Contract Administrators in Construction: Why You Need A Good One

A contract administrator is typically a professional with significant construction industry experience and sometimes a legal background, who manages all aspects of a construction contract to realise the works, from inviting and processing tenders to issuing the final certificate.

We provided a detailed explanation of the role and function in a previous article –Contract Administrators: Who are they and what do they do? If you’re in any doubt about what a contract administrator does, you may want to start there before coming back to this article.

Here we consider why the role exists, explain the key traits and characteristics that make a good contract administrator, and then discuss a few common types of disputes that we’re routinely instructed to resolve for our employer and contractor clients and which directly arise from a contract administrator failing in their duties.

If you are an employer, contractor or subcontractor dealing with a problem with your contract administrator, reach out to our construction team today. Our specialist construction litigation team act in construction disputes and adjudications nationally and have decades of litigation experience. We would love to help you.

Why You Need A Contract Administrator in the First Place

Construction contracts are often long and complicated including amongst other things, stringent payment application mechanisms underpinned by statutory rights pursuant to the Housing Grants, Construction and Regeneration Act 1996 and certificate processes to confirm when works and remedial works are of sufficient quality and have been completed in whole or in part.

As anyone who works in construction will know, construction works rarely go precisely to plan. There are frequent delays and performance ends up differing from how the works were envisaged at the outset – perhaps on opening up or breaking ground the conditions are not as anticipated or the client has a change of heart on the type of materials or finish or the extent of the works.

Generally, the employer isn’t qualified and doesn’t have the time to reasonably or validly assess whether their contractor has complied with the terms of the contract in its applications for payment, or whether the works are of a reasonable quality including whether milestones in the works have been achieved, or whether they or the contractor is liable for the circumstances of a specific delay.

Similarly, contractors are specialised at the building and project management aspects, often dealing with multiple suppliers and many subcontractors who are routinely demanding payment under their separate subcontracts, but they don’t necessarily have the time or expertise to fully interpret or understand an unwieldy construction contract.

From the contractor’s perspective, understanding the complexity, they want to be assured that the contract is going to be adhered to correctly from the employer’s side – they need certainty given the large sums that they will be incurring in the first instance.

Because the employer and the contractor have competing interests – particularly with regards to payment where the employer doesn’t want to pay more than they should and the contractor wants to be paid for all the work they’ve done – and whether the works are of a reasonable standard or have been completed sectionally or in whole relies on an informed opinion or viewpoint, the appointment of an independent arbiter and intermediary makes sense.

Does The Contract Administrator Do What the Employer Tells Them To?

The contract administrator is appointed by the employer and the two may have a good relationship, particularly if the contract administrator is the original architect and has therefore been working with the employer for some time before the contract is signed. However, in performing its functions, the contract administrator is expressly required by the contract to act independently.

This protects both parties. Both want to avoid the unnecessary time and monetary cost of dealing with disputes. If the contract is adhered to, both parties at least know where they stand and why, and they’re less likely to feel like they’ve been treated unfairly even if they aren’t necessarily getting things their way.

What Makes A Good Contract Administrator?

A contract administrator must possess good communication skills and be people oriented. The role involves dealing with a wide range of individuals in sometimes challenging situations, so the ability to persuade and defuse disputes is essential.

Since the employer often knows little about construction, they rely on the contract administrator to understand how the works are progressing and any issues that arise. A contract administrator therefore needs to be a good communicator who can explain complex or technical issues in clear, plain language without jargon.

Having the technical and industry knowledge means that the contract administrator can understand the actions and thought processes of the contractor and can effectively assess the standard of their works, challenges they face and their processes.

The contract administrator needs to be able to build a good working relationship with both sides to keep the contract and works moving effectively. Despite these relationships, the contract administrator needs to be strong minded so that they continue to act independently irrespective of either the employer’s or contractor’s pressure to decide upon certain issues in the way that benefits them.

As alluded to above, it’s also critical they have an eye for detail and good comprehension of written language since they need to be able to interpret a contract correctly.

Common Source of Dispute #1 – Interim and Final Valuations

Most standard form contracts such as those produced by the Joint Contracts Tribunal (JCT) and the NEC contracts published by Institution of Civil Engineers (ICE) contain a stringent valuation process for payments.

The contract administrator plays a key role in the process by having the responsibility of issuing certificates and notices.

Under the typical payment mechanism, the contractor periodically submits valuations of the work they have completed. The contract administrator then reviews the application, inspects the work on site, and assesses the quantity and quality. Based on this assessment, the contract administrator issues a payment certificate stating their own valuation. This certified sum is then what’s payable to the contractor subject to any pay less notice.

Some contracts work slightly differently. Instead of waiting for the contractor to apply first, the contract administrator may issue a payment certificate on their own initiative. However, if the contract administrator fails to do this, the contractor can submit their own valuation (called a “default payment notice”) instead. Subject to any pay less notice, the sum in the payment certificate or default payment notice becomes payable.

As alluded to above, the contract administrator is also responsible for issuing “pay less notices”. These act as a safety net or chance to correct an error when a mistake is made in the payment process described above.

Two types of dispute typically arise from the stringent payment mechanism.

If the contract administrator fails to issue the payment certificate within the fixed period prescribed by the contract and fails to issue a pay less notice, or the certificate/notice does not conform to the stipulated requirements set out in the contract and is therefore invalid, then usually the contractor becomes automatically entitled to either the sum they’ve applied for either in advance of the payment certificate or in default of one.

