5626 BUEG Construction Contracts

1. Faculty of Engineering and Technology Department of Built Environment 5626 BUEG Construction Contracts

2. Lecture Three ROLE OF THE PARTIES IN CONSTRUCTION CONTRACTS

3. In this session… • The parties of the construction contract • Their role and responsibilities

4. Learning outcomes • At the end of this session you should be able to: • Identify the important parties of the construction contract. • Understand their role. • Statutory and contractual responsibilities of the parties.

5. Parties: • The Employer • Construction Manager • The Architect • The Engineer • The Quantity Surveyor • The Contractor • The Certifier

6. The Employer • The most significant party to any construction contract. • Party to the main contract which is created between them and the contractor. • They will also enter into other contracts with their professional team.

7. Role of the employer • The functions of the Employer arise out of their contractual obligations and will include: • To provide the site and give possession of the site to the contractor as laid down in the contract. • To appoint an agent (architect or engineer and planning supervisor/coordinator) to carry out specific functions on their behalf which are essential for the design and administration of the contract.

8. Role of the employer contd.. • To give instructions to enable the work to be carried out. • Where required by the contract, to provide any materials for use by the contractor. • To permit the contractor to carry out all of the work to be done. • To pay for the work done pursuant to the terms of the contract.

9. The Employer must not hinder the progress of the work. • And must not interfere with the independent certifying powers given to his agent pursuant to the terms of the contract.

10. Construction Manager • Active team member in achieving the development goals. • Develop a strategy to meet project goals • Procurement and evaluation • Assisting with cost plan formation, operational reporting against cost plan, managing changes in cost plan during scheme development and identifying cost saving opportunities. • Develop construction logistics strategy, build sequence, access for construction and understanding 3rd party property rights. • Identifying operational constraints of the development and feeding information into the design development process and into the building contract documents.

11. CM Contd.. • Ground investigation reports • De-risk (Contamination) • Recruiting, building and managing a team of in-house assistant project managers/coordinators and clerk of works in the construction and delivery focus. • Managing the contractors including reporting of progress against contract. • Health and Safety

12. The Architect and Engineer By tradition the role of the Architect/Engineer changes when the Employer and the contractor sign the building contract. Prior to that time he/she had been acting as an agent, with limited authority, for the Employer.

13. Subsequent to signing the contract he/she assumes a more complex role of acting for the Employer, but also ensuring that the terms of the contract are properly administered between the parties.

14. 3 principal roles under the contract: • As agent of the Employer • As administrator of the contract, and • As adjudicator/quasi-arbiter. In practice it is difficult to separate these roles or functions.

15. Principal duties and powers normally include: • Issuing copies of contract documents and the like. • Determine any levels and other essential setting out data • Issuing further explanatory drawings and instructions necessary to enable the contractor to carry out the works.

16. Explaining ambiguities and issuing appropriate instructions. • Issuing variation instructions where they are necessary or desirable to facilitate satisfactory completion of the works. • Issuing instructions with regard to the removal of materials or work that are not in accordance with the contract. • Issuing instructions regarding the expenditure of P.C. (where appropriate) and provisional sums.

17. Issuing instructions regarding the making good of defects that appear within the Correction Period. • Giving approval (or rejection) where it is required under the contract. • Measuring and valuing work done (if not done by the QS) • Issuing interim payment certificates • Issuing certificates of substantial (or practical) completion of the works or where required parts of the works (Sectional Completion).

18. Issuing certificates of making good defects. • Issuing the final certificate (except for Design and Build contracts which is the responsibility of the Client) • Granting adjustments to the completion date. • Ascertaining or valuing the sums payable to the contractor for loss and/or expense and other claims that are made under the contract.

19. Where required under the contract, issuing certificates of non-completion (including non-completion by sub-contractors) • Carrying out any other duties and oblgations expressly mentioned in the contract.

20. Other administrative duties (non-contractual) • Dealing with statutory undertakings on all matters affecting design and payments to be made by the employer. • Arranging meetings, chairing the meetings and issuing minutes of meetings. • Monitoring progress and reporting to the employer.

21. Dealing with general and contractual correspondence. • Co-ordinating the design done by other consultants and (where appropriate) by sub-contractors and the contractor. • Advising the employer on general and contractual matters. • Liaising with the QS on variations and the cost of the works.

