost of transport remained with Contractor, as an item for transport was not
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included in the price list. To the extent that this clause constitutes an ambiguity

or inconsistency with the remaining terms of the contract, Contractor could have

made use of core clause 17.1 of contract which states: “The Service Manager or

the Contractor notifies the other as soon as either becomes aware of an ambiguity

or inconsistency in or between the documents which are part of this contract. The

Service Manager gives an instruction resolving the ambiguity or inconsistency.”

No such notice was given during the period of the contract, in which transport

costs were always borne by Contractor. It was only after the termination of the

contract that Contractor claimed the cost of transport.

30. Contractor notified Employer that Contractor intended to claim transport costs at a

without prejudice meeting [E55] held on 17th August 2022 [E54] after the expiry of the

contract. At this meeting Contractor informed Employer that Contractor intended to

claim transport costs for the past three years.[E57]. Employer requested further details

of Contractor’s claim and undertook to respond on receipt thereof.

31. Contractor was obliged to transport the workforce at its cost in terms of the

contract and core clause 11.2[13], which provides that: “To Provide the Service

means to do the work necessary to provide the service in accordance with this

contract and all incidental work, services and actions which this contract

requires.” Further in terms of the contract, if Contractor fails to provide a facility

stated in the service information, any cost incurred by Employer as a result of

Contractor not providing the facility, Employer is entitled to claim back from

Contractor in terms of core clause 25.2 which provides: “The Employer and the

Contractor provide facilities and other things as stated in the Service Information.

Any cost incurred by the Employer as a result of the Contractor not providing the
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facilities and other things he is to provide is assessed by the Service Manager

and paid by the Contractor.”

32. It is common cause that there was no agreement between the parties as to an

essential matter which Contractor submits should be implied in the contract,

namely the price to be paid by Employer to Contractor for the transport of the

contractor’s workforce. As there was no agreement between the parties on the

price for this transport, the cost of the transport remained with Contractor. In

terms of the contract Contractor was liable for the transport costs, unless and

until a price for the transport was agreed between the parties. No such price was

agreed between the parties and thus Contractor’s claim for transport costs is

unenforceable due to the uncertainty of the claim.

33. Contractor submits that the amount of its claim for transport costs should be

computed as the defined cost of the transport, but option A: Priced contract with

a price list, refers to the price for an item only as stated in the price list, and

transport was not such an item in the price list. In contrast to an option A

contract, is an option C: target contract with a price list, in which option C contract

the prices for services provided to date is the defined cost which the contractor

has paid in respect of the service plus the fee, but an option C contract was not

entered into by the parties. Further no compensation event notice in terms of

core clause 61.3 was given by Contractor in respect of transport before the end

of the service period. Core clause 61.7 provides that a compensation event

cannot be notified after the end of the service period. Without a compensation

event arising Contractor cannot claim payment of its price for transport based on
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its defined cost of the transport, as the concept of defined cost is only used to

assess the effect of a compensation event on the Contractor’s price

34. In the circumstances Contractor’s claim for transport costs is dismissed.

DISPUTE 3 :

PAYMENT OF LABOUR BASED ON BIOMETRIC RECORDS

35. This dispute relates to two outage periods at Employer’s Kendall Power Station, namely:

the outage to unit five between January 2020 and May 2021, and

the outage to unit six between November 2020 and August 2021

36. Contractor made use of a biometric time clocking system which captures the time when

an employee arrives at the power station to commence a shift and when he leaves at

the end of a shift. The system uses the fingerprint of an employee to verify that the

employee had arrived and left the work site.

37. During the outage periods, the biometric clocking systems record were not immediately

available, and Contractor’s supervisor submitted daily time sheets to the service

manager which were based on a handwritten tracking system recording employees’

numbers. These daily time sheets were utilized by the service manager in making his

assessment of the amount due at each assessment date in terms of core clause 50.1
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38. When the biometric clocking system’s records became available, Contractor submitted

invoices to Employer based on these records. Employer rejected the invoices and

refused to pay them and insisted that the payments due, as assessed on the submitted

daily sheets, should stand.

39. Contractor is claiming payment the amount of R5 011 815.25 [excluding VAT] from

Employer, as the handwritten tracking system contained inaccuracies, and the use of

daily handwritten timesheets in calculating the amount due in respect of the price for

services provided [core clause 50.2] has resulted in Contractor not receiving payment

of the exact value of the amount due in terms of the valuation bargain of the contract

[see paragraphs 11, 12, 13, and 14 above for an explanation of the effect of the

valuation bargain].

40. In terms of core clause 12.3 no change to the contract will have effect unless it had

been agreed and confirmed in writing and signed by the parties. This is of importance

in the light of Employer submitting that the parties had agreed to use the handwritten

daily records for the purposes of assessing payment in terms of the payment bargain.

No such written agreement has been provided to the adjudicator in terms of core clause

12.3.

41. Further such agreement would not have any effect on the valuation bargain in terms of

core clause 50.2, for which the parties must make use of the most accurate information

available to the parties for the calculation of the exact value of the amount due. This

obliges the parties to make use of the biometric clocking system records for the purpose

of calculating the exact value of the amount due in respect of the price for services

provided.
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42. Core clause 10.1 obliges Employer and Contractor to act in a spirit of mutual trust which

means that Employer must act in a manner that would justify Contractor’s trust being

placed in Employer, that Employer will fulfil its obligations in terms of the contract and

will not prejudice Contractor in anyway not authorised in terms of the contract. This

trust can only be engendered in Contractor if Employer acts strictly in terms of

Employer’s obligations in the contract and pays Contractor the exact amount due in

respect of the price for services provided, which price is the amount due in respect of

labour costs calculated according to the biometric records, which are the most accurate

records available to the parties.

43. In the circumstances Employer is ordered to make payment of R5 011 815.25 [excluding

VAT] to the Contractor together with interest in terms of core clauses 51.3 and 51.4.

DATED at JOHANNESBURG on this the 5th day of December 2023

_________________
TERRENCE DAVIS
ADJUDICATOR
*
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