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.