Standard Contract Terms for Construction

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There have been talks in the construction industry about the need to develop and implement standard contracts for many years. At the end of 2016, amendments to the Construction Law were adopted, obliging the Ministry of Economics to develop standard contract terms by 1st of January 2018. In addition, the development and consolidation of common rules for construction contracts in regulatory enactment are also included as part of the shadow economy restriction measures in the Memorandum of Cooperation between the Construction industry and the Government in 2016.

At present, the contracting authority prepares a new draft contract for each procurement on a case-by-case basis, based on past experience, in order to regulate the relationship between each other during the construction process. This creates additional costs for public procurement client and, in addition, public procurement client does not always have sufficient experience in drafting construction contracts.

Therefore the aim is to create standard contract terms that incorporate best practices and equitable rights between the parties. Provisions on public construction contracts would regulate how the parties act if there is a need to make changes to the project, establish principles that determine when and where it is impossible to request time extensions and other situations, which often need to be addressed by the parties in the construction process.

This would allow the public procurement client to save the resources, that are required to develop the procurement contract and monitor the fulfilment of the contract, and it would be clear to the tenderer that in all government and local municipalities’ procurements have identical requirements. This would generally promote a qualitative construction service and reduce disputes between partners in the construction process.

This standard form of contract has been proven successfully worldwide, for instance, in the Scandinavian countries. As an example is the standard form of contract from FIDIC (International Federation of Consulting Engineers).

The development of standard contract terms should be considered as an important step towards an efficient and high-quality construction process that facilitates the work of both public procurement clients and building companies, saving significant time and financial resources on both sides.