The terms Contract Management and Contract Administration are often used interchangeably in day-to-day construction project delivery. There is some overlap in the roles, and for some small projects it makes sense to combine these. For public and private capital projects, there are significant benefits in distinguishing the roles as independent functions. This article explores the functions of the roles and the benefits of providing them separately.
Contract Management
The employer (the party who typically owns the project) is free to assign contract obligations and responsibilities to another party and often chooses to give these responsibilities to a specialist contractor (the one who delivers these contracted obligations). Best practice during contract preparation by the employer is to assign the obligations, responsibilities and risk to the party who is best suited to manage them. In practice, this means that the employer and the contractor have their own obligations under the agreement to discharge for successful project delivery. It is the management of these obligations and responsibilities that we define as contract management.
Typically, both parties (the employer and the contractor) therefore require a contract manager. This person acts in the interests of the relevant party, understands the contract terms and the deliverables that party is responsible for, and manages them to ensure the project is delivered successfully. Organisations may give this role a different title, or assign it to someone in another role, such as:
- Contract Manager
- Commercial Manager
- Project Manager
The management of a contract is key to ensuring that each party’s (employer or contractor) obligations are discharged. This is a significant risk in construction delivery as, for example, the failure to discharge an obligation may lead to significant cost and time consequences for the party that fails to discharge it.
Contract Administration
The administration of a contract is different. The contract administrator does not own the employer’s or the contractor’s obligations or responsibilities. It is their job to ensure the contract terms which were agreed by the parties are operated correctly. Modern-day construction contracts contain many mechanisms to comply with law, and to operate effectively and efficiently. These mechanisms include:
- Variations
- Instructions
- Certificates
- Notifications
- Interim Payments
To operate these mechanisms effectively, the contract administrator must work closely with both parties to understand the progress of works, ongoing risks, and any change in project requirements.
Although co-operation is key, the contract administrator should not show bias towards either party and should act independently. The UK courts have upheld this duty of impartiality in several cases1, reinforcing the importance of the role. The contract administrator is the first line of defence against disputes, and ensuring the contract is operated as intended significantly reduces the risk of legal action.
Why They Should Be Different
Maintaining a clear split of the roles is therefore an obvious benefit. Human instinct tends towards self-preservation. If the same person is chosen to manage and administer the contract, personal bias may swing that person towards defending their own decision, or interpreting a term for their benefit, which is often not the impartial position.
For example, the employer may be responsible for producing and submitting a noise assessment to the local authority, which is a condition precedent for site access. If the contract manager does not ensure this is produced and submitted, site access will not be granted, and the contract is likely to require that additional cost or time is allocated to the contractor due to the employer’s failure. If the same person that failed to discharge their responsibility is then responsible for assessing the contractor’s entitlement, they are likely to understate or reject this entirely to protect themselves.
Furthermore, engaging a professional to discharge the contract administration duties brings protection for the employer should the role not be performed correctly. Recent cases such as Coventry & Warwickshire Development Partnership LLP v Avison Young (UK) Ltd2 have highlighted projects where the contract administrator did not provide their duty with reasonable skill and care, leading to significant damages for negligence. It is therefore not in the contract administrator’s interest to favour either party, as any decision not strictly based on the contract terms may expose them to a claim in negligence.
Conclusion
Successful project delivery relies on:
- A competent contract manager on both sides who has the knowledge, experience, ability and support to manage the risks and obligations
- A contract administrator who acts impartially to ensure that the intent of the agreement is realised, minimising the potential for disputes
Combining the roles may appear efficient, but it leaves one person torn between protecting their organisation’s interests and administering the contract fairly. Appointing an independent contract administrator alongside a dedicated contract manager is a modest investment that significantly reduces the risk of costly disputes.
If you would like an independent contract administrator on your project, please get in touch.