Time for a new standard - AS 11000 General Conditions of Contract Jason de Lacy Senior Associate 13 March 2015

Background Standards Australia committed in 2013 to revising AS2124 & AS4000 A technical committee comprising stakeholders from regulatory bodies, industry groups, law associations and public authorities was formed in late 2013 and draft development began in January 2014 AS11000 was released for public comment on 23 January 2015 The objective of AS11000 is to provide guidance for legal contracts in all industry sectors AS11000 is the first standard in a proposed suite of contract conditions intended to replace AS2124 & AS4000

Why the change? Takes account of some legislative and case law changes AS11000 is not intended to alter the risk allocation principles in AS2124 & AS4000, but there are several significant changes The changes will have important implications for the construction, engineering and infrastructure sectors

Extensions of time Notices of delay Must be given to Superintendent and the other party within 5 business days Contractor must state if it anticipates claiming an EOT for the delay event Causes of delay - significant departure from AS4000 & AS2124 Delays events beyond the reasonable control of the Contractor which occur before the date for practical completion Variations and acts of prevention after the date for practical completion

Extensions of time Extension of time claims Concurrent delays within 20 business day ‘after the delay occurs’ Issue – unclear when timing starts (when the delay begins or ends?) Concurrent delays AS11000 – entitled to EOT AS4000 – apportionment of delay AS2124 –not entitled to EOT

Extensions of time Further delays Extension of time assessments Contractor must notify of ‘further delays’ from the same cause of delay Issue – unclear whether it refers to a continuation of a notified delay or a separate delay arising from the same cause Extension of time assessments Superintendent must assess or request more information within 20 business days EOT deemed approved if Superintendent fails to do so (as is the case in AS4000) Delay damages vs. delay costs Delay damages for acts of prevention and delay costs for variations

Good faith A new general obligation on the parties to act reasonably in a spirit of mutual trust and cooperation and in good faith Superintendent no longer required to act in good faith, as it is required to do under AS4000 Issue – undefined good faith obligations are ambiguous and fertile grounds for dispute

Subcontracting Contractor must use new AS11002 subcontract conditions (not yet issued) for subcontracts Subcontracts must contain no other amendments or additional clauses except those necessary to reflect the head contract This constraint only applies where the subcontract sum equals or exceeds an amount to be set out in Annexure Part A Failure to comply with this requirement will be a substantial breach AS4000 & AS2124 provided that the Principal’s approval to subcontract may be conditional upon a subcontract including certain provisions

Superintendent AS11000 is explicit about when the Superintendent must act impartially and when the Superintendent acts as the agent of the Principal Issue – some clauses require the Superintendent to act reasonably in situations where the Superintendent might have otherwise have been expected to have an agent’s role e.g. directing separable portions e.g. directing suspensions of the works

Security of payment (SOP) legislation Provisions have been included to enable compliance with the SOP legislation in each State and Territory Superintendent has the authority to act as Principal’s agent in receiving payment claims and issuing payment schedules AS11000 specifies time requirements by reference to business days Issue – proposed timeframe of 10 business days for issuing a progress certificate is a shorter period than the 15 business day allowed in Queensland for payment schedules in response to complex claims

Variations Contractor must notify Superintendent if it considers a direction is a variation within 5 business days of receipt of the direction Superintendent must respond within 5 business days Rates and prices generally are to include allowance for overheads and profit unless otherwise stated

Dispute resolution New early warning procedure A party must notify the other as soon as is it becomes aware of an event or circumstance that ‘may impact upon time, cost, scope or quality under the contract and may become an issue’ Superintendent can also initiate the early warning procedure More flexible dispute resolution procedures conference followed by arbitration conference followed by expert determination and possibly followed by litigation contract facilitation or dispute resolution board Standards Australia intends to produce a separate Standard (not yet issued) to set out the procedures for these additional methods

Other significant changes Program – AS11000 increases the requirements for programs, and provides for additional requirements to be selected in Annexure Part E Acceleration – Superintendent has the power to direct an acceleration of works and the Contractor must comply if it can reasonably do so Defects – Contractor must rectify known defects without the Superintendent needing to give a direction Liquidated damages – the ability to specify a cap has been reinstated (this was present in AS2124 but not in AS4000) Bills of quantity – must be priced (whether or not it forms part of the contract) and is condition precedent to payment Emails – all documents (including claims) can be served by email

Do the changes go far enough? Difficult to get an appropriate balance in any standard form contract If AS11000 is finalised in its current form, both principals and contractors are likely to want potentially significant amendments, including warranties and indemnities work health and safety / principal contractor limits of liability

Summary AS11000 is likely to be extensively used given industry's widespread use of AS2124 & AS4000 AS1100 is only the starting point Each organisation needs to consider special project requirements preferred risk allocations The closing date for submissions on AS11000 is 27 March 2015

Contact Jason de Lacy Senior Associate T +61 7 3914 8250 E jdelacy@mccullough.com.au Disclaimer: This presentation covers legal and technical issues in a general way.  It is not designed to express opinions on specific cases.  This presentation is intended for information purposes only and should not be regarded as legal advice.  Further advice should be obtained before taking action on any issue dealt with in this presentation.