Standards Australia has recently released its proposed replacement for the AS2124-1992 and AS4000-1997 construct only forms of contract, the AS11000: General Conditions of Contract, for public comment.
The intention is that the popular AS2124-1992 and AS4000-1997 will be replaced by the AS11000, once its final form is decided. While AS11000 contains some of the same risk allocation as AS2124-1992 and AS4000-1997, there are significant differences in the discussion draft, and the construction industry needs to understand them.
The stated objective of AS 11000 is to provide general guidance for legal contracts in all sectors of industry, including construction, engineering, health, manufacturing and infrastructure.
The Technical Committee that prepared the draft comprises stakeholders from regulatory bodies, industry groups, law associations and public authorities. It has indicated that the AS11000 is intended to provide a broadly balanced approach to risk allocation in brief and certain language, and to update the standard form to take account of recent changes in legislation and business needs.
It is difficult to get an appropriate balance of risk in any standard form, and in our view, if the AS11000 is finalised in its current terms, both principals and contractors are likely to want potentially significant amendments before using this standard form. There is no information yet as to whether this will be possible, or whether Standards Australia will issue the AS11000 in the same unamendable format as the AS4122-2010.
Some of the key changes proposed in the draft AS11000 (compared with AS4000) are as follows:
- an overarching obligation of good faith, which is not defined, on both parties
- the inclusion of an ‘early warning system’ obliging parties to notify each other and the Superintendent of an event or circumstance that “may impact upon time, cost, scope or quality under the contract and may become an issue” (akin to the existing obligation in the NEC forms of contract)
- all bills of quantity must be priced whether they form part of the contract or not, and the Contractor is not entitled to payment until the bills of quantity have been provided
- the Contractor will be in substantial breach of contract if it engages subcontractors for work over a specific value on terms other than the unamended AS11002-2015 (amendments needed to reflect the head contract are allowed, but nothing else)
- the Contractor is entitled to an extension of time for any delay occurring before the Date for Practical Completion which is beyond their reasonable control
- a party becoming aware of anything which will “probably cause delay to the work under the contract must promptly and within 5 business days give the Superintendent and the other party written notice of that cause and the estimated delay”. If the Contractor gives the notice, it must also state whether it anticipates claiming an extension of time
- the Superintendent must assess extension of time claims, or request more information from the Contractor, within 20 business days, failing which the date for practical completion will be extended by the period claimed
- rates or prices in the contract are now deemed to include allowance for overheads and profit unless otherwise stated
- notices can be served by email, meaning that parties must ensure that their administrative processes are sufficient to deal with issues such as security of payment claims.
Submissions on the draft AS11000 can be made to Standards Australia. The closing date for submissions is Friday 27th March 2015.
Author: Suzy Cairney
Stephen Natoli, Partner
T: +61 3 9321 9796
Tony Britt, Partner
T: +61 2 8083 0497
Troy Lewis, Partner
T: +61 7 3135 0614
Stephen Burton, Partner
T: +61 7 3135 0604
Suzy Cairney, Partner
T: T: +61 7 3135 0684
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