Where the contractor becomes so entitled and the employer refuses to pay, the contractor has a contractual or statutory entitlement to refer the dispute to an adjudicator in a smash-and-grab adjudication.

We advise many contractors in this situation, and we routinely refer applications that weren’t responded to correctly to adjudication and ultimately secure payment for our clients. 

Similarly, we often advise employers on whether their payment certificates and pay less notices are valid and whether they can resist payment from insistent contractors.

The second type of dispute that inherently arises from the payment mechanism concerns the accuracy of the valuation of the works completed, upon which a payment obligation has arisen.

Where the employer or the contractor believes that the valuation in the contract administrator’s payment certificate is too high or unduly low, then they are entitled to refer the valuation to an adjudicator in a “true value” adjudication.

In this type of adjudication, the adjudicator is tasked with reviewing evidence of the contractual work and variations that have been completed – this may include photographs, correspondence, day work sheets, expert reports – and to then issue their own valuation of the work. The adjudicator will decide the sum to be paid or repaid by either party in respect of the valuation referred to them.

We similarly advise employers and contractors on their entitlements in cases involving underlying valuation disputes, and routinely represent clients in true value adjudications.

Common Source of Dispute #2 – Extensions of Time

A well-drafted construction contract will include a fixed completion date for the works and clearly set out the liability of both parties where events occur that cause delay and render that completion date no longer achievable.

To motivate the contractor to meet the completion date, construction contracts typically include liquidated damages for delays. This is a fixed penalty that applies for a defined period (such as £1,000 per week) to the contractor for overshooting the completion date. The liquidated damages need to be set at a level that covers the employer’s additional costs arising from the overrun, for example, the contract administrator’s fees, plant hire, rental costs for alternative accommodation/commercial space, and any liquidated damages they may be exposed to under their own separate contract.

Where a delay event occurs, it is the contract administrator’s responsibility to assess the cause in accordance with the contract’s liability allocation, and then either grant or refuse the contractor an extension of the completion date. Where an extension request is deemed valid, the contract administrator must decide how long an extension is reasonable to grant.

If the contract administrator fails to assess delay claims properly, either by getting liability wrong, failing to grant adequate extensions or simply not assessing a claim within the required timeframe, then the contractor can be held to an earlier completion date and liquidated damages that ought not to apply, or where excessive extensions are granted, the employer misses out on its full entitlement to liquidated damages.

We regularly advise contractors and employers on delay claims, including pursuing those claims via the adjudication regimes stipulated in the contract or by statute. Typically, expert evidence from a delay specialist is required, and we may advise seeking a preliminary “prospects report” so that our client can be confident in their prospects of success at adjudication before embarking on that course.

Common Source of Dispute #3 Certification of The Works As Complete

Standard form contracts typically include a provision for retention, with half released when the works are complete and the other half of the retention released following the conclusion of a defects liability period.

It is generally the contract administrator’s duty to determine when the works are complete or “practical completion” has been achieved as per the JCT standard contract definition.

If, following an assessment, the contract administrator decides that the works are complete, they will usually be obliged to issue a certificate to the contractor confirming the same, which, as mentioned above, usually triggers the partial retention release and the start of the rectification period.

Prior to certifying completion, the contract administrator may have duties under the contract to obtain as-built drawings and O&M manuals from the contractor, as well as to assess the quality and completeness of the works.

The contract administrator certifying completion without first obtaining drawings and Operations and Maintenance (O&M) manuals, or when the works are not actually complete, significantly undermines the commercial leverage that the employer has to get the contractor to provide these documents or to actually complete the works, because the retention held by the employer is split in half. It also means the clock has started ticking on the rectification period early, which again undermines the employer’s position in ensuring remedial work is addressed.

From a separate angle, the contract administrator failing to certify completion when the works have been completed and the contractor has complied fully with its obligations under the contract can result in the contractor either not being paid the first half of the retention, or having issues when applying for the second half of the retention release, since the defects liability period won’t have technically started running as the trigger is the contract administrator’s certification. 

We routinely assist contractors in securing the release of retentions when completion hasn’t been certified by the contract administrator. Often, just a letter of demand sent by us has the weight to secure the release, but a declaration that completion was achieved on a specific date can be sought from an adjudicator if necessary.

Likewise, we regularly advise employers facing claims from contractors for the release of retention or employers who want to pursue claims themselves against contractors for failing to tend to snagging works or issue as-built drawings or O&M manuals. This can be via adjudication or traditional litigation, depending on the approach/forum that best suits our client’s position and commercial objectives.

Next Steps

If you’re a contractor or employer embroiled in a dispute arising from the contract administrator failing in their duties, or for any other reason, it’s important that you seek professional advice quickly because there are usually deadlines built into the contract that you need to take action within.

Further, resolving payment disputes early can unlock funds to keep the works progressing before finances dry up, or avoid making a payment to an entity on the brink of insolvency that you’re not contractually bound to.

Construction litigation and adjudication are specialist legal areas that few solicitors other than city firms have expertise to advise in. Our construction team act nationally. Unusually we represent employers and contractors in all forms of dispute including seeking resolution by adjudication or court claims and whatever the process, dealing with negotiation on your behalf. We’re also happy to back our own advice and to only be paid if we’re right, and we win. We can work in this way because of our use of technology including software, automations and AI. Our specialist construction litigation team has decades of experience working in cases like these. If you have a construction dispute we would love to assist you.