AS4000-2024 – Setting the new standard or just standard

9 minute read  05.06.2024 Joey Henthorn, Nicole Sawick, Michael Creedon

Standards Australia has released a draft update to AS4000-1997 for construct-only contracting. We look at what it means and what should come next.


Key takeouts


  • Standards Australia has released a draft update to the AS4000-1997 General Conditions of Contract, known as AS4000-2024, which is available for public review. Although the scope of the update was relatively narrow, the amendments proposed are a sensible first step to bringing AS4000 up to date.
  • This article summarises the proposed amendments to AS4000-1997 and sets out a list of further amendments, both inside and outside of the scope of the update, which we think should be prioritised as part of a new and more ambitious update project.
  • As the nation’s peak standards development body, Standards Australia has a mandate to lead in the creation of a functional standard suite of modern construction contracts. Given the gestation period needed, a new project with a more ambitious scope should commence as soon as possible so that AS4000 is further developed with more functionality so it can be used in a broader range of applications and with less amendment.

After a 27 year long wait, Standards Australia has released a draft update to the AS4000-1997 General Conditions of Contract, known as AS4000-2024. The draft is available for public review.

In this article we have summarised the review process undertaken, the amendments made, and our wish list of amendments we hope that Standards Australia will consider for inclusion in a future iteration of AS4000 and AS suite amendments more broadly.

The amendments made as part of AS4000-2024 are considered a positive first step by Standards Australia, in what we hope leads to further and more regular amendments to the entire Australian Standards suite of contracts.

History behind amending AS4000

AS4000-2024 is long overdue, but it is not the first attempt at trying to amend AS4000-1997.

In 2013, Standards Australia formed a technical committee with the intent of revising AS4000-1997 to create a new uniform industry standard which captured legislative changes, resolved uncertainty around contract governance and instilled relationship-based/collaborative contracting philosophies.

This resulted in a new draft, AS11000 General Conditions of Contract which took into account public consultation but did not result in a workable solution for the industry due to it not being supporting by the 'full spectrum of interests’. This lack of support related particularly to changes in the allocation of risk.

The learnings gained from the AS11000 saga are reflected in the approach taken and scope of the new amendments made as part of AS4000-2024, as only changes which did not materially impact the risk allocation were allowed.

Process, status and timeline

The timeline for AS4000-2024 is as follows:

In undertaking the review process, Standards Australia formed a review committee known as 'MB-010 General Conditions of Contract' (the Committee) which was made up of the following experts and industry groups:

  • Air Conditioning & Mechanical Contractors Association
  • Australian Construction Industry Forum
  • Australian Institute of Architects
  • Civil Contractors Federation
  • Consult Australia
  • Engineers Australia
  • Housing Industry Association
  • Institute of Public Works Engineering Australasia
  • Law Council of Australia
  • Master Builders Australia
  • Independent Experts (x2)

The Committee was tasked with reviewing AS4000-1997 and determining required amendments having strict regard to the following principles (Scope):

  • reflect developments in legislation and case law since the 1997 edition;
  • keep the updates to the contract tightly focused so as not to impact the risk allocation between the parties;
  • contemporise the language throughout the contract; and
  • amend the terminology and structure so the contract is easier to use and read.

During its public webinar held on 23 April 2024, Standards Australia confirmed that in following this Scope, it did not consider the following issues:

  • state security of payment legislation;
  • modern slavery legislation; and
  • unfair contract terms.

At this stage, Standards Australia has not released a proposed date for publication, but during the public webinar, commented that it aims to be able to produce a new version by the end of 2024. This timing will likely be subject to the amount of comments and feedback it receives during the consultation period.

The proposed amendments

The amendments made as part of AS4000-2024 can be split into major changes and minor changes.

Major changes are summarised below:

1. Insertion of a Formal Instrument of Agreement (FIA)

Most modern day contracts include some form of FIA, which is a legal document used to formalise the agreement between the parties and to annex all contractual documents comprising the agreement. However, despite their widespread use, a FIA is not included in AS4000-1997.

The FIA included in AS4000-2024 provides placeholders for the date of agreement, party details, project details, documents comprising the agreement and contract sum amounts (as well as providing multiple Contract Sum options), while also including signature blocks which allow for execution of the contract in accordance with the Corporations Act 2001 (Cth).

2. Redrafting and restructuring of the Definitions and Interpretation sections

The redrafting and restructuring of the definitions and interpretation sections included:

  • amending definitions so that they are now self-contained;
  • adding definitions which relate to new clauses added;
  • defining 'Document' in line with the Evidence Act 1995 (Cth);
  • clarifying the definition of 'Qualifying Cause of Delay';
  • allowing for the 'Site' to be defined within the Contract Particulars;
  • adding a new definition for 'Work'; and
  • separating out the interpretation section and adding additional interpretation provisions.

3. Clarification of how the adjustment for actual quantities works

Clause 2.5 was amended to remove any uncertainty as to when a variation occurs.

4. Replacement of the Evidence of Contract clause with a new GST clause

The existing clause 6 pertaining to 'Evidence of Contract' was removed as it was unnecessary with the inclusion of a FIA, and was instead replaced by a much needed GST clause which aligns with the A New Tax System (Goods and Services Tax) Act 1999 (Cth).

5. Alignment of insolvency provisions with current legislation

Significant changes were made to clause 39.11 to bring it into line with changes in legislation relating to bankruptcy and insolvency.

6. Amendments to the dispute resolution clause to introduce a range of options

The dispute resolution clause was amended to provide increased flexibility in the form of five different dispute resolution options which include:

  • negotiation and arbitration (default which applies if no options selected);
  • negotiation, mediation and arbitration;
  • negotiation, expert determination and arbitration;
  • negotiation, mediation, expert determination and arbitration; and
  • Dispute Avoidance Board.

