How do revisions to NZS 3910 impact the management of construction contracts?

Introduction

With NZS 3910 accounting for around 80% of construction contracts written in NZ, our building, construction, engineering and infrastructure industries rely on this standard to ensure that contracts are suited to New Zealand’s industrial and legislative scene.

Since the last update to NZS 3910 in 2013, Industry representatives told Standards NZ, the body responsible for the revisions that a revision was warranted to bring good practice up to date. The timing is also consistent and aligns with the pervious 10-year update.

The below provides a summary of why staying updated with contract revisions is important, what NZS 3910 is, why the revision were needed, along with what the revisions mean to industry and the expected benefits the updates will bring.

What is NZS 3910 and why is a revision needed?

NZS 3910 Conditions of contract for building and civil engineering construction NZS 3910 underpins the majority of NZ construction contracts in the building, engineering, construction and infrastructure industry sectors (the construction sector).

A revision of NZS 3910 was needed to meet the needs of a changing landscape. There was a need for contracts to align with current legislation and legal best practices. The revision reduces the use of special conditions, increase transparency on risk and make the documentation easier, through the use of consistent and straightforward language.

What’s new in the NZS 3910 revision?

The new standard is familiar in content and structure, however of note are the following:

  • introduction of an order of precedence in the Contract Agreement.
  • introduction of a Target Cost Contract Price, and provisions for the Contract Price to have various components including Lump Sum, Cost Reimbursable, Measure and Value, and Target Price.
  • inclusion of a new clause dedicated to the Protection of the Environment.
  • addition of clear contract administration processes throughout, including new content on reviewing instructions and decisions.
  • elimination of the Engineer to the Contract and its dual role, replacing it with two distinct new roles (Contract Administrator and Independent Certifier). This significant change ensures clarity on the purpose of each role, emphasising when specific activities demand fairness and impartiality.
  • transition to fault-based indemnity and the introduction of a Limitation on Liability.
  • introduction of the Final Account and Interim Final Account processes.
  • inclusion of important prompts to clearly identify Contractor’s Design Obligations.
Source: https://www.standards.govt.nz/news-and-updates/collaboration-and-clarity-with-nzs-3910-underpinning-construction-contracts/

What do these new revisions to NZS 3910 mean to Industry?

Given how important and well used NZS 3910 is in NZ and that the building and construction industry which is worth $18b to the NZ economy, representing one third of NZ’s workforce and 12% of all businesses, having contracts suited to New Zealand’s industrial and legislative scene… meant that Industry wanted to be involved in the updates to the document.

A team effort involving a 23 strong committee from a range of roles, integrated feedback from 2272 public consultation comments. The outcome of this means that the revised NZS 3910 was built on collaboration and is fair as it reflects a board range of skills and experience.

“NZS 3910:2023 gives a clearer overview of key clauses, retains valuable examples and flow charts, and eliminates any confusing or redundant content. The language is straightforward, consistent, and gender neutral, and legislative references remain timeless.” say Standards New Zealand.

Source: https://www.standards.govt.nz/news-and-updates/collaboration-and-clarity-with-nzs-3910-underpinning-construction-contracts/

Expected benefits of revising NZS 3910

The benefits of the revision to NZS 3910 is to make available to the construction sector a revised standard that:

  • is widely accepted and fit for purpose
  • limits the need for special conditions
  • improves understanding of contracts
  • allocates risk fairly
  • enhances collaboration and results in more contracts that embody Construction Sector Accord principles
  • and allows the industry to document contracts quickly and easily (improving productivity) and address common issues.

When dealing with construction contracts in New Zealand it is always best to capture it all in writing. There are many minute and important details that need to be captured in construction, so by ‘thinking in ink’ you are ensuring that the information is captured in a manner that everyone can read and agree to.

Conclusion

As highlighted above, we can see why the revisions were needed, what the new revisions are, along with the benefits of the revision means to industry.

At Millpond, we welcome these revisions, and our Contract Management training encompasses an overview of current agreements and addresses any challenges that you may have in managing NZS 3910 contracts.

If you use this standard, we encourage you to familiarize yourself with the revised NZS 3910 contract and we also acknowledge the construction industry’s commitment and collaboration for continuous improvement.

If you’d like to know more about Contract Management or our Contract Management in NZ Construction training, please get in touch.

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