On 27 June 2025, Standards Australia published the AS4000:2025. We previously released our thoughts on the proposed amendments here, however this alert summarises the key changes now confirmed in the finalised AS4000:2025
As foreshadowed, the changes to the AS4000:2025 are modest, with the technical committee opting to maintain the contract’s 1997 risk allocation on the basis that the current allocation is well understood by principals, contractors and subcontractors alike. We therefore suggest that the AS4000 should not be used in its unamended form for complex or project financed projects.
There are still updates to the standard contract that enhance the contract and merit further consideration prior to use of the AS4000:2025.
Key Changes
Dispute Resolution
Arguably the most substantive change of the AS4000:2025 is the ability for contracting parties to customise the dispute resolution (DR) regime.
The default DR process has reverted from negotiation and arbitration in AS4000:1997 to negotiation followed by litigation, though the parties can still opt for arbitration instead of litigation as per the previous edition.
The parties also have the option of adopting other dispute resolution mechanisms as a precursor to commencing litigation or arbitral proceedings. The additional DR options are:
- mediation;
- expert determination;
- mediation, followed by expert determination; or
- referral to a Dispute Avoidance Board (DAB).
As a starting point, AS4000:2025 provides that any mediation, expert determination and/or arbitration process be governed by the relevant Resolution Institute Rules.
In selecting the DR process, parties should note the following practical implications:
- Expert determinations are “interim binding” and can be challenged by either party through a notice of dissatisfaction. If the parties cannot agree on an expert, one will be appointed by the Resolution Institute which takes control of the appointment out of the parties’ hands.
- In contrast, a DAB decision be either “interim binding” or final and binding at the election of the parties. If a DAB decision is agreed to be final and binding, the parties cannot litigate or arbitrate that Dispute. In this case, it is advisable to select a three-member DAB Board with the necessary technical and legal expertise to address any potential dispute, which in itself may be difficult for the parties to reach agreement on given what may be at stake.
- Irrespective of any DAB decision being final and binding, the parties still retain their overarching right to institute proceedings to seek interim relief and injunctive or urgent declaratory relief.
- If the parties choose arbitration instead of litigation to finally determine any Dispute, they should consider the suitability of the Resolution Institute Rules and, to the extent deemed suitable, explicitly specify the procedural seat and the number of arbitrators in the arbitration clause, notwithstanding there is no express requirement to do so, in order to minimise the risk of procedural delays in the constitution of the tribunal.
It is important to understand that the alternative or additional DR processes chosen by the parties will apply uniformly to all disputes, regardless of claim value or urgency. Inevitably, not all disputes require a comprehensive multi-tiered DR process. The parties may consider amending the AS4000:2025 to establish value thresholds or carve out claims from specific dispute resolution mechanisms, particularly those involving low-value claims, complex or technical subject matters or issues necessitating urgent resolution.
The introduction of a customisable DR process is a welcome enhancement to the AS4000:25, allowing parties to evaluate various DR options and make informed choices based on the complexity, value, and scope of the Project without necessitating wholesale departures and additional drafting.
General Form
The AS4000:2025 now includes a standardised formal instrument of agreement, intended to improve the execution process and remove the need for contracting parties to draft a bespoke instrument or rely on a letter of acceptance. It also permits the deletion of clause 6 of the AS4000:1997 dealing with the “evidence of contract” which may have caused unnecessary confusion for users.
Additionally, the AS4000:2025 includes a general form deed of novation in Annexure D to permit the novation of subcontracts to the Principal, where the Contractor defaults or the contract is terminated. This is a welcome addition, noting contracting parties until now would typically press for inclusion of their own form of such deeds which may not be necessarily suitable or fully aligned with the standards’ operative provisions.
Annexure Part A - Contract Details
Annexure Part A has been updated and is more comprehensive than its predecessor. The additional concepts introduced are mostly coupled with guidance notes, which assist contracting parties’ understanding of potentially unfamiliar requirements. The Annexure also acknowledges that a one-size fits all approach may not always be suitable, whilst at the same time not veering away from the ‘standard form’ purpose it is intended to serve.
Specifically, Annexure Part A now includes items dealing with:
- project specific requirements for Practical Completion;
- circumstances where disclosure of confidential information is permitted; and
- a more project specific definition of Site.
Legislation Updates
The AS4000:2025 now addresses updated Commonwealth legislative regimes that have a direct impact on construction projects.
In particular, it provides for the introduction of provisions dealing with:
- the A New Tax System (Goods and Services Tax) Act 1999 (Cth);
- the Personal Property Securities Act 2009 (Cth);
- the Corporations Act 2001 (Cth) (including in relation to the meaning of corporate insolvency); and
- the “principal contractor” concept as applicable by reference to the various work health and safety legislation (by jurisdiction).
It should be noted that other state and territory specific legislation are broadly captured by the “Legislative Requirement” concept, where the Contractor is obliged to complete the works in accordance with all applicable legislative instruments (including subordinate legislation, regulations and rules) and all certificates, permits and approvals in connection with the works. This remains substantively unchanged from the AS4000:1997.
Importantly, the security of payment requirements of each jurisdiction are not explicitly addressed in the AS4000:2025. The unamended drafting reflects the lowest maximum amount of time required for payment by any security of payment legislation across all jurisdictions. Accordingly, parties may want to amend the payment timing to reflect the applicable security of payment legislation for the project. This, coupled with a lack of guidance notes to draw attention to the differences between the various jurisdictions, is a regrettable omission that we would hope is addressed in future editions, given its prevalence and relevance in the construction market.
Other Changes
The AS4000:2025 provides a more detailed mechanism for certifying and calculating compensation payable to the Contractor for delay. In particular, the Contractor is obliged to periodically update the Principal for any extended delay arising from a Qualifying Cause of Delay. Delay costs are only payable for a Compensable Cause, which is limited to costs incurred by the Contractor but for the event causing the delay and damages suffered to the extent the relevant Compensable Cause was a breach of contract by the Principal.
From a stylistic perspective, the updated AS4000 addresses the shift to plain-English contractual drafting. The definitions section has also been updated to be more centralised in clause 1, with in-text definition removed throughout the document.
Further guidance
Although the AS4000:2025 addresses some of the shortcomings of the AS4000:1997 and reflects general industry advancements, contracting parties must continue to address project-specific and jurisdictional requirements. In particular, it is unlikely to be acceptable in its unamended form for project financed projects or complex projects which are likely to have more specific requirements and which will merit closer consideration of project and interface risks.
Additionally, some other common contractual elements we typically encounter that are not covered by the AS4000:2025 include:
- general form tripartite agreements, security instruments or approvals matrices;
- Contractor limitations of liability, including a cap on liability for liquidated damages, and the related exclusions from any limitation of liability;
- latent defects regimes;
- the Contractor’s obligation to obtain transferrable warranties from suppliers and subcontractors in favour of the Principal;
- work health and safety obligations on a state-by-state basis;
- security of payment obligations on a state-by-state basis;
- the effect of force majeure events (and the applicable definition of force majeure event); and
- the ability to assign the rights of security under the contract to any actual or prospective lenders or financiers.
For further information on the finalised changes to the AS4000, do not hesitate to get in touch with a member of our construction team.
