Construction Law – Labour unrest in construction – who bears the risk?

The Medupi power station project will no doubt see claims for an extension of time for completion and claims for additional payment following recent reports of labour unrest on the construction site in Lephalale.

Construction at the multi-billion power plant was temporarily suspended on 16 January 2013 for more than a week as a result of what is being referred to as an “illegal strike” by Hitachi Kaefer and Alstom Kentz workers affiliated with the National Union of Metalworkers of SA. The workers are claiming that they have not received sufficient December bonuses and are also “not being paid double” on weekends.  This follows a similar strike in September 2012 when evacuation was ordered at the Medupi site because of violent strikes by workers.

Eskom is scheduled to start supplying power to the national grid from the first unit of the Medupi power plant by the end of this year.  Eskom’s Hilary Joffe has, however, confirmed that labour unrest threatens the completion milestones set out in the current project programme. 

Eskom will ultimately face the risks associated with the delays as contractors are likely to claim extensions of time for completion of certain portions of the project. Eskom may also face claims for additional payment as a result of the delay to contract works and disruption of project schedules. 

Numsa’s Irvin Jim has been reported as stating that the consistent frustration of construction is a deliberate act from contractors in an effort to delay the project in order to claim benefits from Eskom.

Eskom may have to review its current project labour agreement in order to avoid further delays and associated claims caused by the labour unrest.

Claims on these types of major projects involving numerous contractors’ and sub-contractors’ agreements (which are often linked to one another) require analysis of the various parties’ contractual rights and obligations.   AM Theron Incorporated specialises in construction law.