Construction Contracts

Transcription

1 Construction Contracts NZS 3910 NZS 3915 NZS 3916 NZS 3917 Delivered by Falcon Training & Spire Consulting It s good to know 1

2 Housekeeping 1. Emergency procedures 2. Comfort breaks 3. Refreshments: Morning tea, Lunch, Afternoon tea 4. Wifi 5. Mobile phones & laptops 6. Online Feedback 7. Access soft copy materials: Access code: CMT17 2

3 Workshop Objectives Gain familiarity with the most widely used construction contracts in New Zealand Understand the characteristics, features, advantages and disadvantages of each series Review the key aspects of Contract law Managing contracts day to day Practical tips in adopting construction contracts 3

4 Agenda Background & Introduction NZS Series NZS3604 Standard Managing Contracts (NZ ) Summary and real life feedback Lunch 4

5 About your Presenter Paul A. Rogers; M.Bldg.Sci, Dip.Env.Mgt, Dip.En.Mgt, M.IPENZ, F.FMANZ M.IoD is the founder and Managing Director of the New Zealand based management consultancy firm Spire Consulting Ltd. Paul specialises in strategic procurement and supply chain optimisation, asset and facilities management, and organisational performance improvement. Based in Christchurch, New Zealand, Paul consults to a wide variety of clients from Qatar to Queenstown in the local and central government sector, health, infrastructure, petro chem, utilities, manufacturing and commercial property environments. Current Focus = Principal Procurement Advisor to Christchurch City Council for the Infrastructure Rebuild & Southern DHB Alliance. Paul has previously been a visiting lecturer on the MSc Asset Management Programme at Hong Kong Poly University, and is a regular guest presenter at Canterbury University in the Commerce & Marketing dept. Paul, has 35 years experience in asset & facilities management having worked for J.P.Morgan, Lloyds of London, Colliers Jardine and AMP Investments. Prior to forming Spire Consulting, Paul was National Manager Facilities Management at Telecom New Zealand where he was responsible for the contract and performance management of New Zealand s largest facilities management portfolio. Contact: paul.rogers@spireconsulting.co.nz Tel:+64 (27)

6 Now you Your Name & Role Context of involvement in this Workshop Top 3 aspects you are seeking to learn from this workshop today Anything else to contribute to our session today that we should know? 6

7 Construction Contracts Background and Introduction Background & Introduction NZS Series NZS3604 Standard Managing Contracts (NZ ) Summary and real life feedback 7

8 In this section we ll review: Contract options and forms The NZ series vs NEC series Characteristics, features, advantages and disadvantages of each series Practical application and requirement to use the NZ series Basic contract law Fair and reasonable approaches to contracting Practical tips in adopting construction contracts 8

9 Construction Contracts 9

10 NZ Construction Contracts: The 3910/5/6/7 (2013) Suite Designed for New Zealand conditions by New Zealand Lawyers and Engineers. The splitting of NZS 3910:2003 was split into 3 separate contracts (10/16/17). (3917 is a fixed term Contract for services including maintenance) standards easier to follow with tick-box type tables for Special Conditions and include additional standard form documents (to save parties developing their own). 10

11 NZ Construction Contracts: The 3910/5/6/7 (2013) Suite cont. Among the substantive changes, the payment system has been simplified and contains different time periods and there is greater certainty about responsibility for arranging insurance and paying deductibles. The conditions are also aligned with the Construction Contracts Act 2002 and 2015 Amendment. Standards NZ says the 2013 contracts reflect a fair risk allocation between the parties, minimizing the degree of Special Conditions 3915 same as 3910 but no Engineer to the Contract 11

12 Contracts What to use Example 12

13 Getting to Contract Conditions of Tendering 13

14 Getting to Contract Conditions of Tendering 14

15 Construction Contract Choices Choices depend on your specific needs. Build Design Build / Construct Maintain NZS 3910 (2013) NZS 3916 (2013) NZS 3915 (2005) NEC. Engineering & Construction Contract (ECC) FIDIC, JCT, ICE NEC. Engineering & Construction Contract (ECC) NEC Term Service Agreement (TSC) Let s discuss your experiences with these forms. 15

