Contract management is what most often makes or breaks a project, not design
A third of PII claims relate to contract administration, according to the RIBA Insurance Agency. But how a project is set up is often the key to its success – and avoidance of claims.
Key consultant roles need defining and the contract administrator (CA) needs to establish where he/she fits in.
The CA must be robust and firm. If there are separate appointments with other consultants and the contractor, it will have no contractual power to compel them to perform. However, an efficient system for logging and chasing outstanding information gives the project the best chance of staying on track and protects the administrator from claims that the process has not been managed properly.
Key Performance Indicators and the process of identifying problems to the client (while taking care not to unwittingly breach insurance policy terms by incriminating oneself), a climate that encourages early reporting to the client in that vein, should help control other parties who are not performing.
Paper management is crucial. The administrator must operate an efficient written system to respond promptly to contractors’ requests and correct any misleading impressions – particularly requests for confirmation of verbal instructions and architect instructions.
A strong contract administrator will also be flexible enough to acknowledge where information that it has issued during the design stage may need to be amended or augmented, even if this gives rise to an entitlement to the contractor to an extension of time.
‘At large’ and dangerous
The administrator must be fully familiar with the terms of its contract (surprisingly, some do not hold a copy). Particular attention must be paid to the time limits within the contract form, so the administrator can issue the certificates. Otherwise, if a contract is allowed to become ‘at large’ so that the client’s ability to claim liquidated and ascertained damages is compromised, a clear and probably readily identifiable sum can be claimed to be the administrator’s responsibility.
A contract at large also poses the danger of the administrator not awarding an extension of time (EoT) when it knows one is due. It must be firm and remain resolutely independent of its client. If the architect doesn’t issue an EoT, the independence of the administrator will be compromised, leading to more problems and undermining the probity of any EoT award. Depending on the contract form, the administrator is likely to be obliged simply to award an EoT, regardless of what it receives from the contractor. This is distinct from how a loss and expense claim can be dealt with.
Another key area of contract administration involves the adequacy of identifying defective workmanship throughout the project. Most architects now appreciate that they should agree to no more than periodic inspection (not supervision) but what that involves will depend on such things as its agreed frequency, whether the client has a separate clerk of works and whether the administrator is resident. A proper line of communication to the contractor means the administrator will know when key items are visible for inspection.
Practical completion and final certification are fraught with complexities. Practical completion remains at the discretion of the administrator and must be exercised sensibly and robustly if the CA is to resist pressure (usually from the client) to certify. The building contract will stipulate when final certification is to be issued, although architects still avoid issuing a final certificate if they can.
There is not a great deal of available case law on contract administration – presumably because many disputes are resolved by mediation or adjudication (which tends to be publicised only if the courts get involved). The spectre of adjudication means administrators must be even more on their mettle, because there is now high speed dispute resolution if the administration is found wanting.
Mark Klimt is a partner at DWF Fishburns and an RIBA specialist practice consultant