What is AS 2124? An Introduction to AS 2124-1992 for Client Side Project Managers  

It is a common practice in the Australian construction industry to adherence to standard contractual frameworks such as those provided by Standards Australia.

The AS 2124-1992 General Conditions of Contract, commonly called AS 2124 or AS 2124-1992 (or simply AS 2124, AS 2124-1992), is a well-used contract throughout the construction industry but is super old.

How old, you asked? You can check out our blog on 'Why is AS 2124 - 1992 so old?' You'd be surprised to see a rather familiar tech icon in comparison to how old it is!

What is AS 2124?

The AS 2124 contract is a set of general conditions for construction contracts developed by Standards Australia. You can purchase a copy of the AS 2124 here. The flexibility and comprehensive nature of AS 2124 means it can cater to various projects, from infrastructure to buildings, and it often operates at a fixed price/lump sum. Though heavily amended, AS 2124 is usually the preferred legal document by different governmental departments.

AS 2124 provides a foundation for the contractual relationship between:

• The Principal (the party commissioning the work, i.e. the owner);
• Contractor (the party undertaking the work), and
• It is often administered by a superintendent, a third-party service provided by client side project managers

How the parties then interact through the legal and procedural aspects of executing construction projects, including the roles and responsibilities of the contracting parties, procedures for administering the contract, and mechanisms for dealing with common issues such as variations, time extensions, payments, and dispute resolution, are all handled by AS 2124. It looks like many emails and letters are being sent to each other.

Overall, the contract is neutral and does not inherently favour either party but can be risk-adjusted in either direction (to the principal or the contractor).

Basic Features of AS 42124  

• Risk Allocation: AS 2124 specifies how various risks associated with the construction project are allocated between the owner (principal) and the contractor. This includes risks related to construction delays, cost overruns, and unforeseen site conditions. Risks generally occur and cost money, so it's good to divvy them up.
• Contract Administration: The standard outlines the administrative processes and documentation required for managing the contract, including notices, submissions, and approvals necessary for smooth project execution. A lot of administrative notices used to occur over fax; however, now email and systems like Aconex and Mastt are well used.
• Variations: AS 2124 includes provisions for managing variations to the contract scope, allowing for adjustments to be made to the works, contract sum, or project duration as required by changing circumstances.
• Time Extensions: It specifies the conditions under which the contractor is entitled to an extension of time for completing the works, addressing delays caused by unforeseen events or changes initiated by the owner.
• Payment Terms: The standard sets out the terms for certifying and making payments to the contractor, including progress payments, retention amounts, and the final payment process.
• Dispute Resolution: AS 2124 provides mechanisms for resolving disputes that may arise during the project, including mediation, arbitration, or litigation processes.
• Quality and Defects: The standard addresses requirements for the quality of the works and the contractor's obligations to rectify any defects identified during or after construction.

Payment Under AS 2124

Payment claims are a key feature of AS 2124 under Clause 42: Certificates and Payments. Clause 42 outlines how a contractor can seek 'claims for payment' for the value of work completed to date under the terms of the contract.  

Submission of Payment Claims

"At the times for payment claims stated in the Annexure and upon issue of a Certificate of Practical Completion and within the time prescribed by Clause 42.7, the Contractor shall deliver to the Superintendent claims for payment supported by evidence of the amount due to the Contractor and such information as the Superintendent may reasonably require."

Nice and long sentence, isn't it? In AS 2124, they call it a Payment Claim. In AS 4000, as Progress Claim. Same thing! The submission must follow the format and requirements specified in the contract, including any necessary documentation to support the claim.  

Certifying of Payment Claims

Upon receipt of a progress claim, the superintendent must respond.

"Within 14 days after receipt of a claim for payment, the Superintendent shall issue to the Principal and to the Contractor a payment certificate stating the amount of the payment 20, which, in the opinion of the Superintendent, is to be made by the Principal to the Contractor or by the Contractor to the Principal."

In assessing the payment claim, the superintendent must set out (in the certificate) the calculations they used to arrive at the amount. If the amount is more or less than the amount claimed by the contractor, the superintendent must outline the reasons for the difference. As is often the case, if no payment certificate has been issued, the Principal shall pay the amount of the contractor's claim.

One interesting element is that If the contractor fails to make a claim for payment under Clause 42, the superintendent may issue a payment certificate. I wonder how many times that has been used?  

Payment

Payment under AS 2124 has two levers, which is earlier of either:

• "Within 28 days after receipt by the Superintendent of a claim for payment" or
• "Within 14 days of issue by the Superintendent of the Superintendent's payment certificate."

Interestingly, there is no mention of an invoice. So, I guess we just have to rely on the contractor to issue one. Or maybe there were no invoices in 1992?

Conclusion

Despite being created in 1992, the AS 2124 general conditions of contract is still a well-used contract (though, at times, heavily amended) for managing construction projects in Australia under lump sum. Since 1992, there have been several changes to the law, and client side project managers acting as superintendents should stay across special conditions often appended to AS 2124 that accommodate legislative changes that have occurred since the first publication of AS 2124 such as GST, security of payment, work health and safety and more.

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Disclaimer: While Mastt is dedicated to offering valuable industry insights, it's important to note that we are not legal experts. Therefore, our content should not be interpreted as legal advice. We encourage readers to exercise discretion and seek personalized guidance from qualified legal professionals.