While, under law, a written construction contract is only compulsory in relation to residential builds, it is always advisable to have a written contract for all construction projects.
When you embark on any construction project, consideration should be given to a number of issues, such as how variations are dealt with and who bears the risk of cost increases (particularly pertinent due to the current material cost and supply issues in the industry).
Below are some of the more common issues encountered for rural construction projects.
Access
Safe and adequate access will be needed for all construction traffic to the site, including any heavy plant and machinery. It is usually the owner’s responsibility to ensure that sufficient access is available to the contractor. You should ensure that potential transportation hurdles are discussed and, if necessary, have a traffic management plan drawn up so it is clear who is responsible for obtaining and paying for any necessary solution, including any consents.
In addition consideration needs to be given as to whether access over any adjoining land is required. Under most contracts, if the contractor requires access over adjoining land the owner has to procure this which may involve negotiations and payments to neighbours. Access to adjoining land should be limited to where this is absolutely necessary for the build, not just more convenient. If such access is required, it should be agreed with the neighbouring owner early on in the project.
Increased Storage Requirements
It may be necessary for a large proportion, if not all, of the tools, machinery and materials for the project to be stored on site due to distances from business premises or storage facilities. This is particularly noticeable currently as many owners and contractors are purchasing materials ahead of programme and storing them until they are needed, in order to avoid material cost increases and supply shortages.
This requires an area to be available for such storage. Storing items on site requires consideration of a number of issues including insurance responsibility, who bears the risk of damage, and how the items are protected from the elements and/or animals.
On-Site Facilities
There also tends to be a greater need for on-site facilities as workers will be spending extended periods on site without the alternatives that may be found in urban settings. It needs to be clear who is responsible for providing such facilities and cost responsibilities.
Consideration needs to be given to the impact the project may have on any existing operations. This includes the potential for interference from the construction activity such as road use, noise, dust, water use and drainage. A programme plan may assist in mitigating disruption.
It is also important that the disposal of any construction waste is considered particularly where it may be contaminated.
Resourcing
It can be difficult in a buoyant construction market to source contractors, subcontractors and other tradespeople with the correct expertise for rural projects. Contractors may be unwilling to send their workers to work on projects that are distances from their base when there is available work nearer to home. There can also be issues in relation to plant, machinery and material procurement.
Research and Commercial Terms
As with any major expenditure, research is key to engaging an appropriately experienced and financially sound contractor thus minimising the risk of project failure.
Consideration will also need to be given to the form of contract to be used and the basis of the price calculation and timing of payments. It will be necessary to ensure that the payment mechanism meets any funder requirements.
Other key considerations include:
- Retentions – these are a useful mechanism to incentivise the contractor to complete the build on time and in accordance with its contractual obligations. If a retention is to be held there are statutory requirements as to how the sum is to be held that require strict compliance. New requirements came into force on 5 October 2023.
- Liquidated damages for late delivery – if timing of completion of the project is important and/or you will incur costs if the project is not completed on time, liquidated damages provide an ability for you to obtain a fixed payment in the event of late delivery.
- Warranties and guarantees – you should ensure that you get a full suite of warranties and guarantees and that these are provided prior to completion of the project.
- Risk allocation in the contract – particularly in relation to non-fault risks such as natural events and adverse weather.
If you require any advice in relation to a rural construction project please contact a member of our construction 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.
