The Australian Standard General Conditions of Contract AS4000 are undergoing a welcome update.
At this stage, the proposed changes to the AS4000 are modest, with the technical committee opting to maintain the contract’s 1997 risk allocation on the basis that the current allocation is well understood by principals, contractors, subcontractors and subcontractors alike.
However, Standards Australia has committed to review the complete suite of AS4000-based documents, including the AS4902-2000 following the finalisation of updates to the AS4000. Given the age of these standards, this review is much needed.
Key changes
Some of the major changes proposed include:
- insertion of a Formal Instrument of Agreement as an option for forming the contract, with provision for including the Contract Sum;
- revisions to clause 1, with additional definitions and interpretation provisions incorporated;
- amendments to the dispute resolution clause to allow for greater flexibility and choice of alternative dispute resolution. Instead of negotiation followed by arbitration, users can now select one of four options in Annexure Part A or continue to use the default process;
- inclusion of a mechanism for certifying and calculating compensation for delays;
- clarification of how the adjustment for actual quantities works. The clarification removes uncertainty as to when a variation will be triggered (depending on whether the actual quantity is within the limits of accuracy or if the actual quantity of an item exceeds the ‘upper limit’ or falls below the ‘lower limit’ of accuracy);
- addition of clauses dealing with GST and PPSA; and
- alignment of insolvency provision with current legislation.
There are also a number of non-substantive edits, including:
- more modernised, simple and consistent language, including regularising language for time periods (e.g. “as soon as practicable” v “as soon as possible”) and replacing “shall with “must”;
- additional guidance notes included in Annexure Part A;
- inclusion of a pro-forma deed of novation at Annexure Part D;
- a requirement that the Superintendent certifies amounts owing to the Contractor if an EOT is directed after the Principal has levied liquidated damages (rather than such amounts merely being a debt due);
- flexibility for Practical Completion to be backdated in a Certificate of Practical Completion;
- provision for notices under the contract to be provided via email; and
- inclusion of typically agreed exceptions to confidentiality requirements.
Room for improvement?
Whilst the proposed changes are a step in the right direction, many would welcome more extensive amendments to the standard form to reduce the routine amendments users make to the standard form on a project-by-project basis.
The types of changes we would hope to see in the future include:
- inclusion of a concept of site information to allow for a more nuanced approach to management of site and latent conditions;
- inclusion of an authority approval matrix or similar document;
- inclusion of a simple workplace health and safety clause;
- inclusion of force majeure relief and related processes;
- the right to create a separate defects liability period for significant defects;
- a requirement for the Contractor to obtain warranties normally provided by suppliers, manufacturers and subcontractors in favour of the Principal;
- inclusion of a project control group meeting requirement plus provision of monthly reports;
- requirement to coordinate with separate contractors including utilities and telecommunications contractors;
- optional cap on aggregate liquidated damages and on the daily rate for delay costs;
- additional interpretation provisions applying to Separable Portions; and
- similar to the AS4122-2010, inclusion of an optional general liability cap and related exclusions.
Whilst the federal system creates a number of challenges for an ‘Australia-wide’ standard form construction contract, some standard forms have risen to this challenge by creating State based special conditions to address legislation dealing with security of payment, residential construction and design practitioner regulation.
Next steps
Public consultation is open until 29 May 2024, with an updated version of AS4000 expected to be released by the end of 2024 or early 2025.
If you're unsure about what these changes mean for you or would like to learn more, please get in touch with a member of our construction team.