16 NEC Suite 16

17 NEC Vs 3910/5/6 /7 high level comparison NEC seen by the industry as a more collaborative agreement (the language is more equitable ). The NEC Agreements have processes that force parties to communicate clearly and in a timely manner (Early Warning Compensation Events etc.). No Engineer to the Contract with NEC 3910 slightly more litigious (focuses more on liabilities and risk allocation) NZS Suite far more prevalent in NZ. Widely known, understood and accepted by NZers. Written by Kiwis, for Kiwis 17

18 NEC Vs 3910/5/6 /7 high level comparison My Opinion: Both agreements work when both parties understand their roles and contractual commitments. Collaboration is a behaviour and attitude and no contract document can replicate the approach and communication required to deliver project success. 18

19 Series 3910 Best applied All construction works. Typically works over $50k (under $50K most organizations use a Minor Works Contract being a slim form of As above but where there is no Engineer to the Contract 3916 All Design and Build requirements, where the Contractor undertakes the design + physical works delivery 3917 Used for Maintenance Term Service Agreements 19

20 Fair & Reasonable Approach's to Contracting Correct contractor entity entered (post RFP/RFT process) Notification of acceptance of tender/award of Contract best practice Contract should be signed before works commence. At the very least, a formal Letter of Award is entered into. Post tender correspondence e.g. agreed correspondence re tags, minutes of pre-award meetings 20

21 Construction Contracts: The NZS Series Background & Introduction NZS Series NZS3604 Standard Managing Contracts (NZ ) Summary and real life feedback 21

22 In this section we ll review: In depth review of each contract form Examine the meaning and application of each form Review the roles and responsibilities of the Engineer to Contract / Engineers Representative / Project Manager Contract definitions and terms 22

23 Construction Contracts: The NZS Series Background & Introduction NZS Series NZS3604 Standard Managing Contracts (NZ ) Summary and real life feedback 23

24 NZS Update 10 Key Changes 24

25 NZS 3910 Overview: The 2013 Updates 1 of 10 25

26 NZS 3910 Overview 1 of 10 26

27 NZS 3910 Overview 2 of 10 27

28 NZS 3910 Overview 3 of 10 28

29 NZS 3910 Overview 4 of 10 29

30 NZS 3910 Overview 4 of 10 30

31 NZS 3910 Overview 5 of 10 31

32 NZS 3910 Overview 7 of 10 32

33 NZS 3910 Overview 8 of 10 33

34 NZS 3910 Overview 9 of 10 34

35 NZS 3910 Overview 9 of 10 35

36 NZS 3910 Overview 10 of 10 36

37 NZS 3910 Overview Example 37

38 NZS 3910 Overview 38

39 NZS 3910 Overview 39

40 NZS 3910 Overview 40

41 NZS 3910 Overview 41

42 NZS 3910 Overview 42

43 The NZS 3910 Series The Pitfalls & Challenges : Key Considerations 43

44 Key considerations before entering into the Contract: Price Model CONDITIONS OF CONTRACT CONSIDERATIONS SCHEDULE 1 1.2/10.2: Separable Portions where part of the Contract Works are handed over separately 2.1: What type of contract? Lump Sum as stated in Contract, subject to adjustments (e.g. Variations) see Measure and Value: Contract Price = measured quantity at rates in Schedule of Prices, subject to adjustments see Cost Reimbursable: Contract Price = Net Cost + percentages for overheads and profit or Contract rates see Records required as for Dayworks. Certain costs not claimable see

45 Key considerations before entering into the Contract: Price Model /5.11.4: Licenses/Permits resource consent, building consent. Principal usually obtains under NZS 3910 but can set out exceptions. What management plans are required? Site-specific safety plan Quality plan Traffic management plan Environmental compliance plan Cross refer to P&G Specification or other scope/requirements in Contract 45

46 Key considerations before entering into the Contract: Price Model 6.1: Engineer to Contract External Engineer etc. Approved List? 8: Insurance Who is insuring what? Are there existing structures? What is the risk of the project? Are there any specific items of Plant that are critical to the works? Is PI insurance required? 46

47 Key considerations before entering into the Contract: Price Model 11.5/11.6: Warranties and Guarantees Consider what you need and from whom? Default position is the warranties in the Contract (Schedules 13, 17 and 18) 12: Payments Advance payments? Default timeframes selected (although for not selected) If Advance payment will be made Contractor must provide an Agreement for Off-site Materials in Schedule 14 47

