The delivery model is the decision that sets who holds which contracts on your project. Construct-only, design and construct, construction management and the managing contractor variants each put the design risk, the trade contracts, the payment obligations and the statutory duties in a different place. Change the model and you change the price, but you also change who a subcontractor sends a payment claim to, who signs the work health and safety management plan, and whether the residential warranty scheme in your state covers the project at all.
The model determines statutory obligations that fall on you personally and on your company, not on your builder: liability for a trade contractor’s payment claim if you miss a ten business day window, duties as the principal contractor under work health and safety law, and in some states the loss of home warranty cover for your buyers. Those consequences are not negotiable between the parties, and they do not shift because your contract says something different. Your construction lawyer reads the structure and tells you which of them land on you. Your quantity surveyor prices the difference between the models. The specific questions worth putting to each are set out near the end.
Figures, thresholds and commencement dates in this guide were current at the date of writing and change often. Several of the numbers below moved during 2026 alone. Every one is linked to the government source that publishes it, and that source is where to confirm the position on your own project.
What is a construction delivery model, and how is it different from the pricing mechanism?
A construction delivery model describes who holds which contracts and who is responsible for design. A pricing mechanism describes how the money is calculated. They are two separate decisions and mixing them up is the most common error in procurement discussions.
The delivery model answers: does one party hold both design and construction, or are they split? Does the developer hold the trade contracts directly, or does a head contractor hold them? Is the contractor engaged early to advise on buildability, or only after documentation is complete?
The pricing mechanism answers: is the price a lump sum, a schedule of rates, a reimbursement of actual costs plus a fee, a target price with a pain and gain share, or a reimbursement capped by a guaranteed maximum? Cost-plus is a pricing mechanism, not a delivery model. It can sit under a construction management arrangement, under a managing contractor arrangement, or under a construct-only head contract. Australian standard form contracts increasingly acknowledge this separation, and the 2023 to 2025 New Zealand revisions have made it explicit by allowing several price components inside a single contract.
The practical point for a developer is that the two decisions have different consequences. The delivery model tends to drive your statutory exposure and your management overhead. The pricing mechanism tends to drive your cost certainty and your lender’s comfort. A construction management arrangement priced on a target cost basis and a construct-only contract priced on a lump sum basis sit at opposite ends of both scales, and the gap between them is often larger than the gap in the headline construction number.
Which construction delivery models do Australian developers use?
Four models cover most private development work in Australia, with a fifth appearing on larger and public projects. The ACT Treasury Capital Framework’s outline of delivery models sets out the government taxonomy, which runs from traditional models through to relationship and integrated models, and is a useful reference point because most private procurement borrows its language.
Construct-only
The developer engages the design consultants directly, takes the design to full documentation, then tenders the completed documents to builders. One builder holds the trade contracts and delivers the works to the documented design.
The developer keeps design control and generally gets the sharpest price, because builders are pricing a defined scope with fewer unknowns. The trade-off is that the developer owns the design. Where a defect turns out to be a design failure rather than a construction failure, the builder’s position tends to be that it built what it was given, and recovery may run against the consultants and their professional indemnity cover rather than against the builder. The other cost is time: full documentation before tender is often the longest single item on the programme, and holding costs accrue while it happens.
Construct-only tends to suit projects where the design is the value, where the developer has strong in-house or consultant capability, and where the programme can carry a full documentation period.
Design and construct
One contractor takes responsibility for both design and construction, working from a brief that is usually called the Principal’s Project Requirements. Risk concentrates on the contractor, and the developer’s recovery route for a defect is unified against one party.
The developer pays for that concentration. Contractors generally price contingency for design unknowns as well as construction unknowns, so the contract sum tends to sit above a comparable construct-only tender. The developer also gives up design control after execution, because the contractor’s commercial incentive is a buildable, compliant design rather than the most refined one. The brief is the developer’s only real instrument of control, and its quality at tender decides how much the developer can require later without paying for it. The full mechanics of the form, including the novated variants, are set out in the guide to design and construct contracts.
