Both AS 4300 and its successor AS 4902 are widely used forms of design and construct contract in Australia. Although they have many similarities, there are some significant differences.
It is not the case that one contract is necessarily ‘better’ than the other, nor is it the case that one contract is generally more favourable to the principal (or the contractor) than the other. The only way to understand which contract is more suitable for your circumstances is to consider the differences.
1. The availability of extensions of time (EOT)
AS 4300 and AS 4902 each have their own unique method to deal with EOTs.
Clause 35.5 of AS 4300 specifies a broad list of causes of delay for which the contractor will be able to claim an EOT. If the delay occurs on or before the date for practical completion, the contractor can claim an EOT for any event beyond its reasonable control. (You can read more about when you can claim an EOT under AS 4300 here.)
Conversely, AS 4902 utilises the concept of a ‘qualifying cause of delay’ to determine whether an EOT may be claimed. The wording of this definition is potentially confusing and ambiguous. This is the same form of wording that appears in AS 4000.
In their unamended form, the circumstances in which the contractor can claim an EOT under AS 4300 are likely to be broader than under AS 4902. Regardless of which form is preferred, many principals will seek to narrow these causes in any event (for example, by special conditions).
2. The certification of liquidated damages
Pursuant to clause 35.6 of AS 4300, if the contractor fails to reach practical completion by the date for practical completion, the contractor will automatically become indebted to the principal for liquidated damages. No certification by the superintendent is required.
In contrast, clause 34.7 of AS 4902 contemplates the superintendent having to certify liquidated damages in the same circumstances. In other words, the superintendent's certification may be a prerequisite to the application of liquidated damages by the principal.
In many cases, the distinction will be academic - because the superintendent would normally certify liquidated damages where there is a delay. However there can be cases where this can become a critical issue.
One example is where the contract is terminated before liquidated damages have been certified by the superintendent. Under AS 4300, the contractor would already be liable for liquidated damages. Under AS 4902, it may be more difficult for the contractor to apply liquidated damages if termination of the contract brings an end to the superintendent's function.
3. Interest on overdue payments
The default interest rate that attaches to late progress payments under both contracts is high: 18% per annum. This can be amended by the parties in the Annexures, and usually is.
However, under clause 42.7 of AS 4300, interest is compounded at six-monthly intervals. There is no corresponding provision in AS 4902. This compounding provision can have a significant impact in the event of a protracted payment dispute, particularly where the interest rate is left unchanged at 18%.
4. The pricing of extras
There are a number of circumstances under both contracts that allow the contractor to claim additional amounts, over and above the starting contract sum. However different clauses contemplate different ways for these adjustments to be calculated.
In many cases (under both contracts), the adjustment will:
- be treated as a deemed variation; or
- entitle the contractor to claim the ‘additional cost incurred’.
The main difference here relates to whether the contractor is permitted to claim additional overheads and/or profit in relation to the circumstance concerned.
Not only are there differences between AS 4300 and AS 4902 as to how specific items are to be valued, but there are also differences within each contract.
Two relevant examples are the clauses that permit claims for changes to legislative requirements and latent conditions.
Under AS 4300:
- changes to legislative requirements give rise to a variation (clause 14.1); and
- where the contractor encounters a latent condition, clause 12.3 contemplates the contractor as being entitled to claim the extra cost incurred.
In contrast, under AS 4902, the adjustment for a change to legislative requirements is based on the difference in cost incurred (clause 11.2), and the effect of a latent condition is a deemed variation (clause 25.3).
5. Requirements for a notice of delay
The requirements for a notice of delay under the two contracts are different. Clause 35.5 of AS 4300 merely requires the contractor to give written notice of a possible delay and the cause. (You can read more more about the process of claiming an EOT under AS 4300 here.)
AS 4902 requires the contractor to provide details of the delay, including an estimate of the delay.
It is also worth noting that AS 4902 requires the contractor to submit a notice of delay to the principal and the superintendent, whereas AS 4300 only requires the notice to be issued to the superintendent.
6. Apportionment of concurrent delays
Under clause 35.5 of AS 4300, if a delay is caused by multiple causes of delay and any of the causes would not entitle the contractor to claim an EOT, the contractor will not be entitled to an EOT in respect of any part of the delay.
AS 4902 deals with this differently. Specifically, clause 34.4 contemplates an apportionment being made by the superintendent. It relevantly provides:
“When both non-qualifying and qualifying causes of delay overlap, the Superintendent shall apportion the resulting delay to WUC according to the respective causes contribution.”
7. Deemed approval of EOT claims
Both AS 4902 and AS 4300 require the superintendent to respond to an EOT claim within 28 calendar days.
However, pursuant to clause 34.5 of AS 4902, if the superintendent does not give the contractor a written direction of its assessment of the EOT within the 28 day period, the EOT will be deemed to be granted in full, as claimed.
There is no corresponding provision in AS 4300. This means if the superintendent fails to respond within the timeframe, the contractor’s only option is to issue a notice of dispute under clause 47.1 and potentially to pursue a claim in damages.
8. Pricing of negative variations
Under AS 4300, the Superintendent is required to include a reasonable amount for profits as well as for overheads when pricing a deduction. The equivalent clause in AS 4902 relevantly provides that any deduction shall include a reasonable amount for profits but not overheads.
This change benefits the contractor, as it recognises that generally, the contractor’s overheads will remain constant regardless of the quantity of work removed from the contractor’s scope of work.
9. There is no daywork clause in AS 4902
AS 4300 includes a ‘daywork’ clause. The purpose of this clause is to provide a method for valuing variations which is based on the actual cost of carrying out the work. Daywork is used to value a variation where the other methods of valuation provided in clause 40.5 of AS 4300 do not apply.
AS 4902 does away with the concept of daywork completely. This omission highlights the increased power of the superintendent in pricing variations under AS 4902.
The prescription of daywork as a method of valuation in the AS 4300 gave contractors increased certainty about how variations to the contract were to be valued. The removal of this benefits the principal, as the superintendent under AS 4300 has broader powers with which he is able to value a variation.
10. Changes to dispute resolution procedures
Under AS 4300 the parties are required to nominate one of two alternative steps required to be undertaken before a party can commence proceedings. Alternative 1 provides that the parties would meet and attempt to resolve the dispute. Alternative 2 requires the superintendent to undertake a preliminary assessment of the dispute.
The dispute resolution procedure in AS 4902 does not contemplate the second ‘preliminary assessment’ option, and instead requires that the parties meet and attempt to resolve the dispute
This change reflects industry concern that decisions made by the superintendent were of little effect in resolving disputes after a notice of dispute had been issued and were in fact more likely to delay the resolution of disputes.
There is no quick way to determine which of these two contracts may be better suited to your projects. The only way to understand the differences is by conducting a detailed analysis. In any event, most principals using either of these contracts will seek to make modifications.
Both contracts are more than 15 years old, and there have been a number of changes to the law since then. In addition to introducing new clauses dealing with these changes, principals will often seek to alter the risk profile and/or make changes, including changes addressing issues like those discussed above.
Consequently, your biggest issue is not likely to be whether to use AS 4300 or AS 4902, but is more likely to be considering which amendments you might consider making (or accepting).
For more information on AS 4300, take a look at our article Introduction to AS 4300.