Decennial update to the NZS 3910 Conditions of Contract: What’s changed in 2023?
Thinkpiece
After a decade, Standards New Zealand released an updated version of the NZS 3910 standard form construction contract in 2023. This widely used contract template has undergone several significant changes to align with industry practices, legislative reforms, and evolving risk allocation attitudes.
The11 key changes introduced in the 2023 edition:
Target Price Contract Option: In addition to the existing lump sum, measure and value, and cost reimbursement options, a new "target price" option has been introduced. This allows the parties to share the benefits of savings or the burden of overruns when the actual price deviates from the agreed target price.
Split Engineer's Role: The dual roles of the Engineer to the Contract have been separated into two distinct entities – the Contract Administrator (acting as the Principal's agent) and the Independent Certifier (making independent determinations and issuing certificates).
Management Plans and Reporting: The requirement for the Contractor to prepare various plans (quality, traffic management, etc.) has been streamlined, with only the site-specific safety plan being mandatory. The Contractor must now regularly report on matters specified in the Specific Conditions.
Environmental Protection: A new clause has been added, requiring the Contractor to take reasonable steps to prevent any act or omission that could harm the environment, breach relevant laws or consents, or jeopardise environmental compliance.
Contractor's Liability: The scope of the Contractor's indemnity in favor of the Principal has been narrowed, essentially removing the previous 'no-fault' indemnity. Furthermore, a cap on the Contractor's liability has been introduced, subject to certain exclusions.
Final Account: The concept of a "Final Account" and "Interim Final Account" has been introduced, requiring the Contractor to prepare and serve these documents on the Independent Certifier within a specified timeframe.
Extensions of Time: A two-stage notification process for extension of time claims has been implemented, with the first notice stating the circumstances and the second detailing the period sought.
Variations: The variations clause has been amended to incorporate contract price adjustment mechanisms, and the roles of the Contract Administrator and Independent Certifier have been clarified.
Cost Fluctuation: The presumption has been reversed, and cost fluctuations will now apply to the contract price unless the parties specifically agree otherwise.
Dispute Resolution: Significant changes have been made to the dispute resolution provisions, including requirements for senior representatives to attempt resolution, mediation, and arbitration.
Bonds: The forms of Principal's bond and Contractor's performance bond have been amended to remove the reference to joint and several liability.
Overall, the 2023 update to NZS 3910 aims to improve clarity, align with industry practices, and better allocate risks between contracting parties. Principals, Contractors, and Consultants will need to familiarise themselves with these changes and assess their implications for future construction projects.