06.09.2021

Unprecedented ! NZS3910, Risk Allocation and COVID-19

The first Level 4 lockdown of 25 March 2020, implemented in response to the COVID-19 pandemic, exposed various flaws in the risk allocation regime under standard construction contract NZS3910.   

In light of the upcoming review of NZS3910, this essay analysed how it handles risk.  It considered how the government’s guidelines for the public sector construction industry on handling variations during the Level 4 lockdown, affected risk allocation under NZS3910.  And it considered whether the upcoming review should recommend changes to risk allocation under NZS3910. 

Ultimately, this essay made several recommendations:

  • A force majeure clause should be inserted to cover pandemics, and legislation / regulation passed in response to pandemics. 
  • A schedule or risk register should be included to list all risks covered under the contract, to help contractors accurately price risks. 
  • NZS3910’s theory of risk allocation should be changed from a fault-based regime to one which allocates risk to the party best placed to bear it. 
  • Greater use should be made of alternate tendering practices, like those used in Norway, which encourage principals to choose the middle of three tenders, ranked by price, as these enable tenderers to properly price risk.

Lydia’s essay won first prize in the New Zealand Society of Construction Law Essay Prize 2021.  To read Lydia’s essay please click here.

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Kerry
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