The Role of the Contract Administrator under a JCT Traditional Contract - Essay Example

Examine the role of the contract administrator under a JCT traditional contract in terms of the functions, duties and powers that he is granted as well as the potential liabilities that may occur if he does not act appropriately. Introduction: The Joints Contract Tribunal or JCT was established in 1931 and has been providing standard forms of contracts, guidance and other standard legal documentation for the construction industry. JCT produces the contract documentation and through the documents highlights the role of the contract administrator as well as his functions, duties and powers and his associated liabilities if he fails to perform according to his responsibilities. Most JCT contracts would require the employment and contribution of an architect or a contract administrator who would administer the contract. The contract administrator is the only one who decides which contract to use and should also have the sufficient knowledge to understand the terms and administer contract provisions1. JCT provides the basis or guidelines according to which the contracts could be administered. It is important to understand the JCT guidelines in order to decide on the most appropriate JCT form of contract2. JCT helps in providing the guide for the appropriate contract. Some of the contract forms which do not require a contract administrator include the Contractors Design Form, Building Contract for a home owner/occupier, Construction Management Form and the Management Contract Form. However most construction projects require contracts that implemented by the contract administrator. This essay discusses the crucial role of the contract administrator and highlights the problems associated with failure to carry out the responsibilities of a contract administrator adequately. The Role of the Contract Administrator Powl and Skitmore (2005) have surveyed project managers of construction projects who also have the duties of contract administrator and have claimed that in certain cases project managers are overworked although there may be several hindrances to their effectiveness in the management. Issues that could help in making project managers more effective and productive in their job include more awareness and participation within their own organisation for progress and development of the organisation, more general administrative support and greater responsibilities in matters of contract administration3. The importance of trust and contractual relationships has been highlighted in several studies and the contract administrator is responsible for building this trust relationship with the clients. Zaghloul and Hartman (2003) point out that contractual relations are based on confrontational situations that should also reflect the level of trust within a contract document. The total cost of the project is largely controlled by the contract administrator as he is instrumental in building a trust relationship with the other party. Zaghloul and Hartman use cases from the construction industry of Canada to suggest that prices could vary fro 8% to 20% depending on the relationship between parties and the level of trust. Thus trust and contracting methods seem to be related and the relationship between contract administrator and the buyers is crucial and should be developed and maintained by the contract administrator. The relationship could actually aid in effective project management and contract administration although there has been very little emphasis in research on the importance of this relationship. The study highlights the fact that risk allocation mechanisms and contracting strategies should be based on trust relationships between parties for more effective contract administration process. The trust relationship thus seems to be one of the main causes of savings in the bill of construction and the costs of construction would go high for any mistrust between parties showing that the contract administrator is responsible for not just building a smooth professional relationship with parties but also a personal relationship based on trust for effective project management4. The role of the construction contracts is significant in case of dispute during the construction process and the contract administrator plays a role in overcoming or resolving these disputes with the parties. Jannadia et al (2000) use example of industrial projects in Saudi Arabia and suggests that contractual methods can play an important role in dispute avoidance and resolution or DAR. They conducted a survey with 93 questionnaires distributed to 11 owners, 59 contractors and 23 consultants. The parties’ attitudes and opinions towards contractual methods were measured with the help of 20 statements and recommendations from the findings were made to focus on dispute avoidance and resolution between the parties during the phase of the construction. The contract administration methods that seem to be very important in dispute resolution and avoidance and also highlight the responsibilities of the contract administrator are allocating fair contract risks, building of a construction team, provisions for a neutral arbitrator, binding arbitration and drafting the clauses of dispute. Thus for any construction project, even before a conflict arises, the contract administrator is responsible for identifying the potential reasons for dispute that may occur, drafting the clauses that should be followed in case of dispute, and also allow for provisions of a neutral arbitrator, help in the building of a proper construction team and identify the contract risks and solutions of overcoming these risks5. Daoud and Azzam (1999) focus on the fact that construction contracts may have certain pitfalls of delays and cost overruns. The delays and cost overruns may be due to many factors such as changes done to the original contract agreement which include modifications made by the owners on the