Why NZ’s Construction Industry Needs a Contractual Reset Now More Than Ever

Whenever I ask my client why the contract wasn't structured to prevent the current dispute, I consistently receive the same response:

“We’ve always done it this way.”

But what if “this way” is no longer serving us? What if it's holding the entire New Zealand construction industry back from resilience, innovation, and fairness?

The construction sector in Aotearoa is way too risky now. From supply chain disruptions to sudden inflation, from delayed public infrastructure projects to mid-build insolvencies, we've weathered many storms. But as the climate crisis accelerates, regulations evolve, and new technologies disrupt old systems, it’s time we ask:

Are our contracts still fit for purpose?

New Zealand's construction industry is facing a moment of truth. With project delays skyrocketing and costs soaring, it's clear that the way contracts are structured needs a fundamental rethink. The current contract systems are often seen as burdensome and lead to disputes that halt progress. As the construction landscape changes, it’s vital to reassess these contracts to inspire collaboration, spark innovation, and enhance efficiency.

The Contractual Status Quo — And Its Consequences

Let’s call it what it is: contractual complacency. For decades, much of our industry has relied on inherited templates, handshake deals, and “she’ll be right” attitudes when it comes to the fine print. We’re quick to price a job, but slower to interrogate the risk clauses, extension of time procedures, or variation mechanisms that sit quietly in the background—until they explode into full-blown disputes.

As someone who has worked across many different sectors and varies types of projects, I’ve seen the consequences up close. Projects stall, relationships break down, cash flow dries up. More often than not, these issues trace back to poorly understood, poorly negotiated, or poorly written contracts.

In my consulting and educational roles, I work with QSs, engineers, and contractors who are excellent at what they do—but feel overwhelmed by contractual complexities. This isn’t a failure of intellect. It’s a failure of industry culture. We’ve made contractual literacy optional when it should be fundamental.

Another concern is the adversarial nature of current contracts. Many are designed around a "blame game," where parties quickly point fingers when problems arise. This not only breeds conflict but also stifles the teamwork essential for successful project delivery.

Small Contractors, Bigger Risks

Nowhere is this problem more pressing than for small-to-medium companies. In today’s procurement landscape—where government mega-projects dominate and joint ventures proliferate—smaller companies are often operating under pressure, with minimal negotiation leverage. They’re subcontracted into multi-tiered arrangements, sometimes two or three levels down, inheriting risk without proportionate reward.

Or even worse, many of them don’t have access to legal advice or the time to unpack 200-page contracts before signing. They're expected to perform, regardless of price escalations, weather events, or the many other unknowns that arise mid-project. And when disputes occur, legal costs and reputational risks often keep them from pursuing fair outcomes.

That’s not just unjust. It’s economically damaging.

To combat these challenges, the construction industry must move toward a more collaborative contractual approach. Collaboration fosters open communication and information-sharing, which can significantly reduce risks and improve decision-making processes.

A collaborative contract framework could emphasise principles like joint risk management and shared accountability. By setting clear communication guidelines and shared goals from the outset, all parties can work together to overcome obstacles and innovate solutions that are beneficial for everyone involved.

Embracing Modern Contractual Practices

As the construction landscape evolves, New Zealand's industry must adopt modern contractual practices. One effective strategy is to employ alternative dispute resolution methods like mediation and arbitration. These practices can resolve conflicts faster and more amicably.

Another forward-thinking approach is adopting performance-based contracts. These contracts prioritise outcomes over strict adherence to detailed terms, motivating all parties to excel. For instance, aligning incentives with specific performance targets can lead to improved project delivery and overall satisfaction.

Climate Change is Reshaping Risk — But Are Our Contracts Keeping Up?

We’re building in a different world now. Climate change is no longer a theoretical future risk—it’s here. Coastal erosion, flooding, extreme weather delays, supply shortages—these are affecting programme, cost, quality, and safety. But our contractual models haven’t evolved at the same pace.

Many still lack:

• Clear force majeure definitions that include climate-related events

• Flexible programme allowances for severe weather

• Shared risk models for material price escalation

• Clauses supporting adaptive design or lifecycle resilience strategies

  
  

If our contracts don't account for these shifts, they become part of the problem, not the solution. Contractors will continue to price defensively—or underprice out of desperation—and the resulting disputes will be more frequent, more complex, and more financially devastating.

The Myth of the “Standard Contract”

One dangerous belief we need to challenge is the idea that there’s a one-size-fits-all “standard” contract. The truth is, every project is unique. What works for a hospital redevelopment in Auckland may not work for a coastal roading project in the Bay of Plenty.

Every contract should be treated as a living, negotiated document—one that reflects the true scope of works, project-specific risks, and commercial realities on both sides. Yes, we need standard forms for consistency—but we also need the courage to tailor them thoughtfully.

A Call for Change

The need for a contractual reset in New Zealand's construction industry has never been clearer. The challenges facing the sector demand innovative solutions that promote collaboration and efficiency.

Next time when you’re handed a contract, pause and ask:

• Who holds the risk here?

• Is this fair?

• And do we all understand what we’ve signed up for?

  
  

If the answer is no, maybe it’s time for a reset.