Proposed New Version of Standard Construction Contract

22 Oct 12

Standards New Zealand has released a draft amended NZS 3910 Conditions of Contract for Building and Civil Engineering Construction (DZ 3910) for public comment. Comments are due on Friday, 9 November 2012.

This is not a complete overhaul of the standard, and so not all of the quirks will be ironed out.   A quick overview reveals that some of the key changes are as follows:

  • The standard is to be amended to allow it to better fit design & build contracts.  After amendment, there will be three standards – one for construction contracts (3910), one for design and construction contracts (3916), and one for term maintenance contracts (3917).
  • The provisions in relation to cost reimbursement contracts have been expanded, and the obligations on the contractor to supply information (including cost estimates and record-keeping) are greater.
  • There are new procedural obligations on the Principal when the Principal intends to call up the Contractor’s bond.
  • The Contractor may now be required to provide a programme.  The proposed clause 5.10 sets out the content of that programme (if a Comprehensive Programme is required), and the Standard deals with how the programme shall be used to track and report progress.
  • Quality plans will now be more detailed.
  • It is made clear that inspection or approval by the Engineer does not relieve the Contractor of its obligations.
  • There will now be an obligation on the Contractor and the Engineer to notify each other as soon as either becomes aware of any matter which may materially alter the Contract Price, materially delay completion of the Contract Works or result in a breach of a relevant statutory duty.
  • Section 8 (Insurance) has been comprehensively reviewed, as have the forms of insurance certificates (schedules 7 to 11).
  • There are some procedural changes to the Variation provisions in section 9, including as to time frames.  Oral notice by the Contractor of a Variation will no longer be sufficient.  There are also changes to clause 9.3, dealing with how Variations are valued.
  • The Defects Liability Period is renamed the Defects Notification Period, and the Engineer is now required to notify defects within 5 working days of the expiry of the Defects Notification Period.  The Contractor will then have just 5 working days to remedy the defects (unless the Engineer agrees otherwise in writing).
  • There is now provision for warranties.
  • The payment claim and payment schedule provisions have been made clearer and simpler.
  • There is allowance for novation.

The public comment that is sought relates only to the changes that are being made, and not to the other areas that might need reform.

As part of this review, Standards New Zealand is also looking at developing online contract forms, which will be available on a “pay per use” basis (with the fee payable on printing of the final version of the contract being agreed between Principal and Contractor, which will allow the parties to update drafts online without paying each time).  Standards New Zealand intends to offer single use, multi-use and unlimited use pricing structures for the online standards.   It is also investigating network licensing for storage on customers’ own networks, as well as cloud storage.

If you would like to discuss any of these proposed changes or make a submission, please contact Mike Kerr.

A copy can be found here.