Additionally, parties can now choose to make expert determination interim binding through a mechanism in the contract particulars.

7. Addition of a Personal Property Securities Act (PPSA) clause

A much needed new PPSA clause was added which aligns with the Personal Property Securities Act 2009 (Cth).

Minor changes are summarised below.

1. Style changes

  • changing uses of the word 'shall' to 'must' or 'will';
  • no longer using the terminology 'subclause';
  • changing defined terms from italicised to bold and capitalised;
  • referring to the defined term which exists with legislation (where applicable);
  • using consistent language for time periods; and
  • refreshing language used throughout.

2. Addition of confidential information exceptions

Clause 8.5 now contains the following exceptions to documents, information, etc being confidential:

  • the disclosure is necessary to enable a party to perform any of its obligations under the contract;
  • the written consent of the other party is obtained to permit disclosure of the confidential information;
  • the disclosure is required by law;
  • the disclosure is to any professional advisor who agrees to comply with this clause as if they were a party to the contract; or
  • the disclosure is permitted as agreed and recorded in item 19 of the contract particulars.

3. Amendment to the certificate of practical completion clause

Clause 34.6 has been amended so that a certificate of practical completion can evidence a date of practical completion which is earlier than the date the certificate is given.

4. Amendment to the liquidated damages (LDs) clause

Clause 34.7 has been amended to provide for certification of LDs that become repayable as a result of an extension of time (EOT) being granted after LDs have been paid rather than merely stating that they are to be repaid.

5. Amendment to the compensation for delays clause

Clause 34.9 has been amended to provide for certification of compensation for every day which is the subject of an EOT for a compensable cause and for which a claim has been made in accordance with the claims clause.

6. Amendments to Annexures

Annexure Part A has been amended by adding new items related to changes to other clauses.

Additionally, a new Annexure Part D has been added, which includes a standard form deed of novation.

Wishlist of changes for future reviews

The Committee has successfully avoided any changes which would have materially impacted the risk allocation. It has opted for amendments which intend to improve useability, readability and incorporate standard drafting to address the requirements of some construction related Commonwealth legislation. These amendments were necessary, useful and largely uncontentious and do improve the user experience.

However, the cautious approach has severely limited the potential functionality of AS4000-2024 as it will still require substantial amendments in all but the most basic applications.

Standards Australia has indicated a further set of revisions after the currently proposed revisions have been rolled out to the rest of their suite of contracts. We hope that the scope for the next set of revisions will be more ambitious and provide a much more functional standard contract that can be used for a broader range of applications and with less amendment. With this in mind, we believe Standards Australia should make the following amendments in its next iteration of AS4000.

Changes within the Scope of its current review

Electronic document management system

Adding a new optional clause which specifies the electronic document management system to be used (if any).

Appointment of a WHS Principal Contractor

Adding a new clause for the appointment of a WHS Principal Contractor.

Superintendent

Amending clause 20 so that it recognises the dual role of the Superintendent (as contract administrator and certifier) and clarifies the specific functions that the Superintendent is only required to act independently and reasonably when carrying out its certifying functions.

Payment Regimes

Adding new provisions and schedules for optionality to include alternative payment regimes (cost plus and incentivised target cost / guaranteed maximum price).

Security of Payment

Adding new provisions which incorporate requirements under the security of payment laws in each state/territory with options for each state as necessary.

Time and variations

Making minor amendments to clause 34 and 36 to remedy any 'double-dipping' when claiming costs for variations under the variation clause and time related costs related to variation under the delay cost clause.

Notices

Amending clause 7 to accommodate changes to Australia Post delivery times, including by adding options for express post, priority post, normal or both.

Changes outside the Scope of its current review

Limitation of liability regime

Adding a new optional limitation of liability regime, including a mutual exclusion of consequential loss and defined term for consequential loss.

Baseline for site conditions

Adding a definition of site information and clarify whether reliance can be placed on all information or only factual information for the purposes of determining latent conditions.

Include basic project leadership / management obligations

Adding new optional roles for a contract leadership team and contract management team from both parties with a minimum set of meeting and reporting obligations.

Payment of workers and subcontractors

Amending clause 37 to include a statutory declaration/subcontractor statement in relation to payment of workers and subcontractors.

Optional commercial frameworks

Adding a reimbursable cost commercial framework for use with incentivised cost target contracts and guaranteed maximum price contracts, in addition to the current lump sum and schedule of rate commercial frameworks.

Definition of WUC and drawings and specifications

Clarifying that the WUC is defined by the Principal-supplied documents (including the drawings and specification).

Warranties

Adding an obligation for the Contractor to pass through all warranties usually obtainable from subcontractors and suppliers to the Principal.

Adding a sliding scale of optional warranties that can provide a range of options for allocating risk by way of warranties for skill, quality, care and fit for purpose etc.

Next steps

During its public webinar held on 23 April 2024, Standards Australia confirmed that its current focus was to finalise this first revision and then create a structured progress plan to roll out the changes to the rest of their suite of contracts.

In our opinion, there is a clear opportunity for Standards Australia to take a further lead and, as soon as the planned roll out is complete, initiate a new and more ambitious update project with the aim of providing a much more functional standard contract that can be used for a broader range of applications and with less amendment.

However, before it initiates this new update project, Standards Australia should ensure the composition of the review committee reflects all major stakeholders and potential users of AS4000, to maximise its potential for success. For example, there appears to be a noticeable lack of government representation on the existing committee.


We encourage industry to engage in the public consultation process and to help initiate a further review in the near future. This further review should be more ambitious and include a broader scope to standardise more functionality in Australian Standards contracts, with less need for amendment.

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