Construct Only is a project delivery method and type of contract frequently used in the construction industry.
As the name would suggest, Construct Only entails only the construction element of the project, as opposed to the design, procurement or ongoing operations associated with a project.
How do Australian standard “Construct Only” contracts work?
In the Construct Only delivery method, the principal:
- engages design consultants (architects, engineers etc) to develop and finalise plans and specifications; then
- engages a contractor to construct the project in line with the design.
In a true Australian standard Construct Only contract, there should be no liability between the design phase and construction phase of the project.
The design consultants are responsible and liable for the design aspects of the project, whilst the contractors are responsible for constructing the design and are liable where they have failed to comply with the design.
In a typical building contract, the principal will engage a design consultant to carry out the design work specified in the construction contract. The principal will usually enter into a contract with the design consultant separate from the construction contract.
The principal would retain the ultimate responsibility for design under the construction contract but the risk profile for the principal doesn’t necessarily change, as highlighted above. Design consultants should retain liability for design errors and contractors retain liability for construction defects.
For the contractor, on the other hand, the risk profile is vastly reduced. They are only responsible for constructing the project per the design. In certain circumstances, however, the contractor may owe the principal duty of care in the event they become aware of a design defect.
The advantages of a Construct Only delivery method include:
- It is often still referred to as the ‘traditional’ project delivery method so it is very well understood across the building and construction industry.
- Limited risk for the contractor.
- There are a number of well-known standard form contracts (particularly Australian Standard contracts).
The disadvantages of a Construct Only delivery method include:
- Often the construction phase begins prior to the completion of design documents which gives rise to issues as to what’s included in the contractual scope of works. Subsequently, the contractor’s claims for additional costs often arise from variations to the scope of the final documentation.
- Preparing the design prior to commencing construction can increase the total time the project takes.
- Preparing the design prior to commencing construction also means the principal doesn’t receive the contractor’s input and the project is less adaptable.
There are a number of Australian standard Construct Only contracts, the most popular examples being:
- ABIC MW-2008
When should Construct Only be used?
Construct Only is the most suitable project delivery method for construction projects that do not have a great degree of complexity and where the design documentation can be fully and properly prepared prior to procurement.
For example, in a University of Melbourne study around standard form contracts, AS2124-1992 and AS4000-1997 combine to make up approximately two-thirds of projects under $100,000, half of the projects between $100,000-$1,000,000 and 60% of jobs between $1m-$5m.
If you are wondering if a Construct Only contract would suit you and your business contact Morrissey Law & Advisory.
Disclaimer: This publication by Morrissey Law & Advisory is for general information and commentary only and should not be considered or relied upon as legal advice. Formal legal advice should be sought in relation to any matters or transactions that may arise in relation with communication.