standard contract conditions to include additional features for example. Delays may also occur due to lack of understanding and communications between parties on basic contractual issues, due to changes in regulations and legislation and consequent changes that have to be made to the contracts, poor or faulty documentation as prepared by the contract administrator and the influence of local culture or local obstacles on the performance of the project and on the contract parties. This may be explained by the fact that certain project delays may be very culture specific or may happen due to environmental factors or resistance from local communities. Taking the advice and guidance of foreign forms and foreign contract administrators may thus be not a very good step as local culture may have to be understood and dealt with within the local context. The loopholes of the legal system in many parts of world and the changing regulations also seem to be major obstacles to implementations of an effective contract administration process. As Dauod and Azzam point out it is important to settle disputes amicably along with proper arbitration6. Settlements should be made on a fair basis so that justice is done to all parties and the contract administrator has a significant role in bringing about amicable settlements and in building confidence and positive relationships with parties. The various obstacles to implementation of a project highlight the elements in construction problems and it would be important to overcome these obstacles with properly focused solutions probably emphasising the crucial role of the contract administrator who could contribute by administering a flawless contract that would reflect the changing regulatory and legal systems. Harris and Scott (2001) suggest that problems related to delays in the contraction project may be sorted out initially with a proper clause added on this aspect within the contract document and the contract administrator would have responsibility for identifying such possible problems and issues in the project. Al Momani (2000) suggests that construction disputes could be avoided only by a proper understanding of the causes of construction claims and the deeper aspects of the contractual terms and conditions. According to the study contract managers and administrators should have adequate evaluation procedures to avoid possible delays once the projects have started. Delays wee investigated in the study and the causes of delays were established in the case studies of residential buildings, school projects, commercial and office building, medical centres and communication facilities. Al Momani suggests that the main cause of delay in contraction project relate to problems in completion it pertains to the designers, changes in user demands, weather and site conditions, late delivery of products used, environmental and local conditions, economic conditions and increase in price or quantity of the products from what was previously estimated7. All these factors seem to affect the completion of the project within the time specified in the contract document. The risks of contractual disputes are heightened when the various obstacles to contract administration and project management are not identified in the beginning of the project. There have been many important studies on resolution of contract disputes and Ndekugri and Russell (2005) discuss contract disputes on the basis of the Housing Grants, Construction and Regeneration Act 1996. This act has a provision that a party to a construction contract has a right to refer to any dispute at any time under the contract of adjudication. The resolution method would require that a neutral third party adjudicator to determine the reasons for dispute and provide a solution within 28 days after the referral has been received no matter how complex the issues are. The decision given has to be implemented and any mistakes made by the adjudicator could be corrected by law or arbitration. If in come cases the adjudicators’ decision is faulty it may have major effects on one of the parties which by that time may have become insolvent. Thus the relationship between adjudication and insolvency could be very important in the context of contractual agreement disputes. However from a legal perspective, the court may not enforce an adjudicators payment decision if the court decides that the considering instances f formal insolvency, the payee would be unable to make repayment if that is what the dispute settlement required. The contract administrator plays a significant role in acting as a mediator of the dispute settlement process and from the initial stage of contract preparation given by draft guideline of JCT, the contract administrator is responsible for overseeing the entire construction process until the final stages and thus plays a role in identification of disputes, avoiding disputes if any and settling disputes with parties. This is only done when the contract administrator point out to all factors of the legal process even before the project commences. This identification of possible reason for dispute and the various legal clauses by the contract administrator are important indication of whether a project would be successful or delayed. Ensom (1998) highlighted the issues related to the JCT 81 standard form of building contract and its implementation which should be clearly understood to help adjudicator’s reach a decision during a dispute settlement process. The JCT 80 or guidelines on contract administrator clearly states that the contract administrator is responsible for the design of the project and is also responsible for valuation and certification of any construction project. The JCT 81 provides more details in terms of the construction projects and contractor’s proposals and proves to be more effective for dispute resolution. In this context, the case of Waterworth v. Vaughan Developments Limited and others [2000] NIQB 17 (7th June, 2000) could be