What is the purpose of appointing a contract administrator on a construction project?

Now that the construction industry is starting to fully open up its doors and commence projects, all parties involved with construction projects are wary about the increased risk of delays, additional money and other unexpected events as a result of the COVID-19 outbreak.

As the developer and the contractor move into a more uncertain post-COVID development era, it is more important than ever to understand the types of provisions which are within the building contracts and to ensure that a party is in place who is able to operate those provisions correctly.

Generally, this party is known as a “contract administrator”. Under the Housing Grants Construction and Regeneration Act 1996 (HGCRA 1996) and the amendments made to it by the Local Democracy, Economic Development and Construction Act 2009 (LDEDCA 2009), (The “Acts”) there are various provisions which are implied within any contract which involves “construction operations” which must be administered correctly so that both parties know where they stand under the contract.

Specifically, these provisions include the following:

1. There must be an adequate payment mechanism for determining payment under the construction contract. This is generally set out in the standard forms of contract, such as those produced by the Joint Contracts Tribunal, this is generally clearly set out, but it will be implied into any construction contract if the form which you use does not so specify.
2. There will be a right to interim periodical stage payments where work lasts longer than 45 days. Again, in the JCT forms of contract, this is generally a monthly interim payment which is subject to a valuation by a quantity surveyor.
3. The Acts provide for a system of notices so that if a payee does not see the entitlement pay the full amount applied for, it must issue a payment notice of the amount it intends to pay by a certain date. If the contract itself does not specify the timeline for this, it will be five days before the final date for payment.
4. Adjudication. There is a right for either party to a construction contract to refer any dispute which crystallises to adjudication at any time. This would override any provisions to the contrary within the written contract.

A contract administrator is appointed by the employer and their role is to understand the terms of the contract, particularly concerning payment, the right to request an extension of time for completion of works and the mechanism for determining an additional sum being due, and therefore is vital in situations, such as in this recent pandemic, which can change rapidly on a project.

Although the contract administrator is appointed by the employer, it is generally accepted that the duty of the contract administrator is to be expected to carry out those duties impartially when making an assessment.

The benefit of having a properly administered contract is clear for both parties, and in times where the situation can rapidly evolve, it is even more vital that both parties understand what the provisions are of the contract and have somebody specific appointed on behalf of the employer to operate those provisions impartially.

Ashtons Legal’s construction team, comments as follows:

“In my experience, both as a lawyer and running my own building contract, the role of a contract administrator, who is able to effectively mediate, who has the trust of both parties and is able to effectively mediate between them on occasion, has proved vital. I would strongly recommend that if you are intending to carry out a construction project or continue with one, you consider appointing such an individual to administrate the contract for you. This will allow you to focus on moving forward with your construction project, safe in the knowledge that a party has been specifically appointed to pay attention to all of the provisions in the contract on a practical level and this will no doubt make the project more economical and less stressful to run.”

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