Assignment 1

Journal paper on construction contracts

Title: Challenges and Solutions in the Dual Role of Contract

Administrators in Construction Projects.

Course: 218.763 Advance Construction Law 2023

Student Name: Muhammad Usman Khaliq

Student ID: 21013772

Course coordinator: Naseem Ameer Ali

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Abstract:
The paper examines the role of the person administering a construction contract, who must
operate in the client's best interest while simultaneously acting impartially and independently
on other works related to the same contract. Managing the construction contract between the
employer and the contractor is the responsibility of an Engineer to the Contract or a Contract
Administrator under the NZS 3910 form of contract. Two distinct tasks are carried out by this
position: a decision-making task and an agency task. This functional role has existed on
construction projects for centuries, despite the fact that the title Engineer to Contract (or
Contract Administrator in some forms of contract) was not officially used until recently. Given
that the client is paying the building professional, some people may find this peculiar approach
bizarre. The paper looks at possible conflicts of interest that might result from this dual function
as well as the industry's adoption of this strategy without any accountability of the contract
administrator role. The paper also looks at potential remedies for reducing these tensions and
enhancing the openness and accountability of the building process via splitting contract
administrator role. The paper comes to the conclusion that while this strategy may appear
unusual, it is a common practise in the construction sector, and the person administering the
contract must manage the competing responsibilities with honesty and openness to ensure
the project's successful completion.

Keywords: Contract administrator, Dual Role, Project Specific Requirements, Accountbility,

Extension of Times, Uncertainties

1. Introduction:
The building sector not only contributes significantly to each country's economy but also has
a demonstrably good effect on people's quality of life. It is one of the most complicated
industries since it encompasses so many different stakeholders, activities, and business
sectors; as a result, it is seen as risky and difficult (Tatarestaghi et al. 2011). A construction
contract is a pledge to produce a project for a certain fee and within a certain time frame. It is
a mutual agreement that is based on written standards and criteria and is legally enforceable
between two businesses (one is the owner and the other is the contractor) (Saad, 2020).

The economy is still recuperating from the consequences of COVID-19 a few years after the
initial nationwide lockdown in March 2020. After seeing a record gain of 13.9% in the
September 2020 quarter, the gross domestic product (GDP) dropped by 1.0% in the
December 2020 quarter. The GDP statistic maintained by Stats NZ shows a 2.9% decline in
GDP for the year ending in December 2020, the biggest annual decline ever. For the fiscal

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year that ends in December 2020, the GDP contribution of the construction sector decreased
by 7.3%.

The value of non-residential building activity decreased in the Auckland region, and the longer-
term fall in Canterbury shows that the infrastructure and non-residential sectors were the main
causes of this decline. The major reasons for this reduction were lockouts, workforce
availability, and disruptions in the material supply. The residential and non-residential building
projects that were completed each quarter are shown in fig.1 below.

Figure:1 Data Source: Building activity survey, stats NZ

The COVID-19 pandemic has had a considerable impact on the dual roles that construction
contract administrators now play because it emphasises the growing significance of contract
administration in the construction sector. Construction contract management has been
severely impacted by the pandemic's extraordinary challenges to the sector, which include
labour shortages, supply chain disruptions, and health and safety issues.

Contract administrators now have to manage contracts effectively and efficiently while also
making sure that health and safety laws are followed, which requires them to adjust to new
issues brought on by the pandemic. In order to manage contracts in a timely and cost-effective
manner, they have had to deal with problems like delays, cancellations, and changes in
financing sources. An efficient contract administration is one of the potent tools that is certain
to deal with the changing environment and requires adherence to needed obligations. On the
other side, bad contract management can lead to processing errors that have a negative effect
on the project's schedule, spending, and level of quality.

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2. Research method
Legal research methods are crucial to the study of construction law Kumaraswamy, M. M.
(1999). To fully comprehend the legal norms and procedures governing construction law,
researchers must employ a variety of techniques. The choice of research methodologies is
influenced by the study's objectives, available data, and research topic. A strong and insightful
research paper in construction law can be produced with the application of the right research
techniques.

The following legal research techniques are applicable for construction law research papers:

1- Statutory Research: This technique entails examining the statutes, rules, and
ordinances that govern construction law. Analysing zoning laws, building codes, and
environmental restrictions, as well as other rules and regulations from the federal and
state levels that control construction operations, is required for this.
2- Case Law Research: In this approach, construction law-related court rulings,
opinions, and judgements are examined. Finding and comprehending legal precedents
and ideas that are pertinent to construction law requires conducting case law research.
3- Secondary Source Research: With this approach, secondary sources including legal
treatises, journals, and textbooks are analysed. These resources contain commentary,
explanation, and analysis of legal rules and cases that are pertinent to construction
law. Secondary source research can give you a thorough understanding of the legal
theories, fundamentals, and building sector.
4- Empirical research: This approach entails gathering and examining information about
construction law. Interviews, case studies, and survey research are all examples of
empirical research. This approach offers perceptions into how construction law is used
in practical circumstances and can aid in locating areas where the law may be lacking
and where legal reform may be required.
5- Comparative Research: This approach compares the construction laws of various
nations or regions. Comparative research is helpful for locating best practises and
novel legal concepts that can be applied to enhance a jurisdiction's construction law.

