On 15 August, New Zealand law firm Russell McVeagh released a report showing that more than 70% of respondents in New Zealand's construction industry expected construction disputes to increase over the next two years. Contractors were more pessimistic, with 91% expecting this trend.
Reducing construction contract risks was a key concern for respondents. Most respondents were involved in projects worth more than NZ$10,000,000.
A lack of understanding of contractual responsibilities within the industry was the leading cause of disputes. Respondents noted that not everyone always read the amendments in customised contracts.
Related reading
The contract behind a successfully completed apartment project
Delays were the second major trigger for disputes. Both principals and contractors identified changes made by the principal or employer as a cause of delays. Principals attributed delays to the pace of construction and slow consent applications. Contractors, meanwhile, believed design quality affected construction progress.
{Ad}
More than 60% of respondents believed construction disputes had increased over the past two years. Although the increase appeared to stem from structural problems in the industry, relationships, risk allocation and contract terms in particular were within the parties' control.
Respondents' suggestions for reducing the risk of disputes fell into two areas: improving construction contracts and improving industry conditions. Principals' priorities were likely to centre on addressing skilled worker shortages through training programmes and immigration.
Contractors called for greater standardisation of contracts and a rethink of risk allocation. In a construction project, a large share of the risk rests with the builder or head contractor and subcontractors.
NZS 3910 is a commonly used standard contract, with only minor variations. More than 80% of respondents said the contracts they used were based on NZS 3910.