48 On-Site Overheads / Preliminary & General On-site Overheads are defined as expenses or losses. for the general overall running of the Contract Works. See 3910 CoC, Clause 1.2 Definitions (Page 6). On-site Overheads may be considered as direct site costs of the project that cannot effectively be priced within the scheduled items, i.e., site hoardings, insurances or site management The costs are not directly related to changes in quantity / activity 48

49 NZS 3910 The Pricing Schedule Risks Trade Breakdowns Requirement for true schedule of quantities / tender documents Elemental Breakdowns Most appropriate for estimating purposes Activity Based breakdowns Most prevalent in my experience 49

50 NZS 3910 The Pricing Schedule Risks Trade Breakdowns Requirement for true schedule of quantities / tender documents Official standard - most detailed, measured in accordance Elemental Breakdowns Most appropriate (m2), for estimating etc. purposes Activity Based breakdowns with a standard method of measurement, i.e. NZS4202. Trades might include concrete, formwork, reinforcement, asphalting, blockwork, GIB lining, framing, etc. Most prevalent in my experience A component such as a ground floor slab is measured into trades of concrete (m3), Reinforcement (kg), powerfloat Each item priced in its lowest form - variations can be easily and effectively calculated. 50

51 s NZS 3910 The Pricing Schedule Risks Elemental Breakdowns Most appropriate for estimating purposes Elements include foundations, structure, roofing, external façade, internal divisions, etc. Activity Based breakdowns Measurements can be high level such as a rate/m2 for roofing or much more detailed into components - i.e., specific roof sheeting + underlay + insulation x m2 Most prevalent in my experience component rate. Different components are measured to total to the overall element total. A contractor could price the component, however variation is more difficult to calculate as you wouldn t know what the make-up of the component is, i.e. if you changed the insulation you would know the correct deduction to make from the component rate 51

52 NZS 3910 The Pricing Schedule Risks g Activity Based breakdowns Most prevalent in my experience Activities could be measured simply as 1x bridge, Entry roads or could also in include components, i.e., bridge supports, bridge deck, bridge balustrade, etc. The contractor interprets the specifications and drawings provided and prices accordingly. Many possible interpretations leads to large pricing differences and opens the door to contractual claims. It is very difficult to calculate variations from this method 52

53 NZS 3910 Overview: Programmes Programme calibrates resources (and therefore costs) Mutually Agreed Start Date and End Date. Working days calculated : Is a Comprehensive Programme required? Simple programme always required Comprehensive may be required containing critical path analysis/key dates to be met by Principal etc. (more complex works) 10/20 working days for providing simple vs comprehensive No payment until provided 53

54 NZS 3910 Overview: Liquated Damages 54

55 NZS 3910 Overview: Liquated Damages Liquidated Damages Calculated from the period between the Due Date for Completion up until the time of Practical Completion Principal not Engineer notifies deduction of liquidated damages Engineer has no authority to waive liquidated damages 55

56 NZS 3910 Overview: HSE Schedule 19 Form of Health & Safety Monthly Reporting Clause of Schedule 1 If other requirements for H&S reports these should be x-referenced in Schedule 1, cl

57 Role of the Key Parties - Engineer WHO IS THE ENGINEER? Engineer is defined in NZS 3910 as being a professional engineer, architect, surveyor or any other single natural person named in the Special Conditions of the Contract The Engineer does not need to hold any particular qualifications. Such a requirement is at the Principal s discretion While in most cases the person named as the Engineer will frequently be a specialist and usually be registered as an Engineer - the law does not require the Engineer to be qualified or registered to operate in that role under NZS

58 Role of the Key Parties Engineer cont. WHAT IS THE ENGINEER S ROLE? Engineer 2 roles: 1. Expert adviser to Principal 2. Independent decision maker Engineer is ultimately critical to the smooth delivery of the project 58

59 Role of Key Parties Engineer cont. WHAT DOES BEING THE EXPERT ADVISOR TO AND REPRESENTATIVE OF MEAN? The Engineer is the expert advisor to and the representative of the Principal when issuing directions and providing Payment Schedules E.g. ordering a Variation or giving directions as to how to carry out the Contract Works MUST act in the interest of the Principal MUST notify all of the Principal s deductions when issuing a Payment Schedule even if they disagree with the Principal s reasons 59

60 Role of key parties during the Contract Engineer cont. DOES THE ENGINEER OWE A DUTY TO THE CONTACTOR? No There is no contract between the Engineer and the Contractor - Engineer owes obligations to the Principal under the consultancy agreement, not the Contractor NZ Courts have held that the Engineer does not owe a duty of care to the Contractor 60