discussed. In this case a designed contract having features of both JCT 80 and JCT 81 was used and the contract administrator claimed that the hybrid contract fulfilled the purposes and duty of the project8. However there were controversies regarding the application of a non standard form of JCT contract. In another case of Karl Construction Ltd v. Palisade Properties Plc [2002] ScotCS 350 (14 January 2002), the pursuers of the case are the building contractors who entered into a contract with the defenders on purchase and sale of certain buildings. The contract used was the standard form of the JCT building contract of 1980. It was pointed out by the contractors that the contract obligations specified under JCT wee not met by the clients and thus the defenders were said to have breached the conditions or terms of the contract.9 The contract used for this purpose was sufficiently complex although the designs carried out by the contractor has been claimed to be less than actually specified in the contract. The court ruled that the JCT standard contract has clauses that seem to have a typical impact on the sum of the project considered. However certain JCT provisions are given as follows: According to the provisions of clause 30 of the JCT Standard Form, dealing with certification and payment, the payment for work done is to follow the issuing of a certificate by the Architect. Such a certificate must take into account any variations in the project and this would be instructed under clause 13 and The amount of any direct loss and expense sustained by the contractor in consequence of any matter during the project development phase is to be specified in clause 2610 Thus the contract administrator and architect has several responsibilities in certifying the project, in actually drafting and implementing the contract, in identifying legal and procedural issues of contract administrator, in highlighting the problems or reason of dispute within the project management framework. The contract administrator is also responsible for valuation of the project in terms of the JCT standards, in establishing the sum of the project and in reaching agreements on payment and project completion date. Some of the obstacles to the proper implementation of the contract would relate to delays in project management or legal flaws within the contract. These obstacles would generally relate to local conditions and weather, economic conditions and changing prices and changing user demands as also legal or other errors in contract documentation. Conclusion: This essay highlighted with the use of case studies, the importance of the contract administrator and his contribution to the drafting and implementation of the contract to bring about a consensus on project specifications and payment between the parties concerned. The contract administrator is responsible for checking for errors or legal faults within the contract agreement and in keeping with JCT clauses, should try to maintain a contract that is standardised and easily comprehended. This would mean that JCT contract patterns and standards should be followed closely to cover all aspects of a contract and to meet the needs of parties. The contract administrator has an important role in valuation, certification, and determining payment and project delivery options and thus oversees the entire project management process. This essay highlights the central role of the contract administrator and the various obstacles to proper implementation of contract that would lead to the failure of the contract administrator to perform his duties responsibly. Bibliography: Al-Momani A.H. Construction delay: a quantitative analysis International Journal of Project Management, Volume 18, Number 1, February 2000, pp. 51-59(9) Daoud O. E. K.; Azzam O. M. Sources of disputes in construction contracts in the Middle East Technology, Law and Insurance , Volume 4, Number 1, 1 March 1999, pp. 87-93(7) Ensom A.C. Adjudication on JCT 81 contracts Structural Survey, Volume 16, Number 3, 1998, pp. 130-135(6) Harris R.A.; Scott S. UK practice in dealing with claims for delay Engineering Construction & Architectural Management, Volume 8, Numbers 5-6, October 2001, pp. 317-324(8) Hiyassat Salem M.A. Construction bid price evaluation Canadian Journal of Civil Engineering, Volume 28, Number 2, April 2001, pp. 264-270(7) Jannadia M.O.; Assaf S.; A. Bubshait A.; Naji A. Contractual methods for dispute avoidance and resolution (DAR) International Journal of Project Management, Volume 18, Number 1, February 2000, pp. 41-49(9) Keating, Donald. Building contracts : including a commentary on the J.C.T. standard form of building contract / Donald Keating. 4th ed. / with a commentary on the I.C.E. conditions of contract by John Uff. London : Sweet and Maxwell, 1978. Ndekugri, Issaka; Russell, Victoria Insolvency and resolution of construction contract disputes by adjudication in the UK construction industry Construction Management and Economics, Volume 23, Number 4, May 2005, pp. 399-408(10) Ndekugri, Issaka E. The JCT 98 building contract : law and administration / Issaka E. Ndekugri and Michael E. Rycroft. London : Arnold, 2000. Powl, Andrew; Skitmore, Martin Factors hindering the performance of Construction Project Managers Construction Innovation, Volume 5, Number 1, January 2005, pp. 41-51(11) Zaghloul R.; Hartman F. Construction contracts: the cost of mistrust International Journal of Project Management, Volume 21, Number 6, August 2003, pp. 419-424(6) John Adriaanse, Construction Contract Law: The Essentials Palgrave Macmillan,2005. Wallace, I. N. Duncan (Ian Norman Duncan) Construction contracts : principles and policies in tort and contract / by I.N. Duncan Wallace. London : Sweet & Maxwell, 1986. Waterworth v. Vaughan Developments Limited and others [2000] NIQB 17 (7th June, 2000) Karl Construction Ltd v. Palisade Properties Plc [2002] ScotCS 350 (14 January 2002) JCT website, accessed 2006-04-07 http://www.jctltd.co.uk/ Read More