AS 4300-1995 is a widely used form of Australian design & construct construction contract, mostly used on commercial construction projects. This article provides a basic introduction.
When is AS 4300 used?
AS 4300 is typically used on commercial constructions in three different procurement scenarios:
- design and construct;
- design development and construct; and
- design, novate and construct.
In the first scenario, the principal will provide the ‘Principal’s Project Requirements’ which is essentially the principal’s design brief. The contractor is then responsible for developing the design in accordance with the principal’s design brief and constructing the works.
In the second scenario, the principal will provide the ‘Principal’s Project Requirements’ which includes a ‘Preliminary Design’ developed by the principal before the tender phase. The contractor will complete the ‘Preliminary Design’ and construct the works accordingly.
In final scenario, the principal develops the design but then passes responsibility for the design over to the contractor. The contractor is typically required to accept the novation of the principal’s designers. In effect, this means the contractor is entirely responsible for the principal’s designers (regardless of the extent of their involvement in the design development). From the principal’s perspective, novation provides a level of comfort that the design will be completed by the original designers.
Where to buy AS 4300
AS4300 is published by Standards Australia Limited, which is part of SAI Global. It is protected by copyright and you must pay a licence fee to use it.
You can purchase a copy of AS 4300 here.
When buying AS 4300, be sure to buy the right version.
You will notice that different types of licences are available (reference version, multiple use versions, editable versions and so on). Licence fees vary depending on which licence option you pick. You will need to choose the version that best suits your circumstances.
How to assemble AS 4300
The document you purchase from SAI Global is the general conditions of contract. You will need to compile the other contract documents and complete the annexures.
You will also need a document to formalise your entry into the contract you have compiled.
As you will notice, there is nowhere to sign in the AS 4300 general conditions or annexure pages. To address this, the parties will usually adopt:
- a ‘formal instrument of agreement’; or
- a letter of acceptance.
Both documents serve much the same purpose, although most principals prefer a formal instrument of agreement to ensure there is no doubt about which documents are included in the contract.
You can purchase the Australian Standard Formal Instrument of Agreement (AS 4302-1995) here. This document has been produced by Standards Australia for use in conjunction with AS 4300.
What are the basic features of AS 4300?
(a) Lump sum price. The contractor is required to carry out the works for a fixed price and within a fixed timeframe.
(b) Fixed timeframe. The contractor is required to ensure the works reach practical completion by an agreed ‘date for practical completion’. If this does not occur, liquidated damages will apply (if provided for in the annexure).
(c) Practical completion. The contract acknowledges that construction projects can often be used and occupied before all works, including minor works, are completed. This is embodied in the concept of ‘practical completion’.
(d) Design obligations. The contract requires the principal to provide the contractor with a design brief (i.e. ‘Principal’s Project Requirements’). The principal may also be required to provide a ‘Preliminary Design’ where the principal elects to go down the path of design, development and construct or design, novate and construct as opposed to a pure design and construct scenario.
(e) Variations. The contract prescribes a process for dealing with variations.
(f) Extensions of time. The contractor may claim extensions of time to the date for practical completion if it is delayed by an event listed at clause 35.5. The contractor can also claim delay costs for delays caused by the principal, superintendent, the principal’s employees or consultants, other contractors or agents, and other events prescribed by the contract or the annexure.
(g) Latent conditions. The contractor is entitled to claim an extension of time and additional costs if it encounters a latent condition, subject to the contractor following the prescribed notice procedure.
(h) Provisional sums. Where the design of part of the works is not sufficiently developed to enable the contractor to provide a fixed price, the parties can agree on a ‘provisional sum’ instead. The price of these items is adjusted once the final cost is known. AS 4300 contains a specific provision to deal with this.
(i) Separable portions. AS 4300 allows the works to be divided into separable portions (or stages), with each of them potentially having a different access date, date for practical completion and liquidated damages rate. Separable portions can be defined at the time of contract entry, or directed by the Superintendent at any time up until practical completion of the final portion of work.
Criticisms of AS 4300
Although AS 4300 was produced by Standards Australia following consultation with a variety of industry stakeholders, it is not without its critics.
Some principals consider the relief available to contractors to be too generous, and somewhat uncertain. For example, clause 35.5(a) entitles the contractor to claim an EOT for anything beyond its reasonable control. Many principals will seek to limit the availability of EOTs to a list of specific events.
There are parts of AS4300 that are not to the liking of some contractors either. For example, if a delay is caused by multiple causes of delay and any of the causes would not entitle the contractor to claim an EOT, no EOT will be available in respect of the delay. (The equivalent provision of AS 4902 allows an apportionment to be made.)
If the superintendent directs the contractor to perform a variation, the price of the variation need not be agreed or determined before work on the variation commences. There is also no prescribed timeframe for the superintendent to price a variation. Unless the parties make an active effort to promptly resolve variation claims and other contract adjustments, the potential for disputes will only increase as the project progresses.
Advantages of AS 4300
- The contractor will be accountable for all aspects of the design and construction.
- The principal can use the contractor’s full expertise, which means the design and construction process is more efficient.
- There should be fewer variations relating to the design if the contractor has produced the design.
- The construction phase is often faster, as sign-off is typically earlier than in a ‘construct only’ arrangement.
Disadvantages of AS 4300
- The principal has less control over the final design.
- The contract sum may be higher to reflect increased contractor risks.
- If the parties enter the contract at a time when the design is complete, disputes can arise over whether a change is a normal ‘design development’ or a variation.
- The principal is heavily reliant on the contractor, with no team of consultants of its own. Also if the head contractor becomes insolvent, that can create major problems for the entire project.
Developments since release
AS 4300 was released in 1995, making it almost 25 years old. Since then, there have been a number of changes to the law. Parties contemplating a contract under AS 4300 will often agree to special conditions to address these changes.
Examples of legislative changes that have occurred since the first publication of AS 4300 include new laws relating to GST, security of payment, proportionate liability, personal property securities, work health and safety, the Australian Consumer Law and unfair contracts legislation.
Despite its age, AS 4300 continues to be a widely used form of head contract.
If you are thinking of AS 4300 as your contract for a new project, you should consider whether any amendments may be needed. For example, you may wish to alter the risk profile, you may wish to incorporate new clauses to deal with legislation that has commenced since the AS 4300 was first released, and you may also need clauses to deal with specific issues that arise out of your project.
If you have entered into a contract that incorporates AS 4300, be sure to familiarise yourself with the detail of the document so that you understand your rights, obligations, entitlements and liabilities, and so that you can administer the contract accordingly.