61 Role of Key Parties Engineer cont. IS THE ENGINEER INDEMNIFIED WHEN PERFORMING THE ROLE? As an agent, the acts/omissions of the Engineer are treated as acts/omissions of the Principal So long as the Engineer acts within the scope of his/her authority, he/she will be indemnified by the Principal against losses and liabilities in performing his/her duties If the Engineer has apparent or ostensible authority to order additional work, and the Contractor makes a claim, the Principal must pay the Variation (the Engineer may then be liable to the Principal if they acted outside their powers) 61

62 Role of key parties Engineer s Representative WHO IS THE ENGINEER S REPRESENTATIVE? Engineer may appoint Engineer s Representative and Engineer s Representative assistants by giving written notice to the Contractor Normally a Principal's staff member but not always 62

63 Role of Key Parties Engineer s Representative cont. WHAT IS THE ENGINEER S REPRESENTATIVES ROLE? Engineer s Representative can exercise powers of Engineer except: 1. Review matter in dispute 2. Value Variations, issue Payment Schedules, issue completion certificates, EOTs, change Drawings and Specifications UNLESS Engineer expressly authorises 3. Other powers which the Engineer excludes Any instructions or decisions of the Engineer s Representative are deemed to be of the Engineer, and bind the parties 63

64 Role of Key Parties Project Manager WHO IS THE PROJECT MANAGER? Appointed by Principal to represent it as Principal during the Project Need to undertake key duties such as: 1. Reviewing requests for Variations 2. Reviewing provisional Payment Schedules received from Engineer and certifying deductions if required 3. Dispute Resolution 64

65 The Payment Process - example 65

66 Dispute Resolution Process 66

67 Dispute Resolution Process 67

68 Construction Contracts: The NZS Series Background & Introduction NZS Series NZS3604 Standard Managing Contracts (NZ ) Summary and real life feedback 68

69 NZS

70 NZS 3916 Overview 70

71 NZS 3916 Overview 71

72 NZS 3916 Overview + 17: Deed of Novation 72

73 NZS 3916 Overview 73

74 NZS 3916 Overview 74

75 NZS 3916 Overview 75

76 NZS 3917 ( Conditions of contract for building and civil engineering. Fixed term ) Overview 76

77 NZS 3917 Overview 77

78 Construction Contracts: The NZS 3604 Standard Background & Introduction NZS Series NZS3604 Standard Managing Contracts (NZ ) Summary and real life feedback 78

79 In this section we ll review: Review use and application of the standard Address issues and challenges experienced with this standard 79

80 NZS3604 Standard Overview 80

81 NZS3604 Standard Overview 81

82 NZS3604 Standard Overview 82

83 NZS3604 Standard Overview 83

84 Construction Contracts: Managing Contracts Background & Introduction NZS Series NZS3604 Standard Managing Contracts (NZ ) Summary and real life feedback 84

85 In this section we ll review: Day to day management of the contracts Top 5 daily aspects Project Managers need to consider when managing contracts Contract and project reporting options and considerations Contract communications Change management and variation control Programme Management Project Control Group Management 85

86 Day to Day Contract Management 86

87 Day to Day Contract Management: Informal Monitoring and Works delivery tracking 87

88 88

89 Day to Day Contract Management: Relationship Spectrum 89

90 Day to Day Contract Management 90

91 Day to Day management 91

92 Site Visits Site Safety Checks Project Status Reporting Work through example sheets 92

93 Reporting Practices Project Control Communications - Payments 93

94 Construction Contracts: Real time feedback Background & Introduction NZS Series NZS3604 Standard Managing Contracts (NZ ) Summary and real life feedback 94

95 In this section we ll review: Your feedback: All attendees to their Top 5 challenges with these contracts through to the facilitator a week before the workshop. The facilitator will collate and spend the last 80-90mins working through the biggest constraints and issues raised. 95

96 Feedback on the top 5 challenges Based on dedicated feedback from the client on their key issues and challenges with NZS

97 Summary / Wrap-up Around the Table: List the key takeaways Practical learnings you can bring back and implement into the workplace tomorrow 97

98 Action required 1. Now: Online Feedback to be completed in classroom 2. Later: Access soft copies of the materials at: Access code: CMT17 98

99 Thank You Falcon Training Spire Consulting It s good to know 99