Building works contract is a written agreement between parties
A building works contract is a written agreement between parties involved in the building or alteration of any structure. It details the rights and obligations of all parties involved, administration procedures and the contract administrator if one. A contract can be created especially for the project, be one of the standard commonly used contracts with specific amendments relevant to the project or just one of the standard contracts without any changes made.
There are 2 basic types of contracts in use in Australia reflecting the different approaches from engineers and architects. From these 2 types many forms of standard contracts have been produced by particular parties for commercial use in the building and construction industry. These contracts have been developed by bodies such as the Property Council, the Royal Australian Institute of Architects, the Housing Industry Australia and the Master Builders Association. Some examples include –
SBW series contracts
SBW2 Lump sum
MBA and HIA contracts
Australian standard contracts, including the AS 2124 and AS 4000 series
Not all of these contracts are in use today; we will look at the history, content and difference of applications of each one starting with the ones developed by the architects.
The JCC family of contracts was first created by a joint contracts committee (JCC) comprised of representatives from three organizations – the Royal Australian Institute of Architects, the Master Builders Federation of Australia and the Property Council of Australia (formerly BOMA - the Building Owners and Managers Association of Australia) It originated from earlier contracts such as MBW1 in 1970 and E5b in 1970, even going back to an English contract – the RIBA. It was released in January 1985 in two documents;
JCCA – 1985 Building Works Contract with quantities and
JCCB – 1985 Building Works Contract without quantities.
In 1993 revisions were made and 2 new contracts were released;
JCCC – 1993 Building Works Contract with quantities and
JCCD – 1993 Building Works Contract without quantities.
When the Master Builders Association and Royal Australian Institute of Architects commenced the development of the ABIC series of contracts in 1999, it was agreed that the JCC suite (along with some other contracts mentioned later) would be withdrawn from use. This was to occur approximately 12 months after the release of ABIC MW-1 to allow for a changeover period. As a result the JCC suite of contracts would no longer be available after mid 2002.
SBW series contracts including SBW2 Lump sum
The SBW series of contracts were developed for commercial building works of a simple nature and was aptly given the name SBW - Simple Building Works.
The SBW2 lump sum contract was developed to provide a simple easy to understand contract to enable ordinary people to contract a builder to construct their new home, renovate or extend for a fixed sum, or with certain provisions to alter the price. The SBW2 series of contracts differed in its structure in allowing for a separate administrator – usually the architect. The architect was intended to be the go-between for the builder and owner and is not usually listed as a party to the contract. They are to act on behalf of the owner but to act independently when any disputes arise such as - payment claims, completion time of the project, variations to the contract or extensions of time arise between the owner and builder.
This made the contract more complex than others available on the market that had no provision for a separate administrator. It is important to note that the SBW2 contract uses the architect only for administration of the project - not supervision; this is still left between the owner and builder.
As with the JCC suite, with the development of the ABIC series of contracts through the MBA / RAIA association, the SBW-2 would be withdrawn from everyday use. So by the end of 2002, approximately 6 month after the release of the ABIC SW-1, the SBW-2 and all its versions developed for the construction industry were no longer available.
The Construction Industry Contract (CIC-1) was launched by The Royal Australian Institute of Architects in October 1997.
This contract again uses an architect to administer the contract and as with the SBW suite of contracts they are to remain independent when acting in their role as administrator assessing, certifying or valuing in the course of the build. If the owner is unhappy with or just wishes to change architects they are able to, but the new architect is required to uphold any previous decisions made by any past architects.
The contract differs in the fact that it could avoid the disputes that can occur when claims are not presented promptly. It encourages the speedy resolution of all matters with the work in question inspected while the issues are still clear to all parties. To sum up - all claims and other matters that occur during the course of construction are dealt with as they arise.
The contract recognises that issues are best dealt with at the time that they occur so to meet the aim of reduced disputes at the completion of the contract, the contractor is required to meet defined time limits in the contract for claims on the variation of time for completion or the contract sum. It also gives the owner more rights to be kept informed of construction progress and the financial status of the project, in a timely manner.
In a report by the RAIA practice services general manager Graham Scott-Bohanna published in the Australian Construction Law Newsletter -ACLN Issue #65 1999 he states:
“There have been suggestions that the time limits in CIC-l will increase the administrative workload for contractors, however, there is no reason for it to be greater, for any of the parties, than that required under JCC, SBW or AS4000. It is simply required to be completed at the appropriate time.
The contract also recognises, that on occasions, claims will be overlooked or it will not be possible to finalise a claim within these time limits. Under the contract the architect has the power to deal with such claims where there is a genuine cause for the delay."
The CIC was similar to the JCC in the way that it was again written in plain English but also had most terms explained throughout the contract where they first occurred.
Despite the benefits of ease of understanding and dispute resolution issues addressed as the project progressed the Master Builders Association did not like the contract and began a campaign to discredit it and have it taken off the market.
They were successful in their endeavours and in 1999 the RAIA relented and joined forces with the MBA to develop a new series of contracts – the Australian Building Industry Contract or ABIC. From 2000 the CIC suite of contracts in their original form was no longer available as they were revised and renamed under the ABIC.
MBA and HIA contracts
In 1999 the Master Builders Association (MBA) and the Royal Australian Institute of Architects (RAIA) stopped fighting over differences in contracts and started to work together to develop a new series of contracts. They reviewed the CIC suite of contracts produced by the RAIA and created a new Australian Building Industry contract (ABIC) to replace the CIC suite, JCC suite, SBW2 and all the other contracts jointly sponsored and/or published by each of them.
