Construction Law Update – March 2019
NZS 3910's last comprehensive review dates back 55 years ago. Although it has since benefited from 'limited scope reviews' in 2003 and 2013, the needs of the construction industry have evolved and aspects of NZS 3910 are no longer 'fit for purpose'. Principals often seek to make up for these deficiencies by the use of special conditions, however these are becoming increasingly lengthy and complex. This means NZS 3910 is no longer achieving the purpose of a standard form contract, which is to maintain consistency across the industry.
The fact that NZS 3910 has achieved such a dominant use in the industry is a credit to those involved in its creation and development, so we should not be hasty to discard the standard form, or the principles behind it.
Russell McVeagh was delighted to attend and participate in the recent highly anticipated discussion led by Peter Degerholm and Paul O'Brien titled NZS 3910 – it ain't broke, so don’t fix it? hosted by the Society of Construction Law (SCL) in Auckland on 4 March 2019. Peter and Paul were compelling in their view that NZS 3910 needs to be regularly reviewed and updated, and we applaud the SCL for initiating and leading the debate on this topic.
Paul noted some areas of the current NZS 3910 which are particularly in need of updating. These included:
- favouring a more collaborative approach with appropriate Principal involvement;
- revisiting the dual role of the Engineer;
- considering time limits to encourage discipline for both parties in the administration of the contract;
- expanding the NZS suite to align with design appointments, novation agreements and subcontracts; and
- removing the 'one size fits all approach' and incorporating options for improved functionality.
Peter highlighted that an update of an NZS document is not a straightforward task and will require the industry to take the lead, with the approval of Standards New Zealand requiring multiple rounds of consultation, feedback and drafting. It was suggested that we target a new version by 2023 – although we're not sure the industry can wait that long.
We believe that the New Zealand industry needs a new standard form which:
- supports a collaborative procurement and working environment to ensure there is a clear and transparent allocation of risk;
- ensures contracts are administered so that both parties have clear visibility on the expected time for completion and the full costs payable; and
- is part of a suite of contracts using consistent terminology, providing flexibility of options, covering the entire project lifecycle, and where each contract is in a form requiring minimal special conditions.
This is discussed in our recent publication How to get it right from the ground up, which was a follow-up paper to our survey on construction disputes focusing on solutions for the construction sector’s perennial problems. It draws on our research into international trends and from our own observations.
We were encouraged to see the alignment between the SCL presenter's aspirations for an improved standard form and our own views.
We would encourage the industry to take full advantage of work done overseas in this space, particularly, we suggest looking at the work undertaken in the United Kingdom by NEC, a subsidiary of the Institute of Civil Engineer. NEC4 is a suite of construction contracts promoted as putting "collaborative sharing and flexible procurement at the heart of modern procurement".
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