Whose Side Are You On?

Terms such as contract administrator, employer's agent, construction manager and project manager are frequently used interchangeably. They are all appointed and paid by the client who will naturally assume that they should follow his instructions. But what duties, if any, do they owe to the contractor?

Construction lawyer Matthew Duckworth explains.

The differing roles under standard form contracts

Confusion is caused not only by the various terms used to describe the person acting as the employer's representative but also by the variety of approaches adopted in different standard form contracts.

In JCT SBC 2005, the roles of the architect and contract administrator are joined despite the fact that they are two wholly different disciplines. It is easy to forget that there are clear distinctions between the duties associated with each of those roles as a result of which, confusion and conflict can often arise.

The architect's design role should be relatively straight-forward, however the same cannot be said of the contract administrator elements of the role. In addition to the obvious administrative duties, the contract administrator will also be required to make assessments and decisions on issues where the employer's and contractor's interests may not coincide.

Under JCT D&B 2005, the employer may appoint an employer's agent to administer the contract. In such circumstances, the employer's agent will be obliged to accept his employer's instructions and will have very little discretion in doing so. However, in practice, under the JCT D&B form, the employer's agent often finds himself issuing certificates for instance, which obviously presents a clear potential conflict between the interests of the employer and contractor.

The project manager's duties under an NEC3 contract are wide and varied. For some of those obligations, the project manager must act solely in the interests of the employer, for example when deciding which of two alternative quotations to accept. However, recent case law has confirmed that the project manager also has a duty to act impartially and fairly as between the employer and contractor when carrying out his functions of assessment and certification.

The separate roles of a Project Manager

For convenience and the purposes of the remainder of this article, "Project Manager" will be used to refer to anyone fulfilling the role of certifying officer or contract administrator under a typical building contract.

As noted above, the exact role to be performed by a Project Manager can vary enormously and the starting point for establishing a Project Manager�s responsibilities is the terms of his appointment, read in conjunction with the main construction contract. This, however, is only half of the story.

In the case of Scheldebouw BV v St James Homes (Grosvenor Docks) Limited (2006 TCC) the judge considered the general role of a Project Manager (termed "construction manager" in that particular case) which he divided into two distinct functions. The first role requires the Project Manager to act as the employer�s agent by giving effect to the employer's wishes and carrying out his instructions. An example of the Project Manager exercising this �agency function'� would be when he decides what variations should be made to a design and then subsequently issuing the necessary instructions.

The second role is in stark contrast to the first and comes into play when the Project Manager is required to reach decisions on issues where the contractor and employer potentially have opposing interests. Examples of the Project Manager exercising this "decision-making function" are when he must make adjustments to the contract sum, give extensions of time, ascertain and certify loss and expense, issue certificates of practical completion and also issue interim and final certificates.

The judge said that, in carrying out the agency function, the Project Manager owes the usual duties of an agent to his principal and must carry out his client's instructions. In contrast, when exercising his decision-making function, the Project Manager must not simply implement his principal's instructions but is under an obligation to act in a manner that has variously been described as independent, impartial, fair and honest.

How to deal with client pressure

So what should a Project Manager do when faced with client pressure?

For a start, it is worth checking the building contract itself. Some contracts do have explicit duties upon the Project Manager to act fairly and reasonably. If you are acting as an employer's agent under JCT D&B 2005, you should take great care to act within the terms of your appointment in order to avoid conflicts of interest.

Ultimately, the answer is that a Project Manager should stand firm and not compromise his independence. Clients who pressurise their Project Managers to make certain decisions are unlikely to prosper in any event. If there is evidence of undue pressure or an unfair approach, the contractor can bring the matter before an adjudicator who can open up, review and revise any account, decision or notice.

Finally, it is important to remember that a Project Manager may take legal advice upon his duties during a project, provided that the final decisions are his. He is under no obligation to disclose such advice to the contractor.

For more information, please contact Matthew Duckworth in Construction & Engineering.