Contract Administration

Question 1

Who is responsible for administering the building contract?

Answer 1

• NEC3 and NEC4 Engineering and Construction Contract - Project manager (as named in the contract).
• JCT 2016 Design and Build - Employer’s agent (EA)
• JCT 2016 Minor Works, Intermediate, Standard Building Contracts - Contract administrator (as named in the contract).

Question 2

Please detail some of the key responsibilities of the contract administrator under a JCT contract?

Answer 2

• The contract administrator is responsible for administering the terms of the building contract between the contracting parties.

Responsibilities include, but are not limited to:
- Determining extension of time claims.
- Determining loss and expense claims.
- Issuing practical completion statements.
- Issuing instructions to overcome discrepancies and/or changes to the scope of works.
- Issuing instructions to expend provisional sums.
- Certifying interim payments to the contractor.
- Administrating change control procedures.
- Collating and issuing schedules of defects.
- Issuing the certificate of making good defects.
- Notifying partial possession.
- Certifying section completion.
- Certifying non-completion.

Question 3

Do you know how the employer’s agent role differs from the contract administrator role?

Answer 3

Contract Administrator - This is a party who is specifically identified within the contract and is solely responsible for administering the contract for the employer. It is an impartial role and only exists at the point the contract is entered into, i.e. when a contract exists.

Employer’s Agent - This is a party who is identified within the contract and who acts on behalf of the employer in all matters, effectively as if the employer’s agent were the employer. When carrying out certification and decision-making functions under the contract, the employer’s agent should act impartially.

Question 4

What is practical completion?

Answer 4

• Practical completion is often referred to as ‘PC’.
• Generally, it is the point at which a building project is complete, except for minor defects and outstanding works that can be put right without undue interference or disturbance to an occupier.
• Some construction practitioners describe this point as when the building project is “capable of beneficial occupation and use” by the Employer.

Question 5

Can you rescind the PC statement once it has been issued?

Answer 5

Once the PC certificate has been issued, it remains final and binding on the employer and cannot be revoked.

Question 6

Once the PC statement has been issued, what are the consequences for the contractor and employer?

Answer 6

• 50% of retention is usually released (subject to the contract).
• The defect rectification period starts.
• The employer is usually required to start insuring and securing the building.
• The employer’s ability to levy liquidated damages ends.

Question 7

What is a non-completion certificate?

Answer 7

The certificate of non-completion gives formal written notice that the contractor has failed to complete the works described in the contract by the completion date.

Question 8

What are the consequences of a non-completion certificate?

Answer 8

• The non-completion certificate triggers the right for the employer to levy liquidated damages, should they choose to do so.

Three key documents need to be in place to levy damages:
- Certificate of non-completion issued by the contract administrator.
- The employer must write to the contractor, notifying them of their intent to levy liquidated damages (LDs).
- The employer must issue a pay less notice to recover the LDs.

Question 9

Why might the employer’s agent (EA) instruct the contractor to ‘open up’ works that has been covered up?

Answer 9

• If the EA suspects work has not been completed in a proper and workmanlike manner’ or ‘believes materials, goods or work are not in accordance’ with the contract, the EA may issue an instruction to open up the area for inspection.
• This process is defined under clauses 3.12 & 3.13.

Question 10

Assuming the EA has instructed the contractor to ‘open up’, please detail the potential outcomes, including the effect on cost and the completion date?

Answer 10

The EA may instruct the contractor to open up work for inspection:

• If works are not defective, the contractor is paid for opening up and may be entitled to an adjustment of the completion date
• If works are defective, the contractor remedies at their own expense or gives the Employer a saving
• The EA can then instruct the Contractor to open up similar work
• If similar work is defective, no payment or adjustment of the completion date.
• If similar works are not defective, the completion date may be adjusted but still no payment

Question 11

What is an Extension of Time (EoT)?

Answer 11

• The EoT provision allows for the contract administrator to ‘adjust the completion date’, preventing time from becoming ‘at large’ and thereby postponing the employer’s right to recover liquidated damages.
• This provision is used in instances where the delay is not the contractor’s responsibility or fault.

Question 12

What is the procedure for claiming an EoT?

Answer 12

• As soon as it is reasonably apparent that a delay has occurred or is likely to occur, the contractor should write to the contract administrator to notify them.
• The notification should identify the ‘relevant event’ that has occurred and give an indication of the extent of the delay. This is usually shown on a programme demonstrating the ‘cause and effect of the event.
• The contractor is required to submit the information requested by the contract administrator to determine the claim.
• The contract administrator will ultimately notify the contractor of his/her decision of the claim.
• Should the claim be in accordance with the contract and the period of delay be adequately demonstrated, the contract completion date will be adjusted.

Question 13

From a contract administrator’s point of view, what are the time periods related to assessing relevant events and adjusting the completion date?

Answer 13

• The contract administrator/EA must notify the contractor of his/her decision within 12 weeks of receipt of the required particulars (or sooner if the completion date is less than 12 weeks away) and state the extension awarded.
• Under JCT 2024 this review period has been reduced to 8 weeks

Question 14

Assuming the contractor successfully demonstrates a relevant event and the contract administrator/EA subsequently adjusts the completion date, is the contractor due additional preliminaries?

Answer 14

No, the contractor is required to demonstrate a relevant matter for a loss and expense claim.