Construction management
A construction manager, usually a licensed builder, is engaged for a fee to procure, coordinate and administer the trade packages. The developer signs each trade contract directly. The construction manager runs the site but is generally not the counterparty on the trade contracts and does not carry the price for the works.
This is the model that most changes a developer’s legal position, and the change is not obvious from the fee. Because the developer holds the trade contracts, the developer becomes the party to each of them for every statutory purpose: payment claims, retentions, defects, insolvency of a trade, and in most cases work health and safety duties as well. The commercial appeal is real, because removing a head contractor’s margin and preliminaries on the works can take several per cent out of the construction number, and letting trades progressively can start work before the whole design is documented. The exposure is that every risk a head contractor would have absorbed now lands on the developer’s balance sheet.
Standards Australia publishes AS 4916-2002, Construction management, General conditions for the construction manager’s appointment, with AS 4917-2003 as the companion trade contract form and AS 4915-2002 covering project management appointments.
Managing contractor
A hybrid. The contractor is engaged early, often before documentation is complete, to advise on buildability, cost and programme, then manages delivery of the trade packages. Unlike construction management, the managing contractor typically holds the trade contracts and carries some price risk, frequently under a target cost or guaranteed maximum price arrangement once the design matures.
This is the model most often used where a developer wants early contractor involvement without becoming the counterparty to twenty trade contracts. The pricing usually converts at some agreed design milestone, and the conversion clause is where the commercial argument lives. The mechanics of that conversion are covered in the guide to guaranteed maximum price contracts.
How does the delivery model change the numbers on a 24-apartment project?
The delivery model moves the construction number, the consultant number and the risk position, and those three do not move in the same direction. A worked comparison on identical revenue makes the trade-off visible.
Take a 24-apartment development with a gross realisation value of $24,000,000 and land at $4,200,000. Statutory and holding costs of $700,000, selling and marketing of $840,000 and finance costs of $1,150,000 are held constant across all three scenarios, so only the construction and consultant lines move. These figures are illustrative and chosen to show the mechanics, not benchmarks.
Scenario A, construct-only on a lump sum. Construction contract sum $13,200,000. The developer carries full documentation, so consultants run at $1,320,000. Total development cost is $21,410,000, development profit is $2,590,000, and margin on cost is about 12.1 per cent.
Scenario B, design and construct. The changed inputs are the construction sum, which rises to $13,900,000 as the contractor prices design risk, and consultants, which fall to $790,000 because the developer only funds the brief, the reference design and a superintendent role. Everything else is unchanged. Total development cost is $21,580,000, profit is $2,420,000, and margin on cost is about 11.2 per cent.
Scenario C, construction management. The changed inputs are trade packages let directly at $12,300,000, a construction management fee of $615,000 at five per cent of trade cost, consultants back at $1,320,000 because the developer again carries the design, and an additional $180,000 of developer-side overhead to run the contracts. Total development cost is $21,305,000, profit is $2,695,000, and margin on cost is about 12.7 per cent.
On paper the construction management scenario wins by around $105,000 against construct-only. That comparison is only honest if the trade packages land on budget, and under construction management they are the developer’s packages. Apply a six per cent overrun across the trades, which is $738,000, and total development cost becomes $22,043,000, profit falls to $1,957,000 and margin on cost drops to about 8.9 per cent. The construction management fee is held flat in that figure, where a fee struck as a percentage of trade cost would rise with the overrun. Under the construct-only lump sum, an equivalent overrun on the builder’s own trades generally sits with the builder, subject to whatever the variation, latent condition and provisional sum clauses actually say.
That is the shape of the decision. Construction management may buy roughly half a percentage point of margin against construct-only in the good case and may cost more than three in the bad one, and the developer chooses which distribution to carry.
Which standard form contracts sit behind each delivery model, and what changed in AS 4000:2025?
Standards Australia published a revised general conditions of contract in 2025, and the rest of the suite has not caught up yet. That mismatch is a live drafting issue on any project being contracted now.
