Bespoke departures to the Australian Standards - In support of a more balanced approach...
- It strikes us that the existing Australian Standards suite is not fit for purpose. Principals are forever making a changes to the terms to make it more principal-friendly, and contractors are forever trying to push it back to its original position but with clarifications. Neither principals nor contractors are content with the current forms of the document (really, we’re talking about the AS4000 and AS4902 suite, but equally it applies to their subcontract variants and also supply of equipment documents equally the same).
- Of course these two forms of contract remain industry standard baseline documents on which contracting parties are familiar. But really it is the form of the contracts with which people are familiar, often the content is changed so dramatically that each proposed deal needs careful review. And not just a careful review for deal-specific issues, but careful review to assess the departures from the underlying standard document.
- What we would like to see is the industry adopt a “market benchmark” form of construction contract (whether it be for AS4000 or AS4902, but with balanced amendments which are generally accepted). The benchmark would have two developments on the existing AS4000/AS4902:
- the language and formatting would be clearer;
- the content would be more balanced – but drafted with clarity.
- That is, we’d like to see key issues which are forever negotiated included in a “market benchmark” contract. Such a draft contract would address:
- limits of liability (by way of “General Liability Cap”) and appropriate carve outs to those limits of liability;
- an expanded list of qualifying causes of delay;
- an expanded list of compensable causes;
- an option for the inclusion of tender clarifications or assumptions and exclusions;
- an option for the delivery of “free issued material” by the Principal to the Contractor;
- for the AS4902, an design review process which is clear about what the Principal can and cannot object to;
- a more specific latent condition provision;
- clarity on ownership of float (it is not uncommon for less sophisticated parties not to clock this issue in a heavily amended form of contract);
- the nature of liquidated damages vis-à-vis general damages, and the extent to which an liquidated damages cap survives termination;
- force majeure;
- termination for convenience and clear remedies to the contractor;
- the contemplation of the parties entering into a tripartite agreement (for developments which are to be bank financed);
- and a range of other issues – the list of needed requirements goes on.
- And yes we are aware that a new proposed form of AS4000 due out this year. But by all accounts, it’s unlikely to be what the industry craves.
- Often principals, when going to market seeking requests for tender, will offer such heavily amended forms of AS4000 or AS4902, that a protracted negotiation with a serious contractor is inevitable. It is not uncommon for a negotiation to take several months, with rounds of departures tables going back and forth. Is there space for a generally accepted “market benchmark” amended form of AS4000/AS4902, which can go some way to cutting out all of those rounds of negotiations and departures? Surely this would reduce the cost of procuring projects and increase the speed and efficiency of getting projects out of the planning phase and into the construction phase.
- Of course, this is really only addressing the Australian Standard suite. Don’t get us started on the bespoke forms of contracts prepared by the tier 1 contractors in Australia.
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