Master Builders releases contract guidance

The Registered Master Builders has released guidelines intended to help builders improve their productivity and ensure an equitable distribution of risk during the planning stages of major construction projects

The Good Contracting Principles & Guidance document was developed as a resource for members and the wider industry to use, and is available to read HERE. Developed with major construction in mind, it was published to help builders increase productivity and ensure risk and responsibility is fairly allocated during the planning stages of major construction work.

Master Builders’ Commercial Working Group, alongside Vertical Construction Leaders Group and Hazelton Law, identified significant issues, such as lengthy and inconsistent procurement and pre-contract processes, which negatively impact productivity and the sector’s ability to deliver infrastructure projects on time and to budget.

Additionally, the group identified a requirement for greater education, support and clarity during pre-project planning, tender preparation, pre-contract services and contract negotiations.

Master Builders-approved guidance

To help builders navigate those potential minefields, Master Builders has published the Good Contracting guidance booklet.

“This initiative is about improving productivity and fostering collaborative relationships between clients and contractors from the start,” said Master Builders Chief Executive Offer Ankit Sharma.

The material offers builders guidance and information on areas such as terminating contracts without a cause (Termination for Convenience clauses), avoiding payment of liquidated damages for completion delays (Extension of Time Principles and Float), and non-residential construction work conditions of contract (Risk in NZS 3910:2023). Additionally, it features a standard pre-construction contract template for builders to use to ensure an equitable distribution of risk and responsibility on long-lead procurement opportunities.

“This is especially important when unfamiliar contract terms imposed by clients lead contractors to agree to terms and risks they cannot manage,” said Sharma. “A lack of trust at the pre-construction stage leads to poor decision-making throughout the project delivery cycle. Nobody wins when this occurs – not the client, the contractor or the country.”

Risk reduction

Nick Clayton, Wellington Director at Naylor Love, said that contractors often take on more risk than they need to.

“Clients, both private and government, often seek to transfer risk away from themselves to the contractor by using special conditions. Contractors, who don’t have the specialist expertise and experience, then accept those conditions, even though it means they take on more risk than they should.

“The Good Contracting Project is about capturing the lessons we have learned when contracting is done well. From my own experience at Naylor Love, project success is always a team effort led by best-for-project decisions rather than self-interest. Beyond the technical jargon, this is all about building trust and ensuring all parties have the confidence to proceed with a project.”

Other challenges

Additionally, a lack of access to finance was flagged as the biggest challenge for the building and construction industry by 83% of respondents to the Master Builders’ State of the Sector survey, while a lack of consumer demand (75%) and the rising costs of construction (74%) were other big concerns.

Confidence in finance is the key to the sector’s recovery, said Sharma, who called on a change of approach from the banking sector to help turbo-charge the industry’s recovery.

“We need businesses and clients to have the confidence that they can access money for projects, because it sends the signal that the economy is going to recover, and that it’s worth committing to the building process.

“Government has released a series of policies to address the housing shortage and the perennial issue of affordability, which will help in time. However, the highly conservative approach taken by the banking sector is a major barrier, especially given we can see the relief that an ease in interest rates will bring.”