Per the Standards Australia announcement dated 30 June 2025, AS 4000:2025 General Conditions of Contract replaces the 1997 edition after 28 years. Standards Australia states the risk allocation “remains consistent with the 1997 edition, based on the Abrahamson Principles”, so the commercial bargain has not moved, but the mechanics have. The published changes include legislative updates reflecting GST, the Personal Property Securities Act and work health and safety regulation including provision for appointing the contractor as principal contractor, all defined terms consolidated into Clause 1, clarified practical completion procedures including that the date of practical completion may precede the date of the certificate, expanded dispute resolution options covering mediation, expert determination and dispute avoidance boards with negotiation followed by arbitration or litigation as the default, and a Formal Instrument of Agreement. The forms themselves are compared in the guide to AS 4000 and Australian standard construction contracts.
The part that matters for delivery model selection is what Standards Australia says comes next. On the General Conditions of Contract project page, Standards Australia confirms that following the release of AS 4000:2025 it will review and update HB 140:2000, the administration manual, and AS 4902-2000, the design and construct conditions. Until that happens, a developer tendering a construct-only package on AS 4000:2025 and a design and construct package on AS 4902-2000 is using two forms built on different bases, with different definitions and different practical completion mechanics. Where both forms appear on one project, or where a construct-only head contract and a design and construct subcontract sit in the same chain, the interface is worth a lawyer’s attention rather than an assumption.
The broad mapping across the suite is that AS 4000 covers construct-only head contracts, AS 4902-2000 covers design and construct, AS 4916-2002 covers the construction manager’s appointment with AS 4917-2003 as the trade contract form, and AS 4915-2002 covers project management appointments. Amendments to these forms are near-universal in practice, and the amendments, not the base form, are where the risk allocation on a given project actually sits.
What does construction management do to your security of payment exposure?
Under construction management, the developer becomes the respondent to every trade contractor’s payment claim, and the response windows are short and unforgiving. How claims, schedules and adjudication work is set out in the guide to the Security of Payment Act. This is the single most under-appreciated consequence of the model.
Every state and territory has security of payment legislation, and the current Acts are the Building and Construction Industry Security of Payment Act 1999 in New South Wales, the Building and Construction Industry Security of Payment Act 2002 in Victoria, the Building Industry Fairness (Security of Payment) Act 2017 in Queensland, the Building and Construction Industry (Security of Payment) Act 2021 in Western Australia, the Building and Construction Industry Security of Payment Act 2009 in South Australia and Tasmania, the Building and Construction Industry (Security of Payment) Act 2009 in the Australian Capital Territory, and the Construction Contracts (Security of Payments) Act 2004 in the Northern Territory.
Building Commission New South Wales describes a respondent as a party in a contract where construction work or related goods and services are being provided to them in New South Wales, who does not live or propose to live in the relevant part of the premises, and who is served with a payment claim. On a construction management project the developer meets that description on every trade contract, not on one head contract.
The consequence is set out plainly by Building Commission New South Wales on responding to a payment claim. A respondent unwilling to pay the full amount claimed has a maximum of 10 business days after the payment claim is received to give a payment schedule, and the regulator states that where one is not served in that timeframe “you are liable for the full amount claimed”. Where no payment schedule is served, the respondent “cannot raise a defence based on the construction contract or a cross-claim”. The due dates for payment where the contract does not provide an earlier one sit in section 11 of the Act: 15 business days for a head contractor claiming from a principal under section 11(1A), and 20 business days for a subcontractor under section 11(1B), in each case other than on an exempt residential construction contract.
Multiply that by twenty trade packages claiming monthly and the administrative load is not trivial. It is a full-time contract administration function, and a single missed schedule can create a debt with no defence available.
Two jurisdictional changes are worth confirming before relying on older material. In Victoria, the Building and Plumbing Commission states that the 2002 Act was amended by the Building Legislation Amendment (Fairer Payments on Jobsites and Other Matters) Act 2025, with the amendments taking effect from 15 April 2026, and that the changes affect all construction contracts, including those entered into before that date. The Commission lists the removal of the claimable variations and excluded amounts concepts, a monthly entitlement to claim replacing reference dates, a payment claim window extended from three months to six, payment and release terms capped at 20 business days, new provisions on unfair notice-based time bars, and a business day definition that now excludes 22 December to 10 January.
