New edition of ‘CCCS’ released

One of the most commonly used standard form consultancy agreements in New Zealand, the Conditions of Contract for Consultancy Services (commonly known as ‘CCCS’ and previously referred to as ‘IPENZ CCCS’), has recently been updated and is available for use.

It has been some 8 years since the last release of CCCS (third edition), with a number of relevant changes to the construction landscape in New Zealand in the intervening period having driven the more substantive amendments in this fourth edition. These include:

  1. changes in legislation, specifically the enactments of the Health and Safety at Work Act 2015 (HSWA) and Limitation Act 2010, and amendments to the Construction Contracts Act 2002 (CCA);
  2. the wider of use of ‘BIM’ (Building Information Modelling) in the design and delivery of construction and infrastructure projects; and
  3. the release of new and revised standard form construction contracts to the market, most notably NZS3910 and 3916:2013.

Key changes

Some of the more significant amendments are summarised below:[1]

Health and Safety (cls 2.10 & 3.8): the parties’ contractual obligations concerning health and safety have been aligned to the scope of duties imposed by the HSWA. For example, a new definition of ‘designer’ has been included which will apply to a consultant tasked with carrying out the design of plant, substances or structures. Under the HSWA specific obligations are imposed on a designer to ensure the plant, substances and structures are designed without risks to the health and safety of persons.

It is important to remember that, despite these amended provisions, nothing in the agreement will reduce the parties’ respective obligations pursuant to the HSWA. You can read further about the changes brought about by the Health and Safety at Work Act 2015 here.

Payment (cl 5): as a result of recent amendments to the Construction Contracts Act 2002 (CCA), consultants carrying out design, engineering and quantity surveying work (pursuant to contracts entered into or renewed after 1 September 2016) are now subject to the CCA’s default payment process and adjudication regime.

You can read further about recent amendments to the CCA here.

While parties cannot contract out of the CCA, the fourth edition confirms the statutory position that the provisions of the CCA shall apply in circumstances where a payment claim has been issued in accordance with the CCA. The fourth edition also provides the consultant with a default monthly progress payment entitlement (albeit the parties can agree otherwise) with payment due on the 20th of the month following issue of a GST invoice (again, unless agreed otherwise). The consultant now also has a contractual right to suspend in circumstances of a payment default (cl 11.5).

Proactive project management (cls 2.13 and 7): the fourth edition incorporates an ‘early warning’ regime, in line with similar advance notification provisions introduced in the 2013 releases of NZS3910 and 3916 and reflecting an industry trend towards early warning systems and real-time project management (see for example the FIDIC forms). In particular, the consultant must notify the client as soon as it becomes aware, or should reasonably have become aware, of a direction or circumstance which could impact the provision of the services and whether it considers that direction or circumstance involves a variation. Within a further 15 working days, the consultant must provide details of the time and cost impact, as well as recommendations on how to proceed (cl 2.13).

The client is now afforded 15 working days, instead of 10 working days under the third edition, to respond to the consultant stating whether it considers a variation has arisen (cl 7.1). It is now compulsory for the client to give reasons for its decision although the agreement is silent on the implications of a failure by the Client to do so.

In the third edition of CCCS, the consequences of the consultant’s failure to warn of a possible variation were not expressed. Under the fourth edition, consistent with NZS3910 and 3916 the impact of a failure by the consultant to comply with its obligation to notify is expressly to be taken into account when valuing any resultant variation (cl 7.1). The consultant’s failure to notify of a circumstance, even if the consultant was not aware of that circumstance but should reasonably have become aware of it, could therefore result in a reduction in the Consultant’s entitlement to a variation.

Intellectual Property (cl 9): the intellectual property (IP) provisions have been made more favourable to the consultant. For example, while new IP is still jointly owned by the parties (cl 9.1), the fourth edition now makes the client’s rights in relation to new IP (or any licence in respect of pre-existing IP) conditional upon payment for the services for which the IP was produced (cl 9.3).

The fourth edition has also expanded the relevant IP definitions to incorporate ‘models’ and ‘software’, reflecting the adoption and wider use of BIM on projects in New Zealand.

Other new provisions / changes to CCCS of note

  • The liability exclusion provision is now mutual so that neither party is liable to the other for indirect, consequential, special loss, or loss of profit. Formerly this provision applied to protect only the consultant. However, this exclusion still does not contain any industry standard carve-outs, such as in respect of third party claims for personal injury or property damage and/or intellectual property breaches. This exclusion (and other provisions in the liability clause more generally) also provides greater liability protection, for the consultant in particular, against losses that would otherwise be recoverable at law.
  • Rates or prices included in the agreement can now expressly be used (but do not have to be used) to value variations (cl 7.2). This approach goes some way to achieving alignment with the equivalent provisions in NZS3910 and 3916 except that under NZS3910 and 3916 the use of applicable rates and prices is largely mandated rather than optional.
  • The consultant now has an obligation to upload any new geotechnical factual information to the New Zealand Geotechnical Database collected in the course of providing its services in certain circumstances (cl 9.8). As a repository for new and existing geotechnical information, this database builds on the Canterbury Geotechnical Database that was developed for the Christchurch rebuild following the Canterbury earthquakes.
  • More detail has been included concerning the application of the Consumer Guarantees Act 1993 to make it clear when the Act will apply and when it is contracted out of (cls 12.2 & 12.3). Certain provisions of the Fair Trading Act 1986 (FTA) prohibiting misleading conduct (section 9), unsubstantiated representations (section 12A) and false and misleading representations (section 13) are also expressly contracted out of under the fourth edition, except if such conduct or representations were intentional (cl 12.3). While these provisions mutually apply, having regard to the flow and nature of advice and services provided under the agreement, and the potential for FTA claims to arise, practically it is likely that consultants are the greater beneficiaries of the provisions.

Our observations

Given the largely cosmetic nature of most of the changes, and the underlying risk profile remaining largely unaltered, we expect the fourth edition of CCCS will be adopted quickly in the market.

Overall, the changes in the fourth edition seem to benefit the consultant more than the client. For more complex projects, we anticipate that principals/developers will continue to seek amendment to the underlying risk profile to reflect their preferred legal and commercial positions. For instance, some provisions within CCCS still provide more favourable risk and liability positions to consultants than otherwise exist at law, and we anticipate that these types of provisions will be the subject of amendment and negotiation between the parties.

By achieving greater alignment with NZS3910 and 3916, this form provides a better platform for contractors to accept a transfer or novation of consultants.

If you would like to discuss any of the changes please contact your MinterEllisonRuddWatts advisor.

Footnotes

[1] The Short Form Model Conditions of Engagement (SFA) have also been updated and similar changes are reflected therein (we have not specifically commented on the SFA).

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