This week the much-anticipated NZS3910:2023 Conditions of contract for building and civil engineering construction was published (NZS3910).
This publication follows an extensive review of the previous 2013 version of NZS3910, with the purpose of creating a construction contract that is widely accepted, fit for purpose, allocates risk fairly and limits the need for special conditions. This 2023 version is similar to the consultation draft released earlier in the year.
The new 2023 version of NZS3910 makes changes to the 2013 version with a key focus on cooperation, mutual agreement and the effective management of risks between the parties.
Key Changes:
NZS3910:2023 makes the following notable changes:
Role of Contract Administrator and Independent Certifier
To simply and clarify the dual role of the Engineer to Contract, the role has been split into the Contract Administrator and the Independent Certifier roles.
The Contract Administrator is appointed by the Principal to act on behalf of the Principal and gives instructions to the Contractor on a day-to-day basis.
The Independent Certifier is appointed by the Principal and must act fairly, impartially and independently in making decisions for the parties including valuing work and variations and granting extensions of time. Each decision must include reasons and be in writing. 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. The Principal may engage advisers to advise and make recommendations to the Contract Administrator or Independent Certifier.
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. Where one person has been nominated to fulfil both roles, that person will need to make it clear what role they are fulfilling at any given time.
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 at clause 6.4. Any party may request the Independent Certifier to review instructions by the Contract Administrator or decisions by the Independent Certifier. A party may request further review of the decision or request a final decision. A person dissatisfied with a final decision may refer the matter to the dispute resolution process under the Contract.
Dispute resolution
The dispute resolution process in clause 13 have been simplified to remove prescriptive requirements such as the order of dispute resolution processes and mandatory timing. Parties are encouraged to negotiate the dispute before resorting to any third-party dispute resolution such as mediation or arbitration. Simplifying this process is intended to provide flexibility for disputing parties and remove barriers to access.
Target Contract Price
A Target Cost method for the Contract Price has been introduced in clause 2.5 so the parties can share in cost risk and cost savings. A Target cost allows the Principal and Contractor to agree a target cost for the project early on, and any cost savings or cost overruns are shared between the parties in the proportions stated in the Specific Conditions. The Contract Price is determined in the same manner as a cost reimbursement Contract Price. The intention is for parties to work together to minimise cost and incentivise savings. Variations or adjustments to the Contract Price will also adjust the Target Price unless the parties specifically agree they do not apply.
Limitation of liability/ fault based indemnity
Optional limitations of liability have been added in new clause 7 so the maximum aggregate liability of the Contractor to the Principal is limited to the amount recorded in the Specific Conditions (or the level of any insurance policy if this is greater). 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 Contractor 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 critical path of the works, the impact of the Contractor’s failure to give notice, and any steps taken to mitigate the delay.
Environmental protection and management plans
A new section 5.21 has been added for the Contractor to take steps to protect the environment while carrying out the Contract Works. this includes taking all reasonably practicable steps to ensure no act or omission discharges contaminants into the environment, causes any adverse effect on the environment, exceeds any boundary noise levels or is likely to give rise to disciplinary action under the RMA. The Contractor must also comply with any relevant resource consent, district and regional plan and the Resource Management Act 1991.
The new version of NZS3910 also requires the Contractor to provide Management Plans (on top of the usual quality plan and traffic management plan) an environmental management plan, sustainability management plan and any other plans as specified in the Specific Conditions.
Amended final payment process
A new section 9.11 has been added for Interim Final Accounts and 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 has been 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.
There has been a change to some of the previous definitions such as new “Completion Records” instead of the previous as-built plans, and operation and maintenance manuals, and “Margin” instead of offsite overheads and profit and “Preliminary and General” instead of onsite overheads.
Moreover, the structure of Schedule 1 Specific Conditions has been split into Part A: Specific Conditions: General and Part B: Specific Conditions: Insurances. The insurance provisions in clause 8 have been shifted to their own Schedule.
There are also greater reporting requirements including a requirement for the Contractor to provide regular status reports on the project to the Contract Administrator which includes details as stated in the Specific Conditions.
The retention money provisions in 12.3 have also been amended in light of the recent changes to holding, recording and reporting on retentions in the Construction Contracts Act 2002. 12.3.4 requires the Independent Certifier to issue a Payment Schedule on each release of retention money.
If you require any advice in relation to construction, 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 purpos