In Queensland, the trust account framework under the Building Industry Fairness (Security of Payment) Act 2017 currently applies to eligible Queensland Government contracts of $1 million or more and to private sector, local government, statutory authority and government-owned corporation contracts of $10 million or more, per the Department of Housing and Public Works page last updated 2 May 2025. A developer sitting above that threshold has trust account obligations attached to the contracting structure, and the delivery model changes who holds them.
Insolvency risk sits behind all of this. ASIC’s Corporate Insolvency Update Issue 39 reports 9,307 companies entered external administration during the first eight months of the 2025-26 financial year, and that construction was the most common industry for appointments at 24 per cent, ahead of accommodation and food services at 15 per cent. Under construct-only or design and construct, a trade insolvency is generally the head contractor’s problem. Under construction management, it is the developer’s. Counterparty checks matter more under some delivery models than others, and the framework for running them is in the guide to choosing a builder.
Who becomes the principal contractor for work health and safety?
If you commission a construction project and do not appoint someone else as principal contractor with the authority to do the job, you are the principal contractor. This is the default position under the model work health and safety regulations, and it is a common surprise on construction management projects.
SafeWork New South Wales states the position directly on undertaking a construction project: where construction work is valued at $250,000 or more it is a construction project and a principal contractor must oversee it, and “You are the principal contractor, unless you appoint another principal contractor with authority to have management or control of the workplace and discharge the duties of the principal contractor.” The relevant provisions in the Work Health and Safety Regulations are regulation 292, meaning of construction project, and regulation 293, meaning of principal contractor.
The duties that attach are substantive. SafeWork New South Wales lists site signage showing the principal contractor’s name, 24-hour contact numbers and the site office location, and a written work health and safety management plan prepared before work commences, covering the names and responsibilities of those with health and safety duties, consultation and coordination arrangements, incident arrangements, site-specific rules and how everyone is informed of them, and arrangements for collecting, assessing, monitoring and reviewing safe work method statements.
Delegating does not help as much as developers sometimes assume. Safe Work Australia states on work health and safety duties in construction that “A person cannot eliminate their health and safety duties by sub-contracting all, or elements of, the construction work to another PCBU”, meaning a person conducting a business or undertaking (PCBU), and that where two or more people have the same duty, each must consult and comply with it. Commissioning the work is itself listed as a duty-holding activity.
For a developer weighing construction management, the practical question is whether the construction manager’s appointment actually confers the management or control needed for that party to be the principal contractor, or whether it stops at coordination. That is a drafting question with a criminal-liability tail, and it is one for the construction lawyer rather than the fee proposal.
Where do the residential rules restrict cost-plus and construction management?
Residential building work is regulated separately in every state and territory, and in several the delivery model or the pricing mechanism affects whether warranty cover exists for your buyers. Commercial and industrial work is largely free of these constraints. If your project is residential, this section may be the constraint that decides the model.
New South Wales
Cost-plus is permitted and regulated rather than restricted. The Building Commission New South Wales Consumer Building Guide names cost-plus as one of two main contract types, notes there is no guaranteed final cost, and states that progress payments on a cost-plus contract must be supported by receipts or other verifying documents. All contracts must be in writing, work over $20,000 requires a full home building contract with a progress payment schedule, and the maximum deposit before work starts is 10 per cent. Residential building work valued at more than $5,000 must be carried out by a licensed builder or tradesperson.
The insurance position is where construction management bites. The State Insurance Regulatory Authority states in its guidance on insurance obligations for residential building works that home building compensation cover is required where you are a principal contractor for residential building work priced over $20,000 including GST, and that the obligation sits with the principal contractor and is not satisfied by insurance an employee or subcontractor takes out. Two mechanics follow. Where the price is not known or the work is not under contract, the test is whether the reasonable market cost of labour and materials exceeds $20,000. Where a project is done under more than one contract, “the amount will be the total of all the contracts”, so splitting a job into trade packages does not avoid the threshold. Penalties for an uninsured principal contractor run to $110,000 for a corporation. The Authority also defines a developer as a party where the work is on four or more existing or proposed dwellings on land they own.
