Key Proposed Changes to the Australian Standards General Conditions of Contract – the new AS11000
*Update on AS 11000: As of 4 April, Standards Australia announced that "despite the Technical Committee’s best efforts and commitment to the draft, the document was not supported by the full spectrum of interests." Read the full statement.*
Standards Australia has released a draft version of its new ‘AS11000’ which is intended to replace the current standard form of contracts AS2124:1992 and AS4000:1997, and merge them into one new set of general conditions of contract. As part of the process of developing the proposed new ‘AS11000’, public comment was invited on the proposed draft.
The draft of the AS11000 was developed by a Technical Committee consisting of key stakeholders from regulatory bodies, industry, law and public authorities. It is intended to apply to contracts in the construction, engineering, health, manufacturing and infrastructure sectors, and to provide a ‘broadly balanced approach to risk allocation’ between the principal and contractor.
We have set out below a number of proposed changes introduced into the proposed terms of the AS11000 that may impose significant implications for developers, principals and contractors.
Good faith obligation
- The Principal and the Contractor agree to cooperate and to act in ‘good faith’ towards each other. It is important to note that there is no overriding obligation of good faith in the AS4000.
- ‘Good faith’ is not defined in the AS11000, which may create uncertainty and scope for dispute to arise concerning interpretation may be considered as not ‘acting in good faith’.
- The introduction of a ‘good faith’ duty in the contract, may also have an impact on other clauses (i.e. termination for convenience).
- The contractor is required to use AS 11002 subcontract conditions as its subcontract conditions.
- Failure to do so is proposed to be treated as a substantial breach of the contract.
- It is important to note however, that this will ONLY apply when the proposed subcontract sum is equal or greater than the amount specified by the parties.
Role of the Superintendent
- Obligation for the superintendent to act in ‘good faith’ has been removed.
- The Superintendent is required to act “honestly” and “impartially.”
Delay damages vs. delay costs
- The AS11000 seeks to distinguish ‘delay costs and ‘delay damages’.
- ‘Delay Damages’ proposed to be those amounts the Contracts may be entitled to relating to delay to practical completion caused by a Principal’s act of prevention. Delay damages are to be assessed and certified by the superintendent for every working day which is the subject of an extension of time.
- ‘Delay Costs’ proposed to be those amounts the Contracts may be entitled to relating to delays to practical completion due to variations. Delay costs are also assessed by the superintendent and include overheads but not profit.
Security of Payment Act
- The AS11000 has been amended to reflect the Security of Payment (SOPA) consistent with each of the State’s legislation (SOPA). For example:
- the definition of business days from SOPA has been adopted,
- payment claims and payment certificates issued under the contract are deemed to be payment claims and payment
schedules under SOPA; and,
- the superintendent can receive payment claims and issue progress certificates on behalf of the principal.
Early Warning Procedure
- This is aimed at ensuring that issues are resolved as soon as possible.
- ‘Early warning’ procedure to be used as soon as a party becomes aware of any event or circumstance which may impact upon time, cost, scope or quality and which may become an issue under the Contract. The procedure includes:
- giving notice;
- conferencing; and,
- if not resolved, then a party can pursue a claim.
- The Dispute Resolution clause has been expanded and included further options for resolution of disputes, including:
- conference and arbitration;
- conference, expert determination and litigation;
- Contractor Facilitation; and,
- Dispute Resolution Board.
- Standards Australia propose to release a separate Standard containing procedures for additional methods for dispute resolution.
What happens now?
Though originally released for public comment in January 2016, the publication of the AS11000 has been delayed to allow for redrafting after receiving negative feedback on certain key amendments in draft version from industry stakeholders. It is expected that the final version be released at the end of 2017.
Whilst the introduction of the AS11000 is yet to be confirmed, it’s nonetheless important to consider the key changes and possible implications for both Principals and Contractors, and begin considering proposed amendments that may be required to the new AS11000 or introducing some of the new changes of the AS11000 into their existing contact suite precedents.
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