The men with two heads

For hundreds of years it has been standard practice for contract administrators to be used on construction contracts. Traditionally they have been engaged by the employer or owner. Since Sir Christopher Wren’s day, architects have been engaged not only to design buildings but also to manage their erection. engineers also have been involved in the administration of contracts. More recently, project managers and construction managers under new forms of contract have undertaken similar administrative roles.

From Victorian times, if not earlier, contract administrators were given the role of approving work and certifying payments to the contractor. Although engaged by the employer, it was recognised that these roles required the administrator to act impartially. In a number of Victorian and Edwardian cases it became established that if the employer exerted pressure on the administrator so that their judgment became influenced, then their decision would be set aside.

The oddity about an administrator’s role is that it usually has two distinct functions. They are, of course, employed by the client, and in some of what they do, they truly act as its agent. An obvious example is when ordering variations. However, when they have to make decisions about payment and time, they have to switch to an impartial middleman role.

For some time the courts have said that in its middleman role the administrator was acting as a quasi-arbitrator with the result that they could not be sued for negligence by the client. However, in 1974 the House of Lords overruled previous law and established in Sutcliffe vs Thackrah that an architect owed the client a duty of care in the performance of all their duties.

Counsel for the project managers asserted that their role was not the same as a certifying architect. The judge disagreed

In the past two years there have been some interesting cases about the hybrid role of the contract administrator. In Costain vs Bechtel (2005), Mr Justice Jackson had to consider the position of the project manager in the Channel Tunnel High-Speed Rail Link Project. A complaint was made that the project management team had been told to follow a policy that would deny the contractor its true entitlement. The contract was an amended New Engineering Contract. Counsel for the project managers asserted that they owed no duty to act impartially and that their role was not the same as a certifying architect under conventional building contracts. The judge disagreed. He said there were still many instances under the contract in question where the project manager had to exercise independent judgment.

In Scheldebouw vs St James Homes (2006), Jackson was faced with another attempt to argue that a contract administrator did not have to act impartially. The employer had sacked its construction manager and proposed to appoint itself as the replacement. It said since the role of the construction manager under the contract in question was one of pure agency, there could be no objection.

Jackson reviewed most of the important cases on contract administration, and identified again the two distinct functions, which he described as the “agency function” and the “decision-making function”. Both were present, and in the latter the construction manager had to be impartial.

The dual role of the contract administrator is now established. If decisions have to be made in matters in which the contracting parties have differing interests, a duty of impartiality will normally arise. It would need the clearest express words to allow the administrator to act otherwise.