Brendan Cash (Partner) and James Sanderson (Solicitor) in Dentons’ Major Projects and Construction team has covered six core areas of change introduced in the new NZS 3910:2023 in Contractor this year. In their final, wrap-up edition of the 3910 series, they cover the smaller, but no less important, changes throughout the rest of NZS 3910:2023.
While the contract documents have remained unchanged, an order of priority clause has been added to the contract agreement.
The result is that the order the documents are listed in determines which document prevails if there is an ambiguity or a conflict. Contractors also need to be aware that under the 2013 version the contractor’s tender sat towards the top of the list.
However, in the 2023 version, where the order of priority matters, the contractor’s tender sits towards the bottom (i.e., most other documents will prevail over the contractor’s tender, unless the order in the contract agreement is changed).
Interpretation (section 1)
Changes have been made to better reflect market terminology and practice. ‘Preliminary and General’ replaces ‘On-Site Overheads’ and ‘Margin’ replaces ‘Off-Site Overheads and Profit’ and there is now ‘Interim Final Account’ and ‘Final Account’.
A new definition for ‘Target Price’, ‘Contract Administrator’ and ‘Independent Certifier’ have been added to reflect the changes we covered in our previous articles. The ‘Principal’s Representative’ role has also been defined – the natural person appointed to represent the Principal, but who cannot issue Instructions or Decisions.
‘Management Plans’ and ‘Completion Records’ definitions reflect the consolidation under these terms of the various plans respectively the Contractor may have to provide (traffic management, environment, quality, sustainability, etc., but not the Site safety plan) and all as-built records, other asset information, operation and maintenance manuals and other similar items required by the Specific Conditions (see below).
The definition of ‘day’ has been deleted which creates a distinction between ‘day’ and ‘Working Day’. The 2013 version previously defined any reference to ‘day’ as a Working Day.
Changes have also been made to terminology used throughout the general conditions. References to ‘Special Conditions’ are replaced with ‘Specific Conditions’ where reference is being made to Schedule 1 – Special Conditions of Contract – Specific Conditions.
This avoids confusion with Schedule 2 – Special Conditions of Contract – Other Conditions of Contract. References to ‘consent’ are replaced with ‘approval’ in the context of approval from the Principal, Contract Administrator and Contractor.
This avoids confusion with ‘Consents’, which is a newly defined term. Finally, gender specific references have been removed and time periods that were previously in Months have been converted to Working Days.
Bonds (section 3)
There is no longer provision for replacement bonds to be provided where: the Principal alleges that the Contractor has failed to perform obligations (after Practical Completion); or the Contractor alleges that the Principal has failed to perform obligations (after final Payment Schedule).
The forms of bond are unchanged except that they are now only made and executed by the surety.
General obligations (section 5)
‘Good industry practice’ is now included as an express obligation on the Contractor (cl 5.1.1). Health and safety obligations have been brought in line with the Health and Safety at Work Act 2015 (cl 5.8) and management plan
(cl 5.1) sections have been simplified.
Updates to the Comprehensive Programme need to contain the information in 5.13.4 and materials or other things the Principal will supply are to be recorded in the Specific Conditions.
Completion records are to be recorded in the Specific Conditions (5.20). These include ‘as-built records and other asset information’, which is expanded from the requirement to provide ‘as-built drawings’ in the 2013 version.
This captures the broader asset management systems utilised in the market today, such as Building Information Modelling systems. ‘Early Warning’ (now in cl 6.10) replaces the previous ‘Advance Notification’ requirements, which the Contract Administrator is now also obligated to comply with (alongside the Principal and Contractor).
Finally, the Contractor can be required to provide reporting. The report content, frequency, and format are to be recorded in the Specific Conditions (cl 5.22).
Insurance (section 8)
Most of the insurance changes reflect typical special conditions already common in the market.
Any cost associated with a failure by one party to notify the other insured parties of any material policy change is now the responsibility of the party that has arranged the relevant insurances (cl 8.1.2).
Contractor arranged insurances – General
Where insurance is in the parties’ joint names, the insurances must provide that the parties will be severally (i.e., separately) insured, and the actions of one insured shall not affect the rights of any other insured (cl 8.2.3).
The Contractor is required to provide policy wording to the Principal only where the Principal is a named insured (cl 8.2.7). Otherwise, the Contractor only has to provide a certificate of currency when reasonably required by the Principal.
Contractor-arranged construction insurance
The Contractor is to ensure the construction insurance policy ‘insures the interest’ of any Person(s) recorded in the Specific Conditions (cl 8.3.2). The 2013 version required the policy to ‘note the interest’ of the Person(s) recorded in the Specific Conditions. This change recognises that ‘noting an interest’ typically does not make a person an insured party under the contract of insurance. The sum insured needs to cover an allowance for the increase in Costs due to inflation for the reconstruction of the Contract Works and also (under the 2023 version) the unbuilt portion (cl 8.3.3).
Public liability insurance
Public liability insurance is now required to include both products liability insurance and cover for liability arising from the use of construction machinery (cl 8.5.1).
Principal-arranged construction insurance
Construction insurance arranged by the Principal may contain a provision which makes claims proceeds payable by the insurer to the Contractor, only if the Independent Certifier certifies that the reinstatement or repair to the Contract Works is ‘completed in accordance with the Contract (cl 8.8.5)’.
This provision may provide that: It shall not apply to any portion of proceeds that the Contractor is entitled to receive under the policy, irrespective of the progress of the reinstatement. Such proceeds may be paid to the Contractor on a monthly basis in respect of the reinstatement or repairs that have been undertaken.
Miscellaneous
The Guidelines have been substantially updated. These are not a Contract document or legal advice but an important aid to understanding the Contract.
Electronic form documents are now stated in the Specific Conditions and generally throughout and hard copies are optional. The Contract can also be executed ‘in counterparts and by electronic signature’. An electronic copy of the contract can also be marked up (instead of having schedules that amend the standard form).
Conclusion
The 2023 update represents a decade of developments using 3910. Adoption of the 2023 standard has been slow to date but now appears to be increasing and its use will hopefully become more common.
The guidance we have outlined will hopefully help those dealing with the 2023 edition as and when they encounter it.
• This publication is not designed to provide legal or other advice and you should not take, or refrain from taking, action based on its content. Dentons does not accept any liability other than to its clients, and then only in relation to specific requests for advice. For specific advice, contact your legal advisor or
the Major Projects and Construction Team at Dentons on
(09) 379 4196.
Parting words from Jeremy Sole- a final column