They decided to work together and develop a wide ranging suite of contracts to cover all sizes and complexities of building projects being undertaken on a standard lump sum basis. To differentiate between the various forms of the contract a further designation would be added after ABIC in the form of Major Works (MW), Simple Works (SW) or Basic Works (BW). A summary of the three basic forms obtained from the ACLN # 85 in 2002 is below:
Australian Building Industry Contract – Major Works (ABIC-1MW), a standard lump sum contract including an architect as the superintendent and intended for larger and more complex projects above approximately $3.0M. This form was published in 2001 and is intended to replace the JCC suite of contracts.
Australian Building Industry Contract – Simple Works – (ABIC SW-1), a standard lump sum contract including an architect as the superintendent and intended for small to medium sized projects of lesser complexity with a value range between $0.5M and $5.0M. This form was published in mid 2002 and will eventually replace SBW-2.
Australian Building Industry Contract – Basic Works – (ABIC-BW-1), a standard lump sum contract including an architect as the superintendent and intended for small sized projects of low complexity with only a small number of trades. This form was published in late 2001 and replaces MBW-1.
A list of the main differences between other generally available standard forms and the ABIC also obtained from the ACLN # 85 in 2002 are:
The contracts all meet the requirements of State and Territory government legislation on residential or housing projects.
Each section of the contract deals with only one aspect of the project.
Each clause deals with only one issue.
The structure of the contract follows the building process.
Clauses are arranged sequentially.
Time limits are set on the notification of claims for cost or time.
The contracts are written in plain English.
Risk is shared equitably between the parties.
The HIA was created by two builders, Bill Hunt and Perce Newton in 1945in Melbourne and was initially called the Builders and Allied Trades Association (BATA). It was formed to address the issues facing small builders at the time such as shortage of materials and price fixing as a result of WWII. Its ideals were very popular with many trades and became an incorporated body in 1950, expanded into the other states over the next decade and became the Housing Industry of Australia in 1965.
HIA promote their contracts as being:
“the most common form of building contract used for domestic building work in Australia. HIA advocate the use of clear and intelligible consumer contracts that have terms appropriate to the risk and which are reasonably necessary for the protection of each party’s interests."
Australian standard contracts, including the AS 2124 and AS 4000 series
The Australian Standards contracts have their origins dating back to the mid 1920’s when the Institution of Engineers produced a document designed for their projects where they, as the engineer, were the administrator of the contract. Its use was limited to such projects as road works, sewerage works, civil works or water supply works where the engineer was traditionally managing the project.
The Institution of Engineers agreed to let the Standards Association of Australia take over control of their document to make it more suitable for mainstream use. As a result they first published their General Conditions of Contract for construction projects in 1952 calling it CA24-1952. It went through a number of revisions under that title until 1978 when it was revised and its name changed to AS2124-1978. The numerals “2124" were designed to show it was created from both the CA24 document and another Standard for the Supply of Equipment known as CA21. There have been several revisions since, in 1981, 1986 and 1992 in an effort to encourage its universal use on building projects. A subsequent revision in 1997 saw its name changed once again to AS 4000.
During the 1990’s a suite of contracts were developed based on the original AS 2124 and its successor AS4000. The initial standards developed as part of a strategy to expand the range of contract conditions were:
AS4300–1995 General Conditions of Contract for Design and Construct
AS4303–1995 General Conditions of Subcontract for Design and Construct.
AS4305–1996, Minor Works Contract was developed for smaller projects.
Since then the committee has resolved to develop a whole series of contract conditions based on AS4000 as follows:
Design and Construct
Design and Construct Subcontract
Design and Construct Consultant’s Agreement
Minor Works Contract (Administration by Superintendent)
Minor Works Contract (Administration by Principal)
Supply and Installation of Equipment
Supply Only of Equipment
Periodic Supply of Goods
Trade Contract (Long Form)
Trade Contract (Short Form)
Over the almost 90 years since its inception it has gone through many changes, the term “engineer" is not longer used – replaced with “superintendent", administrative processes removed and placed in a separate document and it has been rewritten in clear understandable English.
In 1997 Standards Australia decided to ensure the suite of contracts were reviewed at least every 5 years and as a result the now AS4000 series reflects the current use of such things as bills of quantities, it has construction programs contained within the clauses themselves and is legally up to date.
The main contracts used today are from HIA, the ABIC contracts produced by the RAIA/MBA and the AS 4000 series of contracts, with the others mentioned either superseded with one of the common ones used today or removed from the market as not relevant to the building industry anymore.
An excerpt from homeimprovementpages.com,.au states that regardless of which type of contract you choose it must include the following for it to be valid.
that the commencement and completion date of the project is clearly stated or easily able to be worked out
that your name as the homebuyer and the contractor’s license number is included
a description of all the work to be carried out during the building process, including plans, specifications, and any particular requirements that you may have
the necessary insurances
the contract price
a clearly stated cooling off period
a checklist of 12 items and a caution about signing the contract if you can tick yes to all 12 items
a place for the buyer to acknowledge that they have read and understood everything in relation to the contract
prime cost or provisional sum items are clearly stated
progress payments are outlined
a clause that states that all work will comply with the Building Code of Australia as well as the other standards required by law
that the contract begins on the day when the last party signs the contract and the other party is made aware of this signing – this is the contract date and should not be confused with the starting date for the project.
In some states, there must be a cooling off period in the contract by law. During the cooling off period, you are able to withdraw from the contract but you may still be liable for the expenses that the builder has already incurred.
To conclude I have found some good advice on both the masterbuilders.com.au and architecture.com.au websites stating the following –
“The contract should be selected to suit each individual project, taking account of its complexity, value and any specific project issues or requirements. A contract selected simply because the architect [parties] is familiar with its provisions or is comfortable using it, won’t overcome the inherent difficulties that can arise if the contract is inappropriate for the project."