NZS 3916:2013 review

By Brendan Cash (Partner), Caitlin Hogan (Solicitor) and Millie Wilcox (Summer Clerk) in Dentons’ Major Projects and Construction team.

NZS 3916:2013 contains the conditions of contract for building and civil engineering where the Contractor both designs and constructs the works. As with 3910:2013, which was reviewed and updated with a 2023 edition, Standards New Zealand is reviewing NZS 3916 and has published a draft DZ 3916:2025 for public consultation. 

The proposed changes to 3916 largely mirror the changes that were made to 3910 in 2023. We outlined the key changes to 3910 in a series of articles in 2024 and they included such matters as splitting the Engineer’s role into the Contract Administrator and Independent Certifier roles. Those changes made to 3910 are not up for debate as part of the 3916 review and will be carried over. 

Some of the key changes proposed that are specific to 3916 include the following.

Definitions (clause 1.2)

The definition of ‘Principal’s Requirements’ has been simplified. It now just refers to the requirements ‘included in the Contract and identified as the Principal’s Requirements, including the documents and any Drawings and Specifications listed in Contract Agreement Annexure 1 – List of Principal’s Requirements’. This reflects the introduction of a new annexure to gather and list the Principal’s Requirements in one place. 

While this should theoretically make the document easier to use, the present drafting which says ‘included in the Contract’ does not necessarily mean that all of the Principal’s Requirements are listed in Annexure 1. These could potentially be littered throughout the Contract. To avoid the risk of uncertainty for Contractors we think that it is important that the drafting provides for all Principal’s Requirements to be exclusively listed in Annexure 1. 

Discrepancy (clause 2.2.7)  

This amended clause, currently part of clause 2.2.6, deals with a discrepancy between the actual quantities for measurable items and those used in the schedule of prices. The current drafting provides for a variation where the actual quantity of any single item differs from that given in the schedule of prices to such an extent as to make the schedule of prices for that or any other items unreasonable.

The key proposed change is that the Contractor will only be entitled to a variation if ‘a significant discrepancy has occurred, for which the Contract is not responsible’. This shifts more risk onto Contractors. We do not agree with this change.  

Deeds of novation (clause 4.3.1)

This new clause deals with deeds of novation, where the Principal’s existing agreements with design consultants are transferred to the Contractor. This is in clause 4.1.4 of the existing standard. The new clause 4.3.1 largely mirrors the existing clause but adds in a useful requirement that the Principal provide any deeds of novation to the Contractor for execution within 10 working days after the date of acceptance of tender.

However, the draft does not include a requirement for the Principal to execute the deeds or any consequences if the Principal fails to execute them.

Given the importance of such transfers, this gap in the drafting should be addressed. We suggest that failure by the Principal to provide executed deeds in the required timeframe should entitle the Contractor to a variation or even a right to terminate.

Submission and rejection of design documentation (clause 5.1.10 and clause 5.1.11(b))

Clause 5.1.10 of the draft enables the Principal to specify that the Contractor must submit the design documentation to the Contract Administrator at the stages of design development stated in the specific conditions. In relation to the Contract Administrator’s review, the proposed revised clause 5.1.11(b) requires the Contract Administrator to include reasons if they reject the design documentation and to only reject if, in their ‘reasonable opinion’, the design documentation does not comply with the Principal’s Requirements.

We think these are useful clarifications to ensure that it is clear why any design submitted is rejected and that there are good reasons for it.  

Contractor-arranged professional indemnity insurance (clause 8.6)

Clause 8.6 requires the Contractor to effect professional indemnity insurance for their design. There are two proposed changes to this clause.

First, to change the length of time the cover must be in place, with it running from the date of acceptance of tender until the completion of the contract works and for 6 years thereafter. The current version requires this insurance until the completion and for 5 years thereafter. 

Second, to allow the insurance to be either annual renewable policies or a single policy for the full period specified above.

While the 2013 version allows for a single policy, it specifies that annual renewable policies may only be held until the completion of the contract works, and that a single period run off policy must be purchased for the period thereafter. This proposed change simplifies this aspect.  

Compliance with variations (clause 9.1.4)

Clause 9.1.4 currently requires the Contractor to comply with any variation unless they notify the Contract Administrator that it would affect the ability of the contract works to comply with one of three aspects. The revised draft proposes two changes to this clause. First, it adjusts the number of working days for the Contractor to notify the Contract Administrator, and for the Contract Administrator to amend the instruction.

This is a useful change for Contractors. Secondly, it removes adverse effects on ‘safety of the Contract Works’ as a ground for objecting. Given the importance of, and emphasis on, health and safety in the workplace, we think this ground should be reinstated even if addressed elsewhere.  

Notice of variation (clause 9.2)

Under the proposed revised clause, when a notice of variation is received, the Contractor and Contract Administrator must ‘endeavour to agree’ if the instruction or matter involves a variation. The Contract Administrator must then issue an instruction within 10 working days of their agreement.

If the Contractor and Contract Administrator cannot agree on whether the instruction or matter involves a variation, this will be determined by an Independent Certifier if requested by either party. The Independent Certifier will do this within 20 working days or as soon as practicable. The parties will then be notified of the decision and the reasons for it.

This differs to the 2013 version, where only the Engineer determines whether the instruction or matter involved a variation, and the Engineer has 1 month from the receipt of notice of variation to determine this in writing.

This process was also changed in 3910:2023 but the wording differs. DZ 3916:2025 has shorter timeframes, skips the stage where the Contract Administrator confirms whether they consider the matter involves a Variation, and goes straight to the Independent Certifier deciding the issue absent agreement.  

No change to caps on liability (clause 7)

One of the areas that DZ 3916:2025 does not address are the section 7 caps on liability. The limits on liability, the periods liability will run to and from, and the manner in which consequential losses are addressed will likely be different in the consultant’s arrangements to those covered by 3916. This creates a gap risk for contractors who may be required to take on additional liability. Contractors should be aware of this. 

Conclusion

The changes specific to 3916 are relatively limited as the big changes were made as part of the review of 3910:2013, which have primarily been adopted and are not able to be relitigated. There are some useful changes, but also areas of unnecessary risk transfer. An example is clause 2.2.7 and clause 4.3.1 discussed above.

Contractor’s may be disappointed that some other aspects of the 3916:2013 appear to be left untouched. For example, the Contractor warranty in clause 5.1.8 that the Principal’s Requirements (that it did not prepare) are ‘suitable, appropriate and adequate for the Contractor to complete the design of the Contract Works to meet the requirements of the Contract’ is left untouched.

It is also unfortunate that clause 7 has not been reviewed and amended to address the gap risk referred to above between Contractors and design consultants. Possibly some of the aspects of 3916:2013 currently left untouched by the review may be raised during the consultation process and looked at further, but we shall have to wait and see!  

Paul Buetow, Partner at Dentons, and Simon La Monica of Fletchers Construction are Civil Contractors New Zealand representatives on the Standards New Zealand committee for the reviews of 3916 and 3917.

• 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.