Government agency commitments on special conditions in contracts
Accord Agencies have committed to participating in the process to update, agree and use All-of-Government special conditions for the 2 most commonly used contract templates in the construction sector.
Improving public sector procurement
Through the Transformation Plan 2022-2025's Client Leadership focus area, the Accord aims to improve procurement and risk management practices across the sector. The Accord is working with both the private and public sector to embed new practices and collaborative behaviours that will drive better outcomes out of construction projects. With central government being responsible for around a fifth of all construction spend, there is a need for government agencies to lead from the front in driving better outcomes for construction projects and better outcomes for New Zealand.
The Accord convenes a group of Accord Agencies which represents government agencies that work with the construction sector as either regulators, clients and/or educators, and have responsibilities for delivering relevant priorities in the Transformation Plan 2022-20251. Last year, the Accord Agencies Chief Executives Group identified three key priority areas of work specifically focussed on opportunities for Accord Agencies to increase collaboration. One of these priorities was around the standardisation of special conditions for construction contracts2.
Special conditions in contracts are often used to modify the risk balance by changing who is responsible for risks or by identifying new risk and assigning this to one of the parties to the contract. However, the practice of heavily amending standard contracts with extra clauses defeats the purpose of standardised contracts. It means every project must spend resources, time, money and effort in understanding the intent of contracts and negotiating terms. This can lead to misunderstandings among the project team, difficult project relationships, and impacts on costs and timelines.
Construction sector contracts review
Due to ongoing feedback from the construction sector, last year the Accord undertook a review of how special conditions in construction contracts were being used by procuring agencies across the public sector, including the Accord Agencies.
The review found that agencies are heavily modifying the two most used contract templates in the construction sector – the New Zealand Standard 3910:2013 Conditions of Contract for Building and Civil Engineering Construction (NZS 3910) and the ACENZ Conditions of Contract for Consultancy Services (CCCS) – through the use of special conditions that either amend existing standard clauses or add in additional clauses. The review found inconsistency in the numbers and types of special conditions used by agencies. In the case of NZS 3910, the number ranged from 7 to 310 special conditions. In the case of CCCS, the number ranged from 13 to 81 special conditions.
The Accord Agencies' commitments
Following the special conditions review, the Accord Agencies Chief Executives Group committed to participating in the process to update, agree and use All-of-Government special conditions for NZS 3910 and CCCS. These commitments affect only the Accord Agencies that have significant contracting and procurement functions. As part of this work, the chief executives agreed that agencies may need to modify the standard conditions of contracts to deal with the specific operational or logistical requirements of their organisations and the nature of the projects they are delivering, but these amendments should be minimal. In situations where there is a genuine need to modify standard conditions, the Accord Agencies should all use a common approach.
The Accord Agencies Chief Executives Group’s six commitments to improve their contract practices to achieve greater standardisation and consistency are:
Due by 31 March 2023
- Chief Executives commit to agencies updating their NZS 3910 special conditions to align with the recommended special conditions due to be released by Standards NZ in September 2022
- Chief Executives commit to agencies reviewing special conditions to align with Accord principles(external link)
- Chief Executives commit to agencies subsequently aligning their agencies’ special conditions with the Accord principles
Due by 30 June 2023
- Chief Executives commit to agencies adopting the All of Government special conditions for CCCS (with the ability to add minimal agency/project specific conditions)
- Chief Executives commit to agencies supporting future updates of CCCS All of Government special conditions by providing feedback on these to NZ Government Procurement
Due by 30 December 2023
- Chief Executives commit to agencies working together to develop an All of Government approach to special conditions for NZS 3910 following the release of the full update in mid-2023 [Note: the expected release date of the NZS 3910 update is now December 2023 and this will push back the review of special conditions]
- Chief Executives commit to their agencies updating their special conditions for NZS 3910 and CCCS to align with industry wide updates.
Overall, the Accord Agencies have made good progress since the start of this year in updating, agreeing on and using All-of-Government special conditions for NZS 3910 and CCCS. Agencies are now on track to meeting the majority of their commitments. In the tables and lists below, you can see the progress Accord Agencies have made in meeting their commitments since the start of this year.
Status of Accord Agencies' commitments [accessible format]
Feedback and next steps
We want to hear back from the industry to understand whether public sector procurement has improved as a result of the changes implemented by the Accord Agencies. If you have any questions or feedback regarding these commitments, please get in touch with either the Accord or New Zealand Government Procurement (NZGP).
At the end of 2023, the Accord will also release a more detailed interim review of Accord Agencies' commitments on special conditions that will quantify the level of change and progress made across agencies.
- The Accord Agencies include the Ministry of Business, Innovation and Employment, Ministry of Housing and Urban Development, Waka Kotahi NZ Transport Agency, Worksafe, Ministry of Education, Kainga Ora, Ministry of Health, Ministry of Social Development, Te Waihanga Infrastructure Commission, New Zealand Defence Force, Department of Corrections, Ministry of Justice and the Department of Internal Affairs.
- The Accord Agencies Chief Executives Group's two other priorities were around regional pilots and productivity delivery groups.