New construction contract standards for New Zealand
It’s been almost five years since the whole world was affected by a large-scale economic recession and there are some countries that are still suffering as result of the subsequent debt, while others have bounced back from the recession and are making headway into a happier, healthier economic future. New Zealand’s decision to focus on infrastructure development and building projects has helped the country to keep its head above water, but not without some changes to the building industry standards.
Earlier in 2013, new construction contract standards were introduced with the aim of greatly enhancing the contracting process and the efficacy of binding clauses in contracts for principals, contractors, developers, and project owners. Every construction project is subject to a contract (and the construction law that underpins it) by which all signing parties must abide to ensure that building projects can go as planned and that all parties remain accountable for their contribution to the project.
When starting new construction legal processes need to be in place to protect all parties, which is the reason for construction contracts. Construction contracts are the final documented agreements that follow complex and oftentimes lengthy negotiations to ensure there are no conflicts of interest or other considerations that may become obstacles down the line. The contract needs to be a reasonable and fair agreement, but it also needs to contain certain standards for construction and all the requisite conditions that all parties to the construction project understand. Once they have signed the construction contract, it shows their recognition and support of these conditions.
In New Zealand construction law, the new standards that were revised and introduced relate to Design and Construction, Construction, and Term Maintenance – and all underwent major revisions. Some of the new provisions relate to:
- cost reimbursement contracts
- the requirement for advanced notification for any incidents that are likely to affect time and cost (which should be agreed in the construction contract)
- improvements in the provision of insurance
- better provisions for taking scope variations into account
- better provisions for payment schedules and claims.
While these new guidelines merely reflect common industry practice, they are not specifically required at contractual level. However, it would serve construction companies in New Zealand well to abide by industry practice so that common ground is maintained when dealing with contractors and executing on construction projects.
One of the important provisions is regarding time extensions, which are in place to project construction principals. When there are delays or changes to the construction schedule, it’s important that there is no unfair risk placed on the project principal or on the contractors. In an industry that is a highly competitive and very complex, changing any standards relating to the industry can cause confusion. However, the committee that developed and distributed the new standards in the construction industry will address each of the changes relating to the different construction industry roles separately.