BUILT ENVIRONMENT JOURNAL

An A–Z of contract administration for APC

To administrate contracts successfully – and complete the Contract administration competency – APC candidates must understand a range of responsibilities under the main forms

Author:

  • Jen Lemen FRICS

15 June 2023

Businessman and businesswoman signing a document, seated at a desk

At final interview, APC candidates often show a lack of awareness about contract provisions. An academic knowledge of the contracts is one thing – but applying that knowledge is another.

JCT contracts use the term contract administrator to describe anyone who is not a registered architect administering the contract. On different forms, though, a different term is used for this person; for example, on ICE and FIDIC contracts, the role is referred to as engineer.

The following breakdown of terms and tasks will therefore help surveyors who are responsible for administrating various forms of contract.

Administrator: the role of the contract administrator (CA) was officially introduced in 1987, following amendment 4 to the JCT 1980 form of contract. It relates to the management or administration of the building contract between the employer and the contractor. The role technically begins when the contract is signed.

Conflicts can arise between the CA and the employer, though, if the former is also a designer, because these are two distinct roles. The CA must therefore be clear about their responsibilities with the employer; otherwise, they could contravene their duties under The Construction (Design and Management) Regulations 2015, also known as the CDM Regulations.

Binding contract: there are four key elements required to make a binding contract and surveyors must be aware of these: offer, acceptance, consideration, and an intent to create legal relations.

Completion: the contract should define the completion date, which will be fixed unless an extension of time is approved. There may be a number of prerequisites to ensure practical completion, such as the handover of the health and safety file – as mandated by the CDM Regulations – as well as various testing and commissioning certificates being available and any outstanding works being completed.

Certifying completion will transfer liabilities for works, as well as maintenance and insurance, from the contractor to the employer, and trigger the commencement of the defects liability and warranty periods. Practical completion also means the contractor can no longer claim for delay damages.

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Design: the CA's role does not include design responsibilities under the JCT forms of contract. As a CA, therefore, a surveyor should avoid advising the employer on issues relating to assembly, material choices, specification or design, which includes giving verbal instructions on site or during the early stages of a project.

If they do begin to make design choices, they will incur design liability – which is clearly problematic, especially if the surveyor's professional indemnity insurance does not cover this.

On smaller or less complex projects not requiring a large team, the same building surveyor will act as both CA and designer or lead consultant, but separately appointed to each role with dedicated terms of engagement as they must keep these functions distinct. Otherwise, the design role should be taken on by another party such as a quantity surveyor, structural engineer, lead consultant or architect.

Extension of time: the contract will generally make provision for the contractor to request an extension of time where a delay occurs that is not its own fault. 

The contractor must give written notice of the relevant event to the CA – such as exceptionally adverse weather, or the employer's failure to provide information or materials on time –  who must then consider the merits of the request. 

If an extension is granted, the completion date will be adjusted accordingly.

Where a contractor seeks to rely on late instructions to justify an extension and at the same time it is also delayed by events for which it is itself responsible, the CA will need to ascertain whether the delay resulting from the instruction was the main cause of the hold-up or not.

Final account: this is prepared at the end of the works, adjusting the sum set out in the contract to take account of any variations, provisional sums, loss and expense, and liquidated and ascertained damages, among other factors. The account confirms the final payment required under the contract, but is frequently the source of disputes between the parties.

Guidance: JCT publishes a variety of guidance on the CA role in relation to its contracts, although candidates must also understand other contract types.

RICS has archived its own guidance on contract administration – part of the Black Book suite of documents – due to recent changes in legislation, case law and contract forms. The suite is being reviewed with the aim of producing a comprehensive new edition, but it can be accessed for information only.

Health and safety: the CA must be aware of health and safety requirements, legislation and guidance that relate to works being undertaken. This includes being aware of risk assessment and the need for personal protective equipment when inspecting works on site, as well as health and safety standards and how these affect those working or visiting site.

The CA requires a practical knowledge of the Health and Safety at Work etc. Act 1974, The Regulatory Reform (Fire Safety) Order 2005, the CDM Regulations, the Fire Safety Act 2021 and the Building Safety Act 2022.

Instructions: under the contract, instructions will come from the employer, with variations from the contractor or design team for unforeseen, additional or omitted works.

Instructions by the CA must be given in writing and issued promptly, taking into account any specific contractual requirements. If additional expenses are incurred in giving instructions, then the employer's express consent will be required for these to be paid.

JCT: under the JCT forms of contract 2016, the role of CA is included in Minor Works, Intermediate and Standard Building contracts. The Design and Build contract family instead includes the employer's agent (EA) role. The EA differs from the CA as they act on behalf of the employer – the client – while the contractor takes on the risk and responsibility for both design and construction.

'Instructions by the CA must be given in writing and issued promptly, taking into account any specific contractual requirements'

Knowledge: a surveyor acting as CA must have appropriate, up-to-date knowledge and skills. This includes being able to understand and interpret contractual provisions and then applying them to the specific project.

Keeping abreast of legal changes, case law and RICS guidance is essential to being a diligent CA, and will be evidenced by a surveyor's CPD record.

A CA must have the integrity to ensure they carry out the role correctly; surveyors may, for instance, find that there will be projects where they have to resolve conflicts or issues with their client, the contractor, or both.

Loss and expense: claims for these are often associated with delays, but can be made for any event where the contractor incurs a loss due to the employer's failure to provide, for example, information or materials.

It is essential that the CA understands the contract terms relating to loss and expense – especially any amended terms – because a claim could fail due to defective notices or any stipulated condition precedent, for example.

