In addition to our professional indemnity insurance, informed by Planned Cover provides a contract review service to help consultants understand the insurance and risk implications of professional services agreements. By reviewing approximately 1,300 contracts every year, it allows us to consider trends in client-drafted contracts, and gives us a general understanding of the construction industry. In 2024, this is what we saw.

General Procurement

84% of contracts involved the project principal engaging the consultant. In 6% of contracts, the consultant was engaged by the builder, and in the remainder, by another consultant.

77% of contracts were commercial projects. State government and local government projects, were 9% and 6%, respectively, and university projects were 2%. Federal government and other government or combined projects accounted for low percentages.

Novation              

Across the States and territories, 37% of contracts included provisions allowing for the consultant to be novated. This is the same amount as last year.

The trend towards novation was led most strongly by projects in Victoria (44%) and NSW (31%). The Queensland figure which followed was somewhat low (10%).

Proportionate liability

Proportionate liability legislation which was introduced in 2001-2002 in order to reduce rising liability insurance costs, differs between the States, with some States allowing to ‘contract out of’ the liability regime. In 2024, 23% of contracts contained a clause excluding proportionate liability. This is in line with last year’s statistics. The state-by state breakdown is informative:

Proportion of contracts with contracting out of proportionate liability clauses:

Not surprisingly, NSW has a high percentage because the law in NSW allows for it. Interestingly, in Victoria, 40% of contracts attempted to contract out, even though the Victorian legislation is silent on it. Queensland, where the legislation currently renders such clauses void, understandably has a low rate.

Base contract

Unsurprisingly, the contracts which our insured clients most wanted assistance with were client-drafted contracts, making up 87% of our 2024 reviews.

Of further note, 6% were based on Australian Standard 4122-2010, and 2% were based on Australian Standard 4904-2009.

Take-away points

Professional services contracts sent to our review service in 2024 to date show:

• The percentage of novation remains the same as in 2023;
• Moderate levels of contracting out of proportionate liability, most prominently, in NSW, and surprisingly Victoria, where the legislation is silent on it.
• Our contract numbers, insofar as they reflect the health of the construction industry, demonstrate stability.
• The number of contracts sent to us for review has remained fairly consistent.

Johanna Lawlor
Contracts Advisor – NSW