Most residential property developers use the NZS 3910 standard form of building contract. It’s used for infrastructure works for a subdivision or for building high-rise apartments. It’s used regardless of the procurement method e.g. traditional client-designed projects, design/build (with or without novated design consultants).
NZS 3910 has just had a make-over. This should mean fewer special conditions are needed when using this building contract. The changes bring the standard form more in line with what property developers and their banks require.
There will still need to be some special conditions though. For example:
- The performance bond is better but the clauses within NZS 3910:2013 mean there is a question whether it is truly an on demand bond
- The new form of warranty is good but developers will want continuity guarantees from key subcontractors too
- If materials are being paid for in advance and stored outside NZ or other than at the contractor’s yard, amendments are required to the new form of off-site materials agreement
- The assignment clauses will need modifying to suit bank’s requirements, as an assignment by way of security is routinely requested
- The new provisions for cost reimbursement contracts will need amending if a guaranteed maximum price contract is desired
- The contractor is now obliged to give advance notification to try and prompt a “no surprises” culture and help manage variation claims, but often the developer is also looking for monthly status reports and regular formal meetings so as to fit in with development funding requirements
- If information is required about whether subcontractors have been paid or are threatening suspension, or if there is a need to pay subcontractors directly, then these requirements need to be added
- The extension of time events remain relatively wide and developers may want to narrow these
A new standard form, NZS 3916 (Design and Construct), is due to be published shortly too. Residential property developers (and their bankers) favor a design/build procurement approach for their buildings. This new NZS 3916 design and construct standard will be a very welcome addition to the library. NZS 3910 needs significant amendment to make it work for design/build. NZS 3916 will become the contract of choice for this procurement approach. We will tell you more about NZS 3916 once it is available.