In June 2019, Austroads and the Australian Procurement and Construction Council released the new General Conditions of Contract for Construction, National Capital Works 4 (NCW4).
NCW4 has been developed for construct-only contracts and is intended for use where the principal is an Australian Government or semi-Government agency; it is not suitable for design and construction contracts or where services are procured as part of the contract.
This article provides a high-level comparative overview of NCW4 against another standard form construct-only contract that is commonly used on Australian projects, the Australian Standard AS4000-1997 General Conditions of Contract for construct-only contract (AS4000).
EOT and delay
Compared to AS4000, the EOT provisions in NCW4 have been drafted such that they are broadly more favourable to principals:
- Relevance of construction program: Clause 35.3(a)(iii) of NCW4 provides that the contractor is entitled to an EOT "only if” the claimed delay is to an activity on the then-current construction program and at the relevant time the work is proceeding in accordance with that construction program.These caveats on the contractor's entitlement to an EOT, which are not contained in AS4000, are designed to incentivise the timely creation of accurate construction programs.
- Concurrent delays: If a non-qualifying and qualifying cause of delay overlap, AS4000 provides for apportionment of the resulting delay according to the respective causes’ contribution, in the assessment of the EOT (cl 34.4).Where this occurs under NCW4, a contractor is excluded from claiming an EOT for the period of overlapping delay (cl 35.3(h)).
- Entitlement to delay costs: Under AS4000, acts or omissions of the principal, superintendent or another contractor will entitle the contractor to claim an EOT and delay costs.However, under NCW4, the contractor is only entitled to claim delay costs for a breach of contract by the Principal.There is no entitlement to delay costs for general acts/omissions of the principal, superintendent or other contractors unless the contract expressly allocates this risk to the principal.
- Delay costs exclude profit: Unless provided for in the Commercial Framework Annexure, delay costs do not include profit, loss of profit or loss of opportunity under NCW4.
Role of the superintendent
NWC4 makes clear that the superintendent acts as a certifier only where stated in the contract, and otherwise the superintendent acts as agent of the principal. This reflects the reality in most Government construction contracts that the superintendent will be an employee of the principal. The principal's obligation to ensure the superintendent acts honestly and impartially and arrives at a reasonable measure or value of work, quantities or time is limited to those cases where the superintendent is acting as certifier.
Another point of distinction between the two standard form contracts relates to the superintendent's direction of separable portions. Clause 4 of AS4000 provides the superintendent with a unilateral ability to direct separable portions. However, NCW4 pares back this power, limiting it to cases where the relevant part of the works has reached or will reach practical completion but another part of the works has not reached that stage (cl 22).
Variations
While the provisions relating to variations are largely similar, there are three notable differences:
- Direction constituting a variation: Unlike the AS4000, cl 40.1 of NCW4 expressly deals with the scenario where a contractor considers a superintendent's direction to be a variation but the direction is not expressly identified as such.In this scenario, within 5 business days of receipt of the direction and before commencing the work the subject of the direction, the contractor must provide the superintendent reasons as to why it considers the direction to be a variation.The superintendent must then, within 5 business days of receipt of the reasons, provide a determination as to whether that direction constitutes a variation.A contractor must not commence work the subject of the direction before receipt of the superintendent's determination.This mechanism is designed to crystallise whether a direction is agreed by the parties to be a variation early in the process and before significant time and cost have been expended.
- Cost of assessing Contractor-proposed variations: Similar to cl 36.4 of AS4000, cl 40.4 of NCW4 allows the contractor to make a written proposal for a variation for the contractor's convenience.However, NCW4 requires contractors to bear the costs incurred by the principal in assessing the contractor’s variation proposal, offering reciprocity with the principal’s responsibility to bear the contractor’s costs in preparing a proposal to implement a principal-initiated variation.
- Pricing valuations: In accordance with clause 40.5(c)(iii) of NCW4, the valuation of a variation must not include any amount for costs that the contractor would have incurred or should reasonably have allowed for at the date of acceptance of the tender.There is no equivalent provision in AS4000.