The Consumer Building Guide also names as a trap “a builder who recommends you get an owner-builder permit while they organise all the building work”, on the basis that the builder may be avoiding responsibility and may not hold the right licence or cover. Service New South Wales sets the owner-builder permit trigger at building work worth more than $10,000, with approved education required at $20,000 or more, and states the permit is not available where the property is in a multi-dwelling strata complex. The residential warranty position in New South Wales generally is covered in more depth in the guide to home warranty insurance in New South Wales.
Victoria
Victoria restricts cost-plus by statute, and the threshold is high enough that most residential projects cannot use it. Section 13 of the Domestic Building Contracts Act 1995 provides that a builder must not enter into a cost-plus contract unless the contract is of a class allowed by the regulations, or the work involves renovation, restoration or refurbishment of an existing building where the cost of a substantial part cannot be calculated without carrying out some work. A cost-plus contract must also contain “a fair and reasonable estimate by the builder of the total amount of money the builder is likely to receive under the contract”. Each carries a penalty of 100 penalty units. Where a builder fails to comply, the builder cannot enforce the contract against the building owner, though the Victorian Civil and Administrative Tribunal may award the cost of the work plus a reasonable profit if it considers that would not be unfair to the owner.
Regulation 10 of the Domestic Building Contracts Regulations 2017 sets the allowed classes: contracts entered into on or after 1 August 2017 reasonably estimated to cost $1,000,000 or more, contracts entered into before that date estimated at $500,000 or more, and domestic building contracts for public construction. In practice, a Victorian residential project under $1,000,000 that is not a qualifying renovation generally cannot be procured on a cost-plus basis at all.
Victoria’s insurance regime also changed recently. The Building and Plumbing Commission states that Home Warranty is a mandatory scheme starting 1 July 2026, applying to new eligible domestic building work under contracts signed on or after that date, replacing Domestic Building Insurance for new work while existing policies continue under the old scheme. It applies to eligible projects valued at more than $20,000, provides up to $400,000 of assistance per home, covers major defects for six years and other defects for two, and does not apply to residential buildings more than three storeys containing more than two homes. Older material quoting a $16,000 threshold is out of date. The owner-builder certificate of consent threshold is now domestic building work over $20,000.
Queensland
Cost-plus and construction management contracts are lawful for domestic building work in Queensland, but using either removes a protection your buyers may expect. The Queensland Building and Construction Commission publishes the same warning under both headings on its page covering contracts and agreement types: “As a consequence of the uncertainty surrounding the final contract price for cost plus and construction management contracts, protection for non-completion under the Queensland Home Warranty Scheme is not available to home owners when these contracts are used.”
The Commission defines a cost-plus contract, by reference to section 1 of Schedule 1B of the Queensland Building and Construction Commission Act 1991, as a domestic building contract under which the amount the contractor is to receive “cannot be accurately calculated when the contract is entered into, even if prime cost items and provisional sums are ignored”. On construction management it states that the distinguishing feature is that in addition to hiring a licensed builder as construction manager, “the owner may also be required to engage directly with multiple trades and is ultimately responsible for their performance”, and that a breakdown in one trade contract may affect others.
The Commission is blunt on the incentive problem in cost-plus: because payment claims are proportionate to the total cost of materials and subcontractor charges, “there is actually a disincentive for the contractor to minimise those costs”. Contract levels under Schedule 1B are no contract required below $3,300, a Level 1 contract from $3,300 to $19,999, and a Level 2 contract at $20,000 or more with the Consumer Building Guide provided before signing. The owner-builder permit threshold is building work valued at more than $11,000, and owner-builders cannot access the Queensland Home Warranty Scheme or build multiple dwellings.
Western Australia, South Australia, Tasmania, the Australian Capital Territory and the Northern Territory
The pattern across the remaining jurisdictions is that residential warranty or indemnity cover attaches above a threshold and is the builder’s obligation, not the owner’s, which makes an owner-as-principal arrangement structurally awkward wherever the threshold is met.