3. Effective Contract Administration

The primary focus of the construction business is on successful delivery of the projects, and
each project has a distinct contract that acts as the basis for other project operations. The
agreement must be effectively implemented and cannot be enforced by itself. Due to
globalisation and the massive volume of contracts already in existence, managing and
administering contracts is now recognised as a critical ability for corporate management in
addition to being a crucial element of project management. Poor contract administration can

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cause delays, disagreements, and cost overruns in construction projects, according to a study
by Hwang and Ng (2013). Specialised knowledge and abilities are needed for contract
administration. Contract administrators need a thorough awareness of the project scope,
specifications, and contractual duties to manage a construction project efficiently, according
to Lim et al. (2017). For all parties, efficient contract administration is essential, but many
projects struggle with it. It is hard to resolve such issues and challenges without suitable
management tools to monitor and evaluate the efficiency of the contract administration
process.

Construction contract administration is a specific contractual obligation that is carried out by a

third party during the post-award phase of a project, which starts when a contract is signed
and ends when the performance certificate is awarded. The contract administrator, also known
as the Engineer, Architect, Certifier, or Project Manager, is in charge of overseeing contract
execution as well as associated daily tasks, issues, performance metrics, payments,
variations, and change orders. They also handle information sharing, party communication,
commissioning, handover, and defect rectification tasks. The task is often carried out by the
project team, with each member holding unique duties and obligations that must be properly
managed to avoid having an adverse effect on other areas.

According to Rendon (2007) the biggest obstacle facing project stakeholders is contract
administration, which is also a key source of problems for building projects. Due to poor
contract management, traditional contracts have a number of problems, including inadequate
paperwork, defects in the scope of work, and inadequate specifications or drawings in the
designs as per Yap (2013). Effective contract administration requires the use of contract
specialists and staff employees who have received training in appropriate administrative
practises. Because it needs time, money, and managerial effort, implementing good contract
administration may be more difficult due to numerous hurdles, restrictions, or variables.
Investigating the contract administration procedure and identifying the components of
excellent contract administration practise are crucial for maintaining a positive relationship
between the parties.

To ensure effective and successful execution of construction contract agreement

management and control of the entire contract administration process necessitate a logical,
methodical, and auditable technique as per Watermeyer (2013). Successful contract
administration depends on clear communication. Communication breakdowns between
project stakeholders were discovered to be a significant contributor to disputes and delays in
construction projects in a study by Ogunlana et al. (2014). Processes for contract
administration can be made better through technology. According to a study by Chong et al.

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(2020), digital solutions like project management software and building information modelling
(BIM) can improve contract administration by supplying real-time data, enhancing
communication, and lowering errors.

4. Role of Contract Administrator

An expert who oversees the execution of construction projects to guarantee their effective and
efficient completion is known as a contract administrator. As the main point of contact between
the employer and the contractor, the contract administrator is in charge of managing the
project. Architects, engineers, and other supervisory officers frequently carry out the well-
established function of contract administrator in the construction sector (Abdelhamid and
Everett, 2000). Throughout the course of the construction, the Contract Administrator also
makes decisions and negotiate with the Employer and the Contractor in a fair and impartial
manner. The administrator is in charge of a lot of duties and is given a lot of authority because
they serve as the primary point of contact between the employer and the
contractor/construction teams. The majority of the ongoing project management
responsibilities are given to the administrator by the employer through the appointment of a
contract administrator (Cunningham 2016).

Unless there is an express contractual right to termination, the appointment of a contract

administrator normally lasts until the conclusion of all contract work. Premature termination of
the contract administrator by the employer may constitute a breach of the contract and give
rise to a claim for damages (Jeng and Lee, 2003). Delegating the majority of the ongoing
project management obligations is one of the contract administrator's main responsibilities.
Only if the employer appropriately distributes the engineer's power will this delegation be
effective. Inadequate or excessive delegation can strain relations between the parties to a
contract and result in disagreements (Kayastha, 2014). According to Klee et al. (2015), the
contract administrator's main duty under a professional services agreement is to carry out the
triple limits in a fairway. As a result, the contract administrator is responsible for ensuring that
the project is finished on schedule, on budget, and to the necessary quality standards.

Since the employer might not have the necessary technical knowledge to determine if the
contractor has complied with the contract's requirements, certificates are issued by the
contract administrator to express definite approval of the work. The contract administrator's
decisions and certifications are binding on both the employer and the contractor (Chan and
Kumaraswamy, 2002). A competent contract administrator is required to exercise reasonable
skill and diligence. As the contract administrator, the architect or engineer must exercise
fairness and objectivity while providing payment certifications or deciding whether to give time
extensions, for example (Cunningham, 2016).

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5. Contract Administrator's Conflicting Roles
The contract