Project Management Agreement (New Zealand)

A Project Management Agreement in New Zealand records the project management to be provided, the fees, the service standards, and each party's obligations between the provider and the client under the Companies Act 1993.

The CCLA 2017 consolidates and modernises eleven previously separate commercial statutes into one Act and governs the general contractual rights and obligations of parties to commercial agreements, including project management agreements. Under the CCLA 2017, services must be performed with reasonable skill, care, and diligence. The CCLA 2017 also provides rights of cancellation, damages, and other remedies for breach of contract.

The CCA 2002 applies to project management agreements where the services are provided in connection with construction work. Project management services — including procurement, contract administration, and construction monitoring — are likely to fall within the definition of construction work in the CCA 2002. This means that payment claims and payment disputes under the project management agreement are subject to the CCA 2002's provisions on payment claims, payment schedules, adjudication, and the right to suspend services for non-payment.

The HSWA 2015 imposes duties on project managers who manage or control the workplace, including duties to confirm that appropriate health and safety systems are in place for the construction project. A project manager who is a Person Conducting a Business or Undertaking (PCBU) under the HSWA 2015 must take all reasonably practicable steps to confirm the health and safety of workers and others who may be affected by the project.

A well-drafted project management agreement provides both the client and the project manager with certainty about the scope of services, the fee, the programme, the authority delegations, the reporting obligations, and the dispute resolution process. It also establishes clear accountability between the client and the project manager for all aspects of the project. Project management agreements in New Zealand for construction projects may be subject to the Construction Contracts Act 2002 (CCA 2002) where the services include the management and administration of construction work. Under the CCA 2002, payment claims must be made in a prescribed form, and failure to respond with a payment schedule within the statutory timeframe (5 working days for residential construction) may result in the claimed amount becoming a debt due.

A written Project Management Agreement should be put in place before project management services commence. There are several situations in New Zealand where a formal agreement is particularly important.

For commercial and residential development projects, a project management agreement is needed to engage a professional project manager to oversee the entire development process, from feasibility and design through to construction completion and handover. The agreement should define the project manager's authority to act on behalf of the client in dealings with contractors and consultants, and should specify the reporting obligations and frequency.

For large residential construction projects — such as custom-designed homes, significant extensions, or luxury renovations — a project management agreement may be appropriate to engage a project manager to oversee the architect, engineers, and builder and to manage the programme and budget on the client's behalf. Many clients who undertake major construction projects find it valuable to have an experienced project manager acting as their advocate throughout the process.

For public sector and government infrastructure projects, a project management agreement is typically required under procurement rules and must comply with the requirements of the New Zealand Government Procurement Rules and any applicable legislation. Public sector project management agreements often include specific requirements for reporting, record keeping, and conflict of interest management.

For property development projects involving the subdivision of land and the construction of multiple residential or commercial units, a project management agreement is needed to coordinate the various consultants, contractors, and consenting processes across the development. The project manager must also manage the interface between the construction contract and the various agreements for the sale of completed units.

In all cases, a written project management agreement provides clarity about roles, responsibilities, fees, and accountability, and provides a framework for managing the significant risks associated with construction and development projects.

A thorough Project Management Agreement for New Zealand should include the following key provisions.

The parties clause should identify the client and the project manager by their full legal names and addresses. Where the project manager holds relevant professional certifications such as PMP or CPPM, these may be noted.

The project clause should describe the project clearly, identify the site address, and state the approved project budget. This gives context to all subsequent provisions and establishes the financial parameters within which the project manager will operate.

The scope of services clause is the most important provision in the agreement. It should describe each phase of project management services (pre-construction, construction, and completion), the specific tasks to be performed in each phase, the deliverables (including reports, meeting minutes, and financial summaries), and any services expressly excluded from the agreement.

The authority and delegations clause should specify the project manager's authority to commit expenditure on the client's behalf, including the maximum amount per item and in aggregate that may be committed without prior client approval. Clear delegations protect both the client (against unauthorised commitments) and the project manager (by confirming the authority they have been given).

The fees and payment clause should specify the fee basis, the fee amount, the GST treatment, and the invoicing and payment terms. The payment provisions should comply with the CCA 2002 where applicable. The programme clause should set out the expected project start and end dates and address the fee implications of project extensions. The reporting clause should specify the frequency and content of project status reports. The health and safety clause should address the project manager's HSWA 2015 obligations. The liability and dispute resolution clauses should address the project manager's liability and the process for resolving disputes, including CCA 2002 adjudication for payment disputes. The forms-legal.com Project Management Agreement (New Zealand) provides a ready-to-use template that meets New Zealand legal requirements. Additional key provisions for New Zealand project management agreements include: a clause confirming whether the CCA 2002 applies to the agreement and, if so, the payment claim and schedule procedure; a clause specifying the project manager's authority to engage subcontractors and consultants on the client's behalf; a clause addressing the project manager's obligations under the Health and Safety at Work Act 2015 (HSWA 2015) as a person conducting a business or undertaking (PCBU); and a confidentiality clause protecting commercially sensitive project information consistent with the Privacy Act 2020.