Provision of security and recourse by a party
The intended use of NCW4 by Australian Government or semi-Government agency principals is made evident by its divergence from AS4000 provisions regulating performance securities:
- Contractor-only provision of security: NCW4 contemplates provision of security from the contractor only, highlighting the low probability of a government agency becoming insolvent and thereby making redundant the need to address a principal's insolvency.This is unlike AS4000, which caters for various principals by anticipating provision of security by either party or both parties (cl 5.1).
- Recourse notice requirements: Clause 5.2 of AS4000 only permits an unpaid party to draw on security if notice of such intention to have recourse is given to the other party and 5 days have since elapsed.Principals are afforded greater recourse to security under NCW4, which does not expressly set out any notice requirements that the principal must satisfy before calling upon the security.Clause 5.1(h) of NCW4 also provides that the contractor must not take any steps to prevent the principal from making such a demand against the security, or prevent any security provider from complying with such a demand.
- Release of security: It is common for security to be broken into two tranches, with the first released upon achievement of practical completion and the second released after the issue of the final certificate.Under clause 5.2(a) of NCW4, the principal may withhold a specified amount of the first tranche of security if it has made, or intends to make, a demand against it.Under NCW4, the principal may retain the second tranche of security until the later of the expiry of a specified period after practical completion, the resolution of any outstanding defects or unresolved claims, and the payment of any moneys due and payable by the contractor (cl 5.2(b)).
Very little "d"?
Clause 8.8 of NCW4 recognises that construction documents provided by the principal may not be fully complete and requires the contractor to complete any minor or incidental design and detailing, including the preparation of shop drawings and the design of temporary works. There is an also an option to require the Contractor to take out professional indemnity insurance in respect of the design of temporary works. A contractor under NCW4 would need to be appropriately resourced to fulfil these obligations.
Contractor's indemnities and warranties
It is common for construction contracts to include indemnities from the contractor in favour of the principal for things like personal injury, property damage and infringement of intellectual property rights arising from the contractor’s work. Sometimes, this is also extended to breach of contract. However, NCW4 includes an indemnity from the contractor in favour of the principal that extends to all claims, actions, loss or damage and all other liability arising out of any acts or omissions of a subcontractor (cl 9.1(f)). This provides the principal with a right to be kept whole for any acts or omissions of a subcontractor, regardless of whether the act or omission constitutes a breach of contract or other wrongful conduct by the contractor. The contractor in this scenario would need to seek back to back protection from its subcontractors, however this may be difficult to obtain.
There is also a crucial difference relating to contractor's indemnification of the principal in respect of damage as a result of carrying out the works, which arises under both NCW4 (cl 17.1(a)) and AS4000 (cl 15.1). Under AS4000, the contractor's indemnity excludes "damage which is the unavoidable result of the construction of the works in accordance with the contract" (cl 15.1(d)). Clause 17.1(c)(iv) of NCW4 excludes "damage which is the unavoidable result of the construction of the works in accordance with a construction methodology specified by the principal". Therefore, the carve-out in NCW4 only applies where the principal specifies a construction methodology, whereas the equivalent carve-out in AS4000 is expressed more broadly.
Similar to GC21, NCW4 also introduces a new warranty in relation to "reliance information" and "non-reliance information", being documents listed in items 9 and 10 of the Particulars respectively. Reliance information excludes any interpretations, deductions, opinions or conclusions set out in site conditions information provided by the principal (cl 12.1(d)). Clause 12.1(b) of NCW4 provides that a contractor may rely on the factual accuracy of reliance information, but the principal does not warrant the completeness of this information. No warranty is given by the principal in respect of non-reliance information, and use of this information is at the contractor's own risk (cl 12.1(c)). In summary, these provisions provide the contractor with an entitlement to rely on the factual accuracy of information specified as reliance information in the Particulars, however the Contactor’s contractual remedy where it relies on such factual accuracy to its detriment is not apparent.
Key takeaway
NCW4 has been developed by Austroads and the Australian Procurement and Construction Council for construct-only contracts and is intended for use where the principal is an Australian Government or semi-Government agency. While there are many similarities between NCW4 and AS4000, there are also some important differences as discussed in this article.