NZS 3910 serves the industry well

Abernethy_square.jpgBy Malcolm Abernethy
Executive Officer, NZ Contractors' Federation

Collaborative contracts are seen by many as the future for construction contracts in New Zealand, with many proponents of the idea saying that a different form of contract is required to that currently used – the NZS 3910 Standard Conditions of Contract for Building and Civil Engineering Construction.

NZS 3910 is written in plain English using terms that are well understood and have been tested before the courts.  The standard was developed by industry peers that included representation from central and local government, professional and consulting engineers, contractors and many others, to produce a document that is acknowledged as one of the fairest forms of contract in use. 

Development and fine tuning of the document has been one of its greatest strengths, with a review possibly being timely particularly of those clauses dealing with bonds and insurances.

NZS 3910 was written specifically for the New Zealand construction industry and is well understood by the industry. This has resulted in fewer contractual arguments, particularly when the standard form is used. 

Some client groups are extensively amending the standard, which results in a skewed risk profile, and it is this trend that inevitably leads to adversarial relationships as the risk is not well understood by the contracting parties. 

Where extensive special conditions are applied to a contract, the client is seeking to change the risk allocation, resulting in a higher bid price from contractors trying to cover the added risk being applied to the construction phase of the project.  Extensive changes to the standard form of contract increase the costs of preparing contract documents and increase tendering cost borne by contractors – both of these will be reflected in the final total project cost.

Collaborative forms of contract are being touted by many within the industry as a panacea for the industry, being driven by a lack of knowledge of NZS 3910.  The construction industry is well served by NZS 3910.

The collaborative forms of contract currently being promoted place responsibilities on all parties to notify each other of things that occur or that may have an impact on time and costs for the project.  Notification is not collaboration, it is simply good communication.  Under the collaborative forms of contract when the notification requirements are not met, there are penalties involved and this is no different to what currently occurs under NZS 3910. 

Collaboration is about developing relationships built around trust, respect and co-operation that leads to enhanced project outcomes. Collaboration is about adjusting behaviours, and as the construction industry is mature, collaborative behaviours are well developed, working within the framework provided by NZS 3910 and built on sound communication.

Under NZS 3910 the contract is unfortunately frequently poorly administered, which results in delays and costs to the client that may lead to disputes. This is compounded when modifications are made to the standard clauses. 

Introducing a form of contract that requires different communication procedures will not necessarily lead to collaborative contracting and, indeed, may lead to greater adversarial outcomes due to unfamiliarity with the contract document.

NZS 3910 is used by major client groups in its standard form for large and small projects and for complex projects including design and build. 

The Construction Contracts Act and the processes that the Act requires are accommodated within the standard form of contract. There is no need to introduce a different form of contract that needs extensive modification to meet the Act’s requirements and is unfamiliar to the industry.

The construction industry should promote the extensive use of NZS 3910 in its standard form as an equitable form of contract that is well tested, fair and with all parties being familiar with its procedures and requirements.  The collaborative approach to contracting should continue by working toward best of project outcomes with an open, ‘no surprises’ approach to communication between all parties. 

Contractor Vol.33  No.6  July 2009
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