22. The Quantity Surveyor • Where Bills of Quantities are part of the contract documents it is usual to have a consultant Quantity Surveyor. • It is more common in building contracts for the QS to be named in the contract documents and for their duties and obligations to be stated in the contract.

23. The Contractor • The contractor is the party engaged by the employer to construct the works (and if required to design all or part of the works).

24. The prime obligations of the contractor are: • Carrying out and complete the works in accordance with the contract. • So far as it is necessary by any implied or expressed terms, to design and construct the works using materials and goods of good quality with due care and skill.

25. However, he is also required to: • To take care of the works and, if required, to take out insurances to cover any indemnities given by the contractor. • To comply with authorised instructions given under the contract. • To comply with the drawings and specification for the works. • To proceed regularly and diligently with the works.

26. To complete the works within the period stated or within a reasonable time if no time is stated. • To give notices required by the contract with regard to delay or additional payment.

27. The Certifier as Employer’s Agent • The definition of ‘agency’ describes the relationship the certifier has with the employer. • Agency is when one person (certifier) agrees on behalf of the principle (employer) to conclude a contract between the principle and another party (contractor).

28. The “law of agency seeks to balance the competing interests of the persons the agent is acting for and the person the agent is negotiating with”. • The agent is expected to act personally for the principle and not to delegate powers, as long as the agent acts within the scope of his/her powers and his/her acts represent the acts of the principle.

29. The principle (employer) must take responsibility for the acts of the agent (certifier). • An agent (certifier) can be given authority to reach binding decisions either ‘expressly’ or ‘implicitly’.

30. Traditionally in the UK contracting system, when a certifier is employed under a building contract, he/she is seen to have two separate capacities to perform: • To act as an agent for the employer, where the contractor may treat the actions of the certifier as the actions of the employer. • The certifier must act as an impartial and independent middle person, favouring neither employer nor contractor.

31. The certifier’s second function requires him/her to • “make validating decisions from an independent perspective, about various aspects of the contractor’s performance in order to determine the payment and other entitlements due to it under the contract”.

32. Obviously, the second function does not represent the acts of the employer, however it is the employer ’s breach of contract if the certifier fails to be impartial and fair while performing the second function.

33. The following are examples of the tasks the building contract places on the certifier:

34. Certifier will have to supervise • Coordinate the pre-project, project and post project phases • Investigate employer variations • Agree interim payments • Issue certificates including payment certificates • Approve the materials and workmanship (where the contract so states) • Certify practical completion • Issue schedule of defects • Issue final certificates.

35. Development of the role of Certifier • Since the 19th century it has been common practice in the UK to make use of third party certifiers. • The certifier is engaged by the employer to act as his/her agent and to ‘give the employer the benefit of that professional’s skill and experience’.

36. The profession type of a Certifier depends on the form of contract which is being administered. • In traditional JCT forms of contract Architects have undertaken the role. • Whilst Engineers have that role in ICE forms of contracts. • And Project Managers in the NEC forms.

37. However, with some of the newer forms of procurement, opportunities have arisen for quantity surveyors and project managers to undertake the role. • The JCT forms of contracts have made provisions in the new suite of contracts (JCT 05) for the employer to separate the role of the Architect from that of the certifier (contract administrator as referred to in the contract).

38. Impartiality • ‘Impartiality is appropriate where there exists a conflict of interests between two or more parties, with a third party being involved to either police the conflict or resolve it’. (Lucy, 2005).

39. In many standard forms of construction contracts, the named architect, non architect, engineer or certifier is required to carry out a dual role. • But there is some criticism of this dual role as a burden of the certifying person.

40. This responsibility can ‘create an unavoidable conflict of interest in most of the situations where the certifier is required to act as an independent and impartial third party’ (Ndekugri and Smith and Hughes 2007)

41. Notwithstanding that the certifier is the employer’s agent in making decisions in respect of payment and time for example, he/she must put aside the employer’s best interests and form an opinion or make a decision in a fair and unbiased manner. • And any determination made by him/her must be his/her own and have been reached by exercising his/her professional skill.

42. Next Session • Workshop : • Discussion of the role of the employer under CDM regulation 2015. • Next Lecture (Next week) • Terms and Conditions of Construction Contracts.