Typical causes include delays, variations, suspension of work on site or payment default. These can lead to the contractor incurring costs for disruption, additional site labour, plant and overheads, as well as financial losses and charges.

The burden of proof is on the claimant, though, so it is essential that the contractor keeps good records of actual costs and their link to a relevant compensation event, such as a delay. 

The CA will then consider and resolve the written claim for loss and expense. The contractor will not be reimbursed under any other contractual provision for this type of claim.

Materials on or off site: when undertaking interim valuations during the term of the contract the CA will need to consider materials kept on or off site, and the contract should make specific provision for whether interim valuations need to account for either of these. 

The CA may also need to see evidence of invoices from suppliers or check the physical existence of materials to do so.

Notes: the more records are kept the better. It is not just a case of keeping these until practical completion of the project – they should be retained for a minimum of six years or, if the contract is signed as a deed or under seal, for the applicable period under the Limitation Act 1980

The Building Safety Act 2022 extends the limitation period to 30 years for dwellings completed before 28 June 2022, or 15 years for dwellings due to complete after 28 June 2022.

Records could include site inspection notices, office files, photographs and written evidence of instructions, valuations and any communications with the parties. 

Documentation of actions and events throughout the contract term is essential, particularly when resolving disputes and considering performance of contractual obligations during and at the end of the project.

'The more records are kept the better'

Outset: there are two key terms surveyors need to understand at the outset of a project that are often confused: preliminaries and preambles. Both are found in contract documentation.

Preliminaries are the section of the contract that describes the nature of the work and how it is to be achieved, and which specifies general conditions and requirements for its execution. Preambles, meanwhile, describe the client's expectations about the standard and quality of the work instructed.

Possession: surveyors also need to understand another pair of key terms: partial and sectional possession.

The former is where the employer only takes possession of an area of the building, and the CA will need to issue a certificate granting practical completion for this part of the works. This means that part of the building can be occupied – and could be sold – before practical completion of the remainer occurs.

Sectional completion, however, is pre-planned and defined in the contract documents; for example, where the client requires one part of the building to be completed and occupied before the remainder – in other words, practical completion of defined sections is granted.

Quantum of a contractor's claim: the CA will be involved in assessing the quantum – that is, the financial amount – of the contractor's claim, whether for loss and expense, extension of time, or cost of variations.

Retention monies: these are a sum defined by the contract as being held in trust, by way of assurance that the contractor will complete works as well as remedy any defects after practical completion.

In the JCT suite, an agreed sum in the contract is retained and released on a successful 12-month inspection. A certificate of making good is issued and the client then releases the retention sum. It should be noted that there has been some controversy over retentions in recent years, though, in particular the practice of withholding monies.

Site inspections: the CA will need to inspect the project on site during the term of the contract to ensure that they are able to discharge their responsibilities appropriately.

The terms of appointment should clarify the frequency of inspections, although this will also be affected by the nature of the project, competence of the contractor, progress of the works and any predetermined project stages.

During inspections, the CA should record their observations on a template pro forma, including a review of the quality and progress of the work in relation to the contract and the outcome of the inspection.

It is important that all parties understand that, under the building contract, the CA needs to check work only for the purpose of certification rather than to spot or report defects on behalf of the contractor.

Types of contract: other forms of contract than the JCT include the NEC, which is administered by the project manager. Their role is broader than that of a CA and, as the name suggests, includes project management. FIDIC contracts meanwhile use the role of employer's representative, which is similar to the EA under JCT Design and Build contracts.

Unforeseen works: even the most well-planned project with appropriate contingencies may be subject to unforeseen or additional works. Generally, the CA will need to obtain express authorisation from the employer to instruct additional or unforeseen works, particularly where these require additional expenditure.

There may be associated contractual implications for issuing late instructions, and the CA must be aware of these as well.

Variation procedures: a variation is an alteration to the scope of works under a construction contract, which could be the result of a change in the employer's requirements, statutory reforms, a lack of available materials or revisions to the design.

Typically, variations will require an amendment to the contract sum, so the CA will need to consider the request and supporting evidence, issuing a formal variation to the contract where appropriate.

'Even the most well-planned project with appropriate contingencies may be subject to unforeseen or additional works'

Works: different forms of JCT contract are appropriate for different types of works. For example, a standard building contract is appropriate for larger or more complex works, including specialist work or building services, that are procured by the traditional route.

Intermediate contracts are meanwhile appropriate for simpler construction projects that require all the recognised trades but no specialist works.

Minor Works contracts are for small, simple projects, typically of less than £250,000 in value. What determines the selection of an Intermediate rather than a Minor Works contract is that the former requires detailed procedures or named subcontractors, whereas the latter does not.

XQ: JCT's Standard Building contract continues to be published in three versions: with quantities (Q), without quantities (XQ), and with approximate quantities (AQ). Each includes provisions designed to meet the needs of both private and public sectors.

Yes: the client must formally say yes to the CA's appointment. It will do so by signing a set of written terms of engagement or appointment, which detail the services to be provided, the fee basis and reference to the firm’s complaints handling procedure.

The firm rather than the individual surveyor should be appointed, to avoid any issues relating to personal liability.

Zero-rated VAT: VAT relating to construction works is a complex area of practice, and specialist tax advice should be sought where necessary.

The contractor will be responsible for confirming rates of VAT to the CA and employer, such as zero-rated work for the construction of a new residential dwelling or alterations to listed buildings; VAT is not, however, included in the valuation. The employer will need to know the rate as VAT may not be recoverable on all works undertaken.

 

Jen Lemen FRICS is a co-founder and partner at Property Elite
Contact Jen: Email

Related competencies include: Contract administration, Contract practice, Legal/regulatory compliance

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