Construction contracts under the microscope

The report - an examination of issues associated with the use of NZS Conditions of Contract—was commissioned by Treasury in response to growing concerns around the way NZ Standard contracts are being used. The report highlighted a culture of mistrust and identifies several opportunities for improvement.

The examination found that mistrust between the public and private sectors is influencing the way government procures for construction projects, including the way contracts are set up and how risk is allocated.

'Better procurement practices' is one of the nine priority work areas identified in the Construction Sector Accord, a partnership between government and industry to transform the sector. Government has committed to procurement that is 'fair, efficient, and predictable'. Both government and industry have committed to follow the Accord's guiding principles which include 'Build trusting relationships'.

The report identified several opportunities to make improvements including a comprehensive review of standard contracts, and new guidance for agencies on the use of special conditions and on the appropriate transfer of risk.

A New Zealand Infrastructure Commission will be established later this year to lift the quality of major infrastructure procurement, and ensure the government is supported to meet its commitments under the Accord.

The review was carried out by independent consultants and included interviews with both public and private sector leaders from major contracting, consulting, legal and governing bodies.

Read the full report on the Treasury website [PDF 757KB](external link).