Changes on the way for NZS 3910

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Special Counsel

Consultation is now open on the most significant changes to NZS 3910 since 1987. For the last 14 months, a committee of government agencies and construction and infrastructure organisations appointed by Standards NZ have been reviewing the NZS3910:2013 Conditions of contract for building and civil engineering construction (NZS 3910).

The review has a broad purpose including to ensure the contract is widely accepted and fit for purpose, the need for Special Conditions is limited, and that risk is allocated fairly. This has culminated in a draft version of NZS 3910 which is currently out for public consultation.

The proposed changes focus on cooperation between the parties – ensuring agreement is reached as far as possible and proactively managing risks.

Key changes

A number of key changes to NZS 3910 are proposed:

Role of Contract Administrator and Independent Certifier

To simplify and clarify the dual role of the Engineer to Contract, the revised NZS 3910 proposes to split the role into two: 1) Contract Administrator; and 2) the Independent Certifier. The Contract Administrator is appointed by the Principal to act on behalf of the Principal and is required to give instructions to the Contractor.

The Independent Certifier is appointed by the Principal and is required to act fairly, impartially and independently in making decisions for the parties including valuing work and variations and granting extensions of time. The Independent Certifier is also authorised to act as agent for the Principal in receiving payment claims, issuing payment schedules and making deductions to payment schedules as notified by the Principal.

While it is intended the Contract Administrator and Independent Certifier are performed separately, particularly for larger complex projects, both roles can be performed by the same person.

New process for reviewing instructions and decisions

Where previously the Engineer could review its own decisions, a new review process for dissatisfied parties has been introduced. Instructions by the Contract Administrator or decisions by the Independent Certifier, such as the value of variations or entitlements to extensions of time, can be referred to the Independent Certifier for review.

The dispute resolution clauses have been simplified to remove prescriptive requirements such as the order of dispute resolution processes and mandatory timing. Simplifying this process is intended to provide flexibility for disputing parties and remove barriers to access.

Target cost

A Target Cost method for the Contract Price has been introduced so the parties can share in cost risk and cost savings. A Target cost allows the Principal and Contractor to agree a target for the project cost early on, and any cost savings or cost overruns are shared between the parties in the proportions stated in the specific conditions. The intention is for parties to work together to minimise cost and incentivise savings.

Limitation of liability/ fault based indemnity

Limitations of liability have been added so the maximum aggregate liability of the Contractor to the Principal is limited to the amount recorded in the Specific Conditions. Fault based indemnity has been introduced so the Contractor’s indemnity for Contract Works is limited to loss suffered by the Principal that arises out of any negligence or breach of the Contract by the Contractor.

Variations and extension of time process

To encourage collaboration and reduce disputes, the revised NZS 3910 urges parties to agree, as far as possible, to variations and extensions of time. Failing agreement, the Independent Certifier shall decide the variation value and the extension of time. The revised NZS 3910 also sets out the factors the Independent Certifier shall have regard to in deciding an extension of time which include the extent of delay to the Due Date for Completion, and any steps taken to mitigate the delay.

Environmental protection

A new section has been added for the Contractor to consider the construction site and surrounding environment. It requires the Contractor, when carrying out Contract Works, to take all reasonably practicable steps to ensure no act or omission discharges contaminants into the environment, causes any adverse effect on the environment or exceeds any boundary noise levels. The Contractor must also comply with any relevant resource consent, district and regional plan and the Resource Management Act 1991.

Amended final payment process

A new section has been added for Interim Final Accounts and the Final Accounts. This process allows the Contractor to amend the Contract Price to take into account claims for variations or instructions occurring after Practical Completion. The Final Account shall be agreed as far as possible between the parties, or failing that decided by the Independent Certifier, and the Contractor will then submit a final payment claim.

Other changes

NZS 3910 is also being amended in a number of other ways including modernising and simplifying language and updating references to legislative obligations such as those under the Health and Safety at Work Act 2015.

The revised version introduces an order of documents that determines which documents take precedence in the Contract Agreement in the case of ambiguity between terms.

There are also greater reporting requirements on parties. This includes early warnings for matters that materially alter the Contract Price, materially delay completion of the Contract Works, or result in a breach of a statutory duty. As well as a requirement for the Contractor to provide status reports on the project to the Contract Administrator with details as stated in the Specific Conditions.

Consultation ends on 30 June 2023

Further changes to NZS 3910 are expected following public consultation which is open until 30 June 2023. The publication of the new edition of NZS 3910 is anticipated by the end of this year.

The committee is also intending to revise the NZS 3915, 3916 and 3917 suite of contracts to align them with the changes to NZS 3910.

The special conditions for NZS 3910 used by all of government are also expected to be reviewed and published in the second half of 2024.

If you have any questions about NZS 3910 please contact a member of our Construction & Projects team.

Disclaimer: the content of this article is general in nature and not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose.

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