After nearly three years in drafting, the construction industry is still waiting for Standards Australia to release the Australian Standard (AS) 11000 general conditions of contract.
The AS 11000 is intended to replace the AS 2124-1992 and AS 4000-1997 as the standard form head contract for construction, engineering and infrastructure works and will be the first contract in a proposed full update to the Standards Australia contract suite.
Though originally released for public comment in January 2016, the publication of the AS 11000 has been delayed to allow for redrafting due to negative feedback on certain key amendments.
Proposed changes
The AS 11000 contains a multitude of amendments, some more contentious than others. The key amendments include as follows:
provision has been made to ensure consistency between payment clauses under the contract and security of jurisdiction in Australia;
- the superintendent is now expressly authorised to act as the Principal’s agent under the relevant security of payment act;
- each party has an overriding duty to act in good faith towards the other, and to participate in an early warning procedure, which is required in addition to all other notification requirements elsewhere in the contract;
- service of notices by email is now expressly permitted;
- when seeking approval to subcontract, approval is contingent upon the contractor using the proposed AS 11002 Subcontract Conditions, containing no other amendments than those necessary to reflect the head contract;
- the requirements for a valid program have been increased; and
- a distinction is drawn between ‘delay damages’ and ‘delay costs’.
Why are we waiting?
While legal commentators and industry members have welcomed the update to better reflect new legislation and contemporary concern that a number of the changes introduced within the AS 11000 will increase uncertainty and the cost of contracting.
In particular, the AS 11000 does not attempt to define what ‘good faith’ means, nor how it should be applied in the context of a construction contract with clearly defined risk allocation. Due to the unsettled nature of the case law surrounding the duty of good faith, it seems likely that the inclusion of a good faith obligation will increase, rather than decrease, the number of disputes under the contract.
Similarly, though the purpose of the early warning procedure is to resolve issues promptly to prevent escalation into dispute, its mandatory nature may result in parties ‘jumping the gun’ and creating conflict in relation to matters which would ordinarily be resolved as the project progresses.
Contractors may also be disincentivised to contract using the AS 11000 due to the likely increase in costs stemming from:
- the requirement to use a largely unamended AS 11002 as the form of subcontract; and
- the need for additional programming resources due to the more stringent program and updating requirements.
Where to from now?
It is now expected that a revised draft of the AS 11000 will be released by Standards Australia in mid-2017, with publication of the final version pushed back until the end of 2017.
We expect that the revised draft will be substantially different, as it is hard to envision the AS 11000 receiving significant industry acceptance in its current form.