Building Contract Templates: Which Should I Use?
There are several template building contracts available in the Australian construction industry.
The template you choose will depend on the size and nature of the job and whether you are an owner or contractor. Whilst the owner is entitled to determine the form of contract, in the case of domestic building many owners will look to the builder to provide the first contract draft.
In this article we set out five of the main organisations which issue template contracts and describe the scope and style of each of their contracts.
In addition, Queensland legislation imposes particular obligations as to the written form and content of building contracts. The contract used for jobs in Queensland must comply with that legislation.
Five of the major building industry organisations and their pro forma contracts are:
Queensland Building and Construction Commission (“QBCC”)
QBCC is the successor to the Building Services Authority.
QBCC administers the Queensland construction industry, including domestic building.
An object of the relevant legislation is to achieve a reasonable balance between the interests of building contractors and consumers.
In Queensland, building contracts, whether domestic or commercial, must be in writing. Domestic building contracts must be accompanied by a Contract Information Statement in a QBCC approved form.
QBCC issues several templates which are free to download or which you can purchase in hard copy from a QBCC office (see http://www.qbcc.qld.gov.au).
QBCC contracts cover:
- new home construction;
- renovations, extensions and repairs;
- small building projects (i.e. less than $3,300);
- residential demolitions;
- natural disaster repairs; and
- subcontracts for domestic and commercial subcontracting.
In keeping with the statutory objectives, QBCC contracts do seek to maintain the balance between builders and owners (consumers).
Master Builders Queensland (“MBQ”)
MBQ is an industry organisation which supports member builders with template documentation, advice and updates on industry matters.MBQ also offers a range of templates including:
- Residential Contracts covering residential building, renovations, minor works, trade contracts, simple works and pool building; and
- Commercial Contracts covering commercial building, minor works and a commercial cost plus template.
Also available are subcontracts and a range of administrative pro formas and advice.
Because of its industry focus, the MBQ forms are particularly suitable for contractors. They will also find the related administration forms and advice bulletins of particular help.
The MBQ contracts are drafted to comply with the legislative requirements and also recognise the statutory aim of a fair allocation of risk.
MBQ offers an online document service, e-Docs, exclusive to MBQ members and available through http://www.masterbuilders.asn.au.
Housing Industry Association (“HIA”)
HIA is a national organisation which aims to represent professionals engaged in the housing industry.
HIA membership covers a wide spectrum of industry involvement including contractors, developers, professional service providers such as architects and lawyers, financiers and educators.
For Queensland work, HIA offers pro formas available for purchase by members and non‑members. The available catalogue of HIA pro formas is at [email protected] or call 1300 650 620.
Members can also use HIA Contracts Online to create personalised documentation.
The HIA suite for Queensland includes QC1 New Homes Contract, QC2 Fixed Price New Homes (but with some scope for variations) and QC3 Alterations and Renovations.
There are also Minor Works (under $3,300) and Small Works forms and administrative pro formas such as Variation Orders and Practical Completion Certificates.
Both MBQ and HIA offer carefully drafted documents which take account of industry experience and the day to day administrative requirements of building jobs.
Choosing between MBQ and HIA forms is likely to be based on personal allegiance and experience.
Standards Australia (“SA”) and SAI Global Limited (“SAI”)
Standards Australia is a not for profit organisation which develops and promulgates Australian Standards for a vast (circa 7000) range of industry matters. It operates under a Memorandum of Understanding with the Commonwealth Government.
The commercial management of SA standards is now operated by a separate ASX listed company, SAI Global.
Many of these standards are of direct relevance to the building industry, e.g:
- AS1684.2 - 2010
Residential timber-framed construction - non-cyclonic areas;
- AS3959 - 2009
Construction of Buildings in bushfire prone areas;
- AS4340.0 - 2007
Inspection of buildings - general requirements.
Standards Australia has, for many years now, published and regularly revised standard forms of constructions contracts which are settled on the advice of industry panels.
The forms themselves are available for purchase in hard copy or as downloads from SAI Global.
SA contract forms are widely used in commercial building projects and are drafted for that purpose.
The current contracts are the AS4000 series which include:
- AS4000 - 1997: General Conditions;
- AS4902 - 2000: Design and Construction;
- AS4915 (Draft): Project Management;
- AS4916 (Draft): Construction Management;
- AS4305 - 1996: Minor Works
AS4000 and AS4902 each has a companion sub-contract form.
The AS series contracts are widely used on large scale commercial projects. They are not designed for use in residential construction.
The long period over which they have developed means that their drafting has often been considered by the courts and there is a great deal of legal material which explains the meaning and scope of their provisions.
Australian Instituted of Architects (“AIA”) / Master Builders Australia (“MBA”)
AIA and MBA jointly publish a suite of building contracts which are intended for use when an architect administers the project. These are known as the Australian Building Industry Contracts (“ABIC”).
The ABIC series includes a major works contract (“MW”), a simple works contract (“SW”) for projects up to $2 million, a basic works contract (“BW”) for values up to $50,000 and an early works contract (“EW”) for preliminary works.
Again there are template documents to support the administration of these contracts, guidance notes and separate versions for housing and commercial projects.
The impetus for the use of an ABIC contract is usually an architect who is comfortable with administering a project that way.
Users should note the provisions dealing with timely presentation and resolution of claims.
Note also that there are particular forms of ABIC contracts for use in Queensland.
It is important, if using an ABIC template, to use the correct version for Queensland.
Choosing a Template
The decision as to which template to use will often be determined by allegiance to a particular industry body. All of these groups provide workable, well tested and legally conforming templates.
It’s obviously important to choose a template which fits the job. Domestic building contract forms are specifically aimed at complying with the relevant legislation and are not suitable for commercial projects.
Likewise, commercial forms such as the AS4000 series are not generally suitable for domestic building projects.
Other than that, the QBCC contract is a well tested residential building template and the Australian Standard contracts are often chosen for major commercial projects.
One advantage of using tested and well understood contract forms is that estimators feel that they understand their risk allocation and are perhaps less inclined to include contingencies based on uncertain or unknown contract risk.