NZS 3910 is the most commonly adopted construction contract in New Zealand. Since its last review and release in 2013, New Zealand’s population has increased significantly and a new generation of contractors and other players have entered the industry. 

On 9 May 2023, Standards New Zealand released its proposed revisions for market consultation with a draft DZ 3910:202X. The eight-week consultation process with public submissions ended on 30 June. These submissions will now be reviewed and a new NZS 3910 will be released, hopefully in December.

Why did NZS 3910 get updated and why is a standard form important?

The general conditions of NZS 3910 have been developed over many years, dating back to NZSS 623:1964, by representatives from a broad spectrum of the industry. They can be found on the inside cover. They have agreed a set of comprehensive contractual clauses that generally reflect a more fair allocation of risk. However, with the continued rise of complex Special Conditions and changes in various laws, the general conditions are long overdue for an update and refresh. It is important for anyone who uses NZS 3910 to become familiar with the changes outlined below. For greater detail on specific changes, see our series of articles on NZS 3910 on the Dentons in New Zealand website (www.dentons.co.nz/en/insights).

New definitions (clause 1.2)

Some new terms have been introduced, but the definitions remain unchanged:

• ‘On Site Overheads’ has been replaced with 'Preliminary and General’ (P&G) as this is the way it is commonly described in the industry.
• ‘Offsite Overheads and Profit’ has been replaced with ‘Margin’ again to align with the industry terminology.

New ‘target price’ mechanism (clause 2.5)

Under the current NZS 3910, there are three contract price options – cost reimbursement, measure and value, and lump sum. DZ 3910 has a new ‘target price’ contract price mechanism to allow for the sharing of cost savings and over-runs.

Contractor’s general obligations (clause 5) 

A number of changes have been introduced to the Contractor’s obligations, including:

• Health and Safety (5.8-5.9) in line with the Health and Safety at Work Act 2015.
• Protection of the environment (5.21) now requires the Contractor to take practical steps to ensure compliance with resource management laws and applicable resource consents.
• Reporting (5.22) now requires the Contractor to regularly provide status reports with specific timeframes and to report on matters and content to be agreed and set out in the Specific Conditions.

‘Contract Administrator’ and ‘Independent Certifier’ replaces ‘Engineer to Contract’ (clause 6.1 and throughout)

The amendments have ‘split’ the Engineer’s role into two separate roles – a Contract Administrator (to act as the Principal’s agent and to give instructions e.g. on variations) and Independent Certifier (who will be acting independently of both parties when making and issuing decisions e.g. practical completion).

This change is significant as it recognises the long-standing issue that the Engineer often cannot fulfil its dual role effectively and impartially and there is often bias when making decisions or issuing determinations and certificates.

Fault-based indemnity (clause 7.1)

A notable change is that the indemnity is now ‘fault-based’ which means the Contractor will only be liable for matters to the extent that it causes actual damage. This significantly narrows the scope of the Contractor’s exposure.

Liability cap (clause 7.2)

The new amendment introduces an option to have a cap on the Contractor’s liability, which promotes greater certainty as to the nature and extent of risk. There is an option to cap liability at 100% or a lesser percentage of the Contract Price. It is important to note that there are a number of exclusions to this cap, being fraud, illegal acts or omissions, abandonment by the Contractor of the Contract, and willful or reckless misconduct.

Variations (clause 9)

DZ 3910 brings together under Section 9 (and gives it a new title) all price adjustment mechanisms. This includes cost fluctuations, contingency payments and Provisional Sums, Provisional Items and Prime Cost Sums. These are no longer dealt with in Payment section 12. Arguably, this better reflects the split between the Contractor Administrators’ role in valuing adjustments to the Contract Price, to the Independent Certifier’s role in processing payment claims and Payment Schedules. The committee has also introduced a process whereby more focus is given to the Contractor and Contract Administrator agreeing the value of the Variation. If agreed, it is recorded in an Instruction.

Extensions of time (clause 10)

The changes here focus on the process for submitting an extension of time claim to reduce the likelihood of a dispute arising and if one does arise, to resolve it quickly. The Independent Certifier is given a leading role in this process. As with Variations, the parties are encouraged to reach agreement as to entitlement and period of delay, and record the same in an Instruction.

Disputes (clause 6.4 and 13)

Section 13 has been streamlined to retain just the external dispute resolution processes of mediation and arbitration. To this is added the requirement for senior representatives of the parties to try and resolve the dispute as a first step. A notable revision is to dispense with Formal Decisions altogether and as a precursor to mediation or arbitration. All other processes have, sensibly, been moved into the new clause 6.4. Here, the focus is on the Independent Certifier reviewing Instructions of the Contract Administrator and Decisions of the Independent Certifier.

What does it all mean?

The proposed changes are a positive step towards reducing the need for Special Conditions and will hopefully promote efficiency and fairer risk allocation in the construction industry. It is important for industry players to become familiar with these changes. It is also advisable to review your current NZS 3910 templates and be prepared to have these updated to reflect the changes.

This article originally appeared in Issue 197 of the AUG/SEP 2023 edition of Build Magazine.