falcon spire contract management training for …...the splitting of nzs 3910:2003 was split into 3...

Construction ContractsNZS 3910 | NZS 3915 | NZS 3916 | NZS 3917

www.falcontraining.comIt’s good to know

Delivered byFalcon Training & Spire Consulting

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Housekeeping1. Emergency procedures

2. Comfort breaks3. Refreshments:

Morning tea, Lunch, Afternoon tea

4. Wifi5. Mobile phones & laptops6. Online Feedback7. Access soft copy materials:

www.falcontraining.com/templates Access code: CMT17

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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

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Agenda

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Background &

Introduction

Background &

Introduction

NZS 3910‐15‐16 Series


NZS3604 StandardNZS3604 Standard

Managing Contracts

(NZ3910‐5‐6)

Managing Contracts

(NZ3910‐5‐6)

Summary and real life feedback

Summary and real life feedback

LunchLunch

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: Email: [email protected]:+64 (27) 4400 867. www.spireconsulting.co.nz

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About your Presenter

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?

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Construction Contracts –Background and Introduction

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Background & IntroductionBackground & Introduction




Managing Contracts

(NZ3910‐5‐6)

Managing Contracts

(NZ3910‐5‐6)

Summary and real life feedbackSummary and

real life feedback

In this section we’ll review:

Contract options and forms

The NZ3910-5-6 series vs NEC series

Characteristics, features, advantages and disadvantages of each series

Practical application and requirement to use the NZ 3910-5-6 series

Basic contract law

Fair and reasonable approaches to contracting

Practical tips in adopting construction contracts

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Construction Contracts

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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).

2013 standards easier to follow with tick-box type tables for Special

Conditions and include additional standard form documents (to save

parties developing their own).

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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 Contract11

Contracts –What to useExample

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Getting to Contract – Conditions of Tendering

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Getting to Contract – Conditions of Tendering

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Construction Contract Choices Choices depend on your specific needs.

Let’s discuss your experiences with these forms ….

Build Design Build / Construct Maintain NZS 3910 (2013) NZS 3916 (2013) NZS 3915 (2005)

NEC. Engineering & Construction Contract (ECC)

NEC. Engineering & Construction Contract (ECC)

NEC Term Service Agreement (TSC)

FIDIC, JCT, ICE

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NEC Suite

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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 NEC3910 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…’

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NEC Vs 3910/5/6 /7 high level comparison

My Opinion:

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“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.”

“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.”

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Series Best applied

3910• All construction works.• Typically works over $50k (under $50K most organizations use a ‘Minor

Works Contract’ being a slim form of 3910

3915 • 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

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

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Construction Contracts:

The NZS 3910-15-16 Series

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Managing Contracts

(NZ3910‐5‐6)

Managing Contracts

(NZ3910‐5‐6)


real life feedback


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

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Managing Contracts

(NZ3910‐5‐6)

Managing Contracts

(NZ3910‐5‐6)


real life feedback

NZS 3910 -

2013 Update

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10 Key Changes

NZS 3910 Overview: The 2013 Updates

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NZS 3910 OverviewExample

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NZS 3910 Overview

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NZS 3910 Overview

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NZS 3910 Overview

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NZS 3910 Overview

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NZS 3910 Overview

The NZS 3910 Series

The Pitfalls & Challenges : Key Considerations

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CONDITIONS OF CONTRACT CONSIDERATIONS – SCHEDULE 11.2/10.2: Separable Portions – where part of the Contract Works are handed over separately2.1: What type of contract? • Lump Sum – as stated in Contract, subject to adjustments (e.g.

Variations) – see 2.2.1• Measure and Value: Contract Price = measured quantity at rates

in Schedule of Prices, subject to adjustments – see 2.3.1• Cost Reimbursable: Contract Price = Net Cost + percentages for

overheads and profit or Contract rates – see 2.4.1. Records required as for Dayworks. Certain costs not claimable – see 2.4.2

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Key considerations before entering into the Contract: Price Model


5.11.3/5.11.4: 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

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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?

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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 – 12.2.8 (although for 12.5.9 not

selected)• If Advance payment will be made Contractor must provide an

Agreement for Off-site Materials in Schedule 14

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3910 - 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

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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

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Trade Breakdowns

• Requirement for true schedule of quantities / tender documents





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Official standard - most detailed, measured in accordance

with a standard method of measurement, i.e. NZS4202.

Trades might include concrete, formwork, reinforcement,

asphalting, blockwork, GIB lining, framing, etc.

A component such as a ground floor slab is measured into

trades of concrete (m3), Reinforcement (kg), powerfloat

(m2), etc.

Each item priced in its lowest form - variations can be easily

and effectively calculated.


s





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Elements include foundations, structure, roofing, external

façade, internal divisions, etc.

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

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


g



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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

NZS 3910 Overview: Programmes

Programme calibrates resources (and therefore costs)

Mutually Agreed Start Date and End Date. Working days calculated.

5.10.4: 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

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NZS 3910 Overview: Liquated Damages

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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

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NZS 3910 Overview: HSE

Schedule 19 – Form of Health & Safety Monthly Reporting

• Clause 5.7.15 of Schedule 1

• If other requirements for H&S reports these should be x-referenced in Schedule 1, cl 5.17.15

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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 3910

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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

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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

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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

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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)

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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

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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

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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

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The Payment

Process -

example

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Dispute Resolution Process

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Dispute

Resolution

Process

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Managing Contracts

(NZ3910‐5‐6)

Managing Contracts

(NZ3910‐5‐6)


real life feedback

NZS 3916

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NZS 3916 Overview

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NZS 3916

Overview

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+ 17: Deed of Novation

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NZS 3916

Overview

NZS 3916 Overview

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NZS 3916 Overview

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NZS 3916 Overview

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

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NZS 3917 Overview

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The NZS 3604 Standard

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Managing Contracts

(NZ3910‐5‐6)

Managing Contracts

(NZ3910‐5‐6)


real life feedback


Review use and application of the standard

Address issues and challenges experienced with this

standard

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NZS3604 Standard Overview

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NZS3604

Standard

Overview

NZS3604 Standard Overview

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NZS3604

Standard

Overview

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Managing Contracts

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Managing Contracts

(NZ3910‐5‐6)

Managing Contracts

(NZ3910‐5‐6)


real life feedback

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

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Day to Day Contract Management

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

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Day to Day Contract Management: Relationship Spectrum

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Day to Day Contract Management

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Day to Day management

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Site Visits – Site Safety Checks – Project Status Reporting

Work through example sheets

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Reporting Practices – Project Control –Communications -Payments

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Real time feedback

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Managing Contracts

(NZ3910‐5‐6)

Managing Contracts

(NZ3910‐5‐6)


real life feedback

In this section we’ll review: Your feedback:

• “All attendees to email 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.”

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Feedback on the top 5 challenges

Based on dedicated feedback from the client on their

key issues and challenges with 3910 – 16 + NZS3604.

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Summary / Wrap-up

Around the Table:

List the key ‘takeaways’

Practical learnings you can bring back and implement

into the workplace tomorrow

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Action required

1. Now: Online Feedback – to be completed in classroom

www.surveymonkey.com/r/FalconTraining

2. Later: Access soft copies of the materials at:www.falcontraining.com/templates

Access code: CMT17

98

Thank You Falcon Training

www.falcontraining.com

[email protected]

Spire Consulting

www.spireconsulting.co.nz

[email protected]

99www.falcontraining.comIt’s good to know

falcon spire contract management training for …...the splitting of nzs 3910:2003 was split into 3...

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