New Zealand’s most commonly used standard form construction contract has undergone a long awaited review and update in what is now the NZS 3910:2023 form. Since the last version was released in 2013, there have been many legislative, industry and attitude changes (particularly towards pricing and delivery risk) and the construction sector was calling out for a comprehensive review of this document.

One of the aims of the revised form was to limit the need and use of special conditions. Here are some of the most significant changes:

• The introduction of a Target Price so that cost savings and cost overruns can be shared between the Contractor and Principal. This “pains” and “gains” adjustment doesn’t include a lot of detail or complexity but reflects what is often seen in the industry now and promotes a fairer risk-gain reward system.
• Clarification that the Contract Price can be made up of a number of different pricing components (e.g. lump sum, cost reimbursement, target price). Recognising the complexity of some projects and that the Contract Price can be hard to determine at tender/contract entry and often includes a mix of different pricing methods.
• The Engineer is replaced by a Contractor Administrator (who acts for the Principal giving directions) and an Independent Certifier (who is to be independent and impartial on matters such as valuing work and certifying scheduled amounts). However, these new roles can still be carried out by the same person so the conflict of interest issue remains.
• The introduction of an Interim Final Account (setting out the proposed final Contract Price for the whole of the Contract Works up to the date of Practical Completion) and a Final Account (setting out the proposed final Contract Price for the whole of the Contract Works after issue of a Final Completion Certificate limited to the Interim Final Account and any Variations occurring after Practical Completion). This no doubt promotes early discussion and transparency on adjustments to the final Contract Price, which can often be kicked down the road until the final payment claim.
  
• The Contractor’s indemnity is now fault based and much narrower than the previous ‘catch all’ version. There is also an option to include a cap on the Contractor’s maximum liability under the Contract (with some specified exclusions).
  
• New dispute resolution provisions that do away with the previously prescribed ‘tiered’ approach. Time bars are also removed, meaning arbitration is available at any time.

Although some good head way has been made (for example around contractor risk and liability, fairer pricing mechanisms, earlier discussion and more certainty on proposed final price claims/adjustments), the need for special conditions remains. Matters such as Government suspensions (e.g. Covid), termination rights, the extent and type of allowable variations, time delays, site contamination and other disruption events will likely still be hotly contested.

It should also be noted that the related 3915 and 3916 contracts have not been updated in line with this revision and there is currently no timeframe for when this will occur.

In a sector that is fraught with uncertainty and challenges, let’s hope it’s not another 10 years before a more comprehensive review of our 3910 contract is achieved.

If you would like more information on the changes to the NZS 3910 contract please get in touch with Nicole Warner.