In Western Australia, Building and Energy states that the Home Building Contracts Act 1991 requires a builder to take out home indemnity insurance in the owner’s name before accepting payment or commencing work where residential building work is valued over $20,000. In South Australia, the government states that building indemnity insurance is required for domestic building work requiring council approval and costing $20,000 or more, and that “You cannot take out building indemnity insurance if you are carrying out the building work yourself”.
Tasmania is worth reading closely if you are contemplating splitting a residential job into packages. The Residential Building Work Contracts and Dispute Resolution Act 2016 does not apply below a contract price of $20,000, but section 8 provides that where a contractor and owner enter two or more separate contracts that could have been the subject of a single contract, “The separate contracts are taken to be a single contract for which the contract price is the sum of the contract prices for the separate contracts”. Tasmania expressly recognises cost-plus rather than restricting it, defining it as a contract “under which the amount the building contractor is to receive under the contract cannot be calculated when the contract is entered into”, and applies a different variation test to it: an addition or omission is a variation only where it is not reasonably contemplated by the contract.
In the Australian Capital Territory, regulation 37 of the Building (General) Regulation 2008 provides that the statutory warranties, standard conditions and insurance part of the Building Act 2004 does not apply to residential building work costing less than $12,000. In the Northern Territory, the government states that reforms commencing 30 March 2026 increased the minimum prescribed value triggering a fidelity fund certificate from $12,000 to $25,000, and that a certificate must be held before a building permit is issued for prescribed residential building work and before demanding payment from an owner.
No government source published by Western Australia, South Australia, the Australian Capital Territory or the Northern Territory appears to state a restriction on cost-plus for residential work, so this guide takes no position either way in those jurisdictions and the point is worth confirming with the relevant regulator. Victoria remains the clear statutory restriction, and Queensland the clear warranty consequence.
How does the NSW Design and Building Practitioners Act change the delivery model choice?
On a class 2, 3 or 9c building in New South Wales, the design and building practitioner scheme assumes a single accountable building practitioner, and that assumption sits awkwardly with construction management. This is a real constraint on the model, not a paperwork issue.
Building Commission New South Wales states on building classes and roles under the scheme that class 2, 3 and 9c buildings are currently regulated, that the legislation expanded to certain new class 3 and 9c buildings on 3 July 2023, and that alteration, repair or renovation work on existing class 3 and 9c buildings will be subject to it from 1 July 2028. That 2028 date is a deferral, and material still quoting 1 July 2026 is out of date. Certain low risk class 3 buildings and class 9 buildings with a minor class 3 part have been exempt since 1 July 2024.
The provisions that bear on delivery model selection are on the building practitioner obligations page. Building Commission New South Wales states that “There is only ever one building practitioner for a project” and that “Where there is more than one builder, the building practitioner is the principal contractor”. A developer running twenty trades directly on a class 2 building still has to identify one registered building practitioner to make and lodge the building compliance declaration, and if there is more than one builder that practitioner is the principal contractor, which brings the work health and safety question above back into play.
The lodgement mechanics, set out on the design practitioner obligations page, are tight. Regulated designs must be lodged on the NSW Planning Portal before any relevant building work starts, a certifier cannot issue a construction certificate or complying development certificate without the design compliance declarations, and each varied design and declaration must be lodged “within one day of the variation”, with Building Commission New South Wales noting that “Work may need to stop so that the varied design can be prepared and declared in time to meet this timeframe”. Regulated designs cover building elements including fire safety systems, waterproofing, building structure, building enclosure and building services required by the Building Code of Australia.
There is also a statutory duty of care in Part 4 of the Design and Building Practitioners Act 2020, owed by a person carrying out construction work to each owner and each subsequent owner, which cannot be delegated. The scope of that duty and how it applies to a particular contracting structure is a matter to put to a construction lawyer with the actual contract chain in front of them.
How does the delivery model change your funding and drawdowns?
