Standards New Zealand has used the first review of NZS 3910 in ten years to create two new construction standards:
NZS 3916 conditions of contract for building and civil engineering – design and construct, and
NZS 3917 conditions of contract for building and civil engineering – fixed term.
We have already produced a commentary on the new NZS 3910:2013. This Brief Counsel looks at NZS 3916 and NZS 3917.
NZS 3916:2013 – Design and Build Variant
NZS 3916 is based on NZS 3910:2013, with the defining difference being that NZS 3916 moves the responsibility for design from the principal to the contractor.
Thus, NZS 3916 is a design and build contract, whereas NZS 3910 is essentially a build-only contract.
NZS 3916 offers developers a better starting position for their design and build contracts as traditionally they have had to “convert” NZS 3910, often requiring significant amendments.
The key upsides to a developer of procuring on a design and build basis are that, generally speaking:
- the contractor cannot ‘hide’ behind design prepared by the developer - i.e. the contractor has ‘single point responsibility’ for the delivery of the project, and
- the project can be ‘fast-tracked’ as the contractor is in control of both the design and construction.
The main downsides are that:
- the developer loses a significant amount of control over the design (noting that the interests of the contractor and the principal in design development can often conflict), and
- the contractor will typically include a price premium for taking on design risk.
Comparison with NZS 3910:2013
The key points of difference from NZS 3910:2013 are:
- rather than traditional principal (being the developer) supplied specifications and drawings, there are “Principal’s Requirements”. From the principal’s perspective, it will be important to ensure that the Principal’s Requirements are robust, as they will effectively set the bar in terms of design and specification
- the contractor develops and completes the design from the Principal’s Requirements
- the engineer (being the contract administrator) has the opportunity to review the design and, to the extent that the design does not comply with the Principal’s Requirements or the contract, reject the design
- the contractor generally accepts responsibility for any prior design provided by the principal
- provisions have been included to allow the principal to transfer any agreements it has with design consultants to the contractor. Privity of contract with the design consultants will typically give the contractor more comfort as, if problems arise with design, it may have contractual recourse against the design consultant to help off-set liability in that regard to the principal
- the contractor is responsible for obtaining all consents necessary for design and construction
- the contract strengthens the intellectual property provisions, with the contractor’s design for the project being jointly owned by both parties, and
- unlike NZS 3910, NZS 3916 does not contain a variation ground for extra work in dealing with unidentified utilities or utilities in the ‘wrong’ place.
NZS 3917:2013 – Fixed Term Variant
NZS 3917 is also based on NZS 3910:2013.
As the name implies, it is designed for use where the contract is intended to operate over a defined period of time e.g. one year, rather than until a defined scope of work has been completed. Typical uses could be for repair, maintenance or renewal works.
Comparison with NZS 3910:2013
There are a significant number of departures from NZS 3910:2013, among them:
- there is a Contract Works Period, which has a commencement date and an expiry date (as opposed to a regime under which defined works have to be completed by a due date for completion)
- accordingly there is no extension of time regime (although, interestingly, liquidated damages can still be applied for contractor delay or any other contractor failure, should this be recorded in the Special Conditions of Contract)
- the contractor is not given “possession” of the site or exclusive use of the site, which recognises that the principal is likely to be using the site for its day-to-day operations. The principal may also require separate contractors to have sole occupancy of portions of the site, to the exclusion of the contractor, which is to be treated as a variation
- there is no “Comprehensive Programme” regime (being a regime under which the contractor has to provide a detailed programme for the execution of the works, although the contractor is required to provide a basic programme and there is flexibility for the principal to require a detailed programme)
- there is no “Defects Notification Period” regime (being a regime under which the contractor has to rectify defects attributable to it for a defined period following completion). The contractor is obliged, however, to rectify defects attributable to it that may arise prior to the expiry of the contract period, and
- once work is complete and capable of use by the principal, the contractor is generally no longer responsible for the care of that work (as opposed to the contractor generally being responsible for the care of the works until completion of all of the works or completion of the applicable “Separable Portion”).
Chapman Tripp comments
This review has delivered significant gains.
NZS 3910:2013 is an improvement on its predecessor document – being more in line with the market, more user-friendly and more comprehensive. NZS 3916 offers developers a better base contract for design and construct procurement, and NZS 3917 offers a base contract for fixed term works.
However, as with all standard documents, discerning developers will still want to customise them to reflect their specific needs and risk appetite.
We are confident that the new forms will be widely used in the New Zealand construction industry and that – over time – developers will base their template or ‘in-house’ construction contracts on the new forms.