Earlier this year, a review committee comprising members from key organisations across the construction and infrastructure sector (appointed by Standards NZ) commenced a revision of the current form of NZS 3910:2013 – Conditions of contract for building and civil engineering construction, with the aim of publishing a full revision in late 2023.
On 4 October 2022, the review committee, in consultation with Standards NZ, the Construction Sector Accord and New Zealand Infrastructure Commission, Te Waihanga, published a set of recommended Special Conditions to help ‘bridge the gap’ until publication of the full revision.
These Special Conditions amend the General Conditions of Contract in Schedule 2 of NZS 3910:2013 as follows:
- Health and Safety at Work Act 2015: Clause 5.7 is updated to align with the requirements of the Health and Safety at Work Act 2015. The committee is considering further changes to the standard for greater alignment with the Act.
- Change in law: Clause 5.11.10 is updated to entitle the Contractor to a Variation if the Cost of performing the Contract increases by reason of the making of or an amendment to any ‘secondary legislation’ or ‘instrument’ – this is intended to extend the application of this clause to capture Government public health orders such as those issued as part of the Government’s response to COVID-19. These Special Conditions do not otherwise address risk allocation in relation to COVID-19 or pandemic / force majeure risk more generally.
- Advance notification: Clause 5.21 is updated to require the Principal (via the Engineer) to give advance notice to the Contractor of any matter which is likely to materially alter the Contract Price, delay completion of the Contract Works, or result in a breach of a statutory duty in connection with the Contract Works. Previously, the obligation to provide advance notice only applied to the Contractor and the Engineer. The committee appears to have indicated that this change is intended to promote greater collaboration in delivery.
- Limitation of liability: As the most substantive change introduced under these Special Conditions, a new clause 7.2 is introduced to limit the Contractor’s maximum aggregate liability under the Contract (subject to a number of exclusions). We note that the clause that has been proposed is generally consistent with the approach taken in the public sector in recent times (for example, a consequential loss exclusion provision is not included). While the relevant liability limitation amount has not been prescribed (the amount, if any, is to be nominated in the Special Conditions), there is an option in the Special Conditions to select 100% of the Contract Price which may indicate a baseline amount.
- Insurance: References to the Forest and Rural Fires Act 1977 (now repealed) are deleted from the insurance provisions in clause 8.
In a separate update released on 30 September, the review committee flagged a number of key focus areas that it has been discussing and considering for the new revision, including:
- Role of the Engineer to the Contract (EtC): Removing the role of the Engineer’s Representative and refining the role of the EtC through clearer scope and definition in terms of the “impartial” decision making and when issuing “directions”.
- Contract terms: Updates to the contract agreement (including the order of precedence) and contractual provisions relating to interpretation, the type of contract, bonds, indemnities, and insurance.
- Obligations: Updates to contractual provisions relating to the Contractor’s responsibility for design, and in relation to health and safety, compliance with laws and consents, environmental plans, and payments (particularly around Principal’s deductions).
- Appointment of advisers: The committee agreed that the Principal should be required to nominate its advisers in the Contract. We assume advisers will include the PM and QS.
- Extension of time, Variation costs and liquidated damages: Updates to provide greater clarity on concurrent delays, to develop and introduce an expedition clause, to clarify common areas of difference between Variation cost calculations and processing costs, and to introduce values and caps on liquidated damages are under consideration. The committee has also agreed not to introduce any hard time bars.
- Technology: A workshop has been scheduled with Lawhawk (a legal automation specialist), Standards NZ’s senior digital advisor, committee members and technical experts to have a detailed discussion on the different options for updating the format of the document and interfacing options for users – this will consider whether Special Conditions can be presented as a “track change” amendments to the General Conditions, which has long been a request from users of the NZS suite of contracts. This is the approach adopted overseas (e.g. in Australia, through their standard forms).
- Plain language: The committee will ensure that plain language guidelines will be followed for this revision such that the revised NZS 3910:2013 can be easily understood by all users – we support this approach.
A draft version of the full revision is scheduled to be released in January 2023, for a public consultation phase between February and May. We expect that the draft revision will incorporate and expand on the amendments made in the Special Conditions, as well as address those key areas that are currently being considered by the committee.
This article was co-authored by Sean Kim, a solicitor in our Construction and Infrastructure team.
Read more of our related insights.View all insights