Available capital

Retained income plus shareholder loans plus net asset value. One of the two tests that determine the CIDB grade, which is why distributing profit early reduces the grade the company can hold.

CIDB

The Construction Industry Development Board, established under the CIDB Act 38 of 2000, which maintains the Register of Contractors. Public sector clients may not award construction contracts to unregistered contractors.

Class of works

The category in which a contractor is graded: CE civil engineering, GB general building, ME mechanical, EP electrical infrastructure, EB electrical building. A 4GB grading says nothing about civil capability.

Defects liability period

The period after practical completion during which the contractor must remedy defects, typically twelve months. The second half of retention is released after it expires.

Final account

The agreed final value of a contract including all variations. The point at which the true margin on a contract becomes known, and the reason a monthly cost report matters.

Financial capability

Best annual turnover in the two preceding financial years, and available capital. One of the two grading tests.

Invoice discounting

A revolving facility advancing a percentage of certified, undisputed payment certificates. Modelled at 85 per cent. Not available against retention or work in progress.

Payment certificate

The document certifying work completed and payable in a period. The clock on payment runs from a valid certificate, which is why documentation discipline precedes finance discipline.

Practical completion

The point at which the works are substantially complete and may be occupied. The first half of retention is released here.

Preliminaries

The contract-specific costs not attributable to a measured item: site establishment, supervision, insurance, guarantees and the financing cost of the payment cycle.

Register of Projects

The CIDB register on which the client must record a project within 21 days of award. A project not on it earns no works capability credit whatever its value or quality.

Retention

Ten per cent withheld from every certificate, released half at practical completion and half after the defects liability period. R5.20 million is withheld during Year 5; R2.86 million remains outstanding at year end.

Section 20 limitation

The South African tax rule capping the set-off of assessed losses at the higher of R1 million or 80 per cent of taxable income.

Works capability

The largest single contract completed in the relevant class within the preceding five years and registered on the Register of Projects. The second grading test, and the one that many small contracts do not move.