Construction, Builders, NZS3910 Building Contracts and Covid-19

Construction, Builders, NZS3910 Building Contracts and Covid-19

At a press release on 24 March 2020 at 1.00 pm a spokesperson for the Ministry of Business, Innovation and Employment (MBIE) said: "If you are in doubt whether you are an essential service, you're probably not".  

The Government’s Covid-19 website says: “only businesses that are essential to the provision of the necessities of life may remain open during the Level 4 Alert period. If a business is unsure whether it provides such products or services, it should shut its premises”.

This signals to builders and building and construction entities who hope to fall within the category of entities related to essential services and critical infrastructure that this category will likely be narrowly interpreted.

Is Your Business an Essential Service?

The essential services list was updated 26 March 2020 at 7.30 pm. Builders and those in the building and construction sector providing essential services do include:

  • Any entity involved in building and construction related to essential services and critical infrastructure, including those in the supply and support chain.
  • Any entity involved in any work required to address immediate health or life safety risks, or to prevent serious environmental harm, and relevant essential supply chain elements.
  • Any entity with statutory responsibilities or that is involved in building and resource consenting necessary for the above purposes.

Therefore any business, construction company or builder (“builder”) that is involved in building and construction that relates to essential services or critical infrastructure may be able to continue to operate. For example, those in electrical work, telecommunications, plumbing, gas fitting, and drain laying fit within the first two definitions. A builder can also provide services if it is needed to maintain health and safety at home or work. However it appears that under these definitions, the services must (1) be needed to maintain human health and safety at home/work; and (2) that need must be immediate. Therefore the emphasis is on essential repairs, not those that pose no immediate threat to health and safety. Businesses should not be carrying out work where the need is not immediate and can wait for another day.

A builder that complies can continue to operate from its premises but it must put in place alternative ways of working to keep employees safe, including shift-based working, staggered meal breaks, flexible leave arrangements and physical distancing.

Those businesses that are related to the supply chain elements of points one and two above may also continue to operate ( eg Placemakers, Mitre 10 and other retailers for supplying trade customers for essential purposes only).

Critical infrastructure includes roads, rail, ports, airports that are open, and so any businesses involved with this type of infrastructure may also remain open. Additionally, businesses can continue to provide services to fast moving consumer goods, food production, key public services, health services and emergency services.

Other essential services are defined by Schedule 1 of the Employment Relations Act 2000 to include businesses related to:

2    The production or supply of electricity.

4    The supply of water to the inhabitants of a city, district, or other place.

5    The disposal of sewage.

7    The provision of all necessary services in connection with the arrival, berthing, loading, unloading, and departure of ships at a  port.

15  The production of butter or cheese or of any other product of milk or cream and the processing, distribution, or sale of milk, cream, butter, or cheese or of any other product of milk or cream.

Essential services also includes sectors and occupations specified in Schedule 1 of the Civil Defence Emergency Management Act 2002 including:

1. An entity that produces, supplies, or distributes manufactured gas or natural gas (whether it is supplied or distributed through a network or in bottles of more than 20 kg of gas).

2. An entity that generates electricity for distribution through a network or distributes electricity through a network.

3. An entity that supplies or distributes water to the inhabitants of a city, district, or other place. An entity that provides a waste water or sewerage network or that disposes of sewage or storm water.

4. An entity that provides a telecommunications network (within the meaning of the Telecommunications Act 1987).

5. An entity that provides a road network (including State highways).

6. An entity that produces, processes, or distributes to retail outlets and bulk customers any petroleum products used as an energy source or an essential lubricant or additive for motors for machinery.

7. An entity that provides a rail network or service.

Any builder that does not fall within the above mentioned lists is deemed to be a non-essential service.

A builder that continues to operate who has not been deemed an 'essential service' will be at risk of government imposed sanctions, or enforcement steps.

Covid-19 and Notification Requirements Under NZS3910 Building Contracts

If non-essential construction businesses must now “shut their premises” then there are issues for a builder performing works under a NZS3910 Building Contract. The shut down may mean that it is impossible to perform certain terms or comply with deadlines under that relevant contract. Under the standard construction contract NZS3910 there are multiple notification requirements for both the contractor and the principal which are time essential. These notification requirements are especially relevant in cases where Covid-19 restrictions cause a delay such as stopping a contractor from meeting a time frame.

In such cases, a builder or sub-contractor may need to give notice of the delay within 20 days of the delay occurring, otherwise they will not get an extension.

If you are unsure whether your contract contains a notification requirement, please get in touch with us.

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© McVeagh Fleming 2020

This article is published for general information purposes only.  Legal content in this article is necessarily of a general nature and should not be relied upon as legal advice.  If you require specific legal advice in respect of any legal issue, you should always engage a lawyer to provide that advice.