Lenders generally price certainty, and delivery models differ in how much of it they produce. This is often the constraint that decides the question before the developer’s own preference does.
A fixed price construct-only or design and construct contract with a single creditworthy counterparty produces a defined contract sum, a defined completion date and a single party to sue. Cost-plus and construction management produce neither a fixed sum nor a single counterparty, and the funding conversation tends to be harder as a result. Market practice, which no government source publishes, is that fixed price arrangements with a head contractor attract more straightforward terms than open-ended ones, and a current term sheet is the only reliable place to confirm what a given financier will accept on a given structure.
The mechanical differences are worth modelling rather than assuming. Under a head contract, drawdowns typically follow certified progress claims against one contract, and the quantity surveyor’s progress certificate is the trigger. Under construction management, drawdowns have to reconcile against many trade claims with different cycles, retentions and defect positions, and the certification burden multiplies. The interaction between claim cycles, certification and drawdown timing is set out in the guide to construction loan drawdowns.
Contingency also behaves differently by model. Under a lump sum head contract, the contractor’s own risk allowance sits inside the contract sum and is generally not accessible to the developer, so the developer’s contingency is provided against variations, latent conditions and developer-driven scope change. Under construction management, there is no contractor risk allowance to rely on and the developer’s contingency is carrying the trade package risk directly, which is a different sizing exercise. The framework for that is in the guide to construction contingency.
What do the delivery models look like in New Zealand?
New Zealand runs a parallel structure with its own standard forms, and all three were revised between 2023 and 2025. A developer working across the Tasman should not assume the Australian forms or the Australian statutory position transfers.
Standards New Zealand states that NZS 3910:2023 Conditions of contract for building and civil engineering construction is now complemented by NZS 3916:2025 for design and construct and NZS 3917:2025 for fixed term contracts, each updating a 2013 edition. Standards New Zealand describes NZS 3916 as similar to NZS 3910 but adapted “to provide for the situation where the Contractor is responsible for design as well as construction”, and NZS 3917 as being for contracts running for a defined period rather than a defined scope.
The changes make the delivery model and pricing mechanism separation explicit. Standards New Zealand lists the introduction of a Target Contract Price and provisions allowing the contract price to have several components including lump sum, cost reimbursable, measure and value, and target price, clearer identification of contractor design obligations, the elimination of the Engineer to the Contract and its dual role in favour of two distinct roles, removal of the principal’s obligation to search for utility records, a transition to fault-based indemnity with a limitation on liability, and the introduction of final account and interim final account processes. Standards New Zealand notes that the 2023 revision of NZS 3910 was the first substantial revision in a decade and was jointly commissioned by the Construction Sector Accord through the Ministry of Business, Innovation and Employment and the New Zealand Infrastructure Commission.
On payment, the Ministry of Business, Innovation and Employment states that the Construction Contracts Act 2002 provides default payment provisions, bans pay-when-paid practice, and provides fast-track adjudication with a binding and court-enforceable decision. Where the contract does not make payment obligations clear, the default provisions apply and provide for monthly progress payments. A prescribed notice, Form 1, must accompany every payment claim for contracts entered into on or after 1 December 2015. The Act’s payment claim, payment schedule and due date provisions sit in sections 18, 20 and 21, and those are the sections to confirm the current default timeframes against.
The retentions regime changed materially and is a genuine cash constraint. The Ministry states that new retention money requirements came into force on 5 October 2023, applying to new commercial contracts from that date and existing commercial contracts renewed on or after it, and expressly not to construction contracts with homeowners or residential occupiers. A party holding retentions must hold the money on trust without mixing it with other money or assets, hold cash retentions separately in a bank account with prescribed ledger accounts, use retentions only to rectify non-performance and give ten working days’ notice before doing so, provide quarterly reports and post-transaction reports to each subcontractor, pay out when due, and pay interest on late payments. The Ministry states that penalties include up to $50,000 for a director and up to $200,000 for a company “unless it is proven that all reasonable steps were taken to hold retention money”. These are New Zealand dollars.
On the residential side, the Ministry states that a homeowner doing residential building work costing $30,000 or more must have a written contract with prescribed minimum content, and that it is the contractor’s responsibility to provide it. The prescribed content expressly contemplates non-fixed pricing, requiring “the contract price or the method by which the contract price will be calculated”. New Zealand does not appear to restrict the pricing mechanism the way Victoria does; it regulates contract content and pre-contract disclosure instead. Implied warranties apply for up to ten years regardless of whether there is a written contract or what its terms say, and regardless of project cost, with a separate 12-month defect repair period.
The delivery model consequence in New Zealand runs through the licensed building practitioner scheme. The Ministry states that restricted building work is residential design, construction or alteration work requiring a building consent that involves or affects a home’s primary structure, weathertightness or certain fire safety design, and must be carried out by licensed building practitioners who provide a Certificate of Design Work or Record of Building Work. The rules cover houses and small to medium sized apartments, defined as buildings with two or more residential units, no commercial units or facilities, and a maximum height of less than ten metres. Mixed-use apartment buildings, commercial buildings of any height and apartment buildings exceeding ten metres fall outside the restricted building work regime, which changes the certification chain for a developer contracting trades directly on those projects.
One further point for an owner contracting trades directly: the Ministry states that a disclosure statement and consumer protection checklist must be given before signing by each person the owner contracts with, where work meets the $30,000 threshold or the owner asks, with fines up to $50,000 for an individual and $150,000 for an organisation for knowingly false or incomplete information. An owner holding ten trade contracts is owed ten disclosure statements. An owner holding one head contract is owed one.
What to ask your construction lawyer
These are the questions that decide the delivery model on your facts, and they are the ones this guide deliberately does not answer.
- On our contracting structure, who is the respondent to each payment claim under the security of payment legislation in our state, and what is the response window on each trade contract? What contract administration resource do we need to meet it every month?
- If we go to construction management, does the construction manager’s appointment give that party management or control of the workplace sufficient to be the principal contractor under the work health and safety regulations, or do we remain the principal contractor by default?
- Our project is residential in this state. Does our proposed pricing mechanism or delivery model remove any statutory warranty or insurance protection that our buyers would otherwise have, and does that create a disclosure obligation to purchasers?
- If we split the works into separate trade contracts, do any aggregation provisions treat them as a single contract for licensing, insurance or contract-level thresholds?
- We are contracting a construct-only package on AS 4000:2025 and a design and construct package on AS 4902-2000. Where do the two forms conflict on definitions, practical completion and dispute resolution, and what amendments reconcile them?
- On a class 2, 3 or 9c building in New South Wales, who is our single building practitioner under the design and building practitioner scheme, and does our delivery model make that party the principal contractor?
- Which of the amendments proposed to the standard form change the base risk allocation, as opposed to the administration, and what is the commercial value of each?
- If a trade contractor becomes insolvent mid-package, what are our step-in, security and set-off rights under this structure, and how do they differ from what we would have under a head contract?
- What are our retention obligations under this structure, and in New Zealand, do the trust account and reporting requirements apply to us directly?
What to ask your quantity surveyor
- What is the estimated difference in total construction cost between a head contract and a directly-let trade package strategy on this project, and what is in the head contractor’s preliminaries and margin that we would be taking on ourselves?
- What contingency should we be carrying under each delivery model, and how does that change once there is no contractor risk allowance sitting inside the contract sum?
- Where is the documentation on this project actually up to, and is it complete enough to tender construct-only without a variation stream?
- Under a construction management strategy, which trade packages carry the most interface risk between packages, and who prices the gaps between them?
- How would the certification and progress claim cycle differ between one head contract and twenty trade contracts, and what does that do to our drawdown timing?
- Which cost lines in our feasibility move if we change delivery model, and which do not?
What to ask your project manager or construction manager
- What is your scope on this appointment, specifically whether you are procuring, coordinating or contracting, and where does your responsibility for cost and programme stop?
- Which contracts will we sign directly, and which will you sign?
- What is your fee basis, and does it rise with the cost of the works?
- Who prepares and maintains the work health and safety management plan, and who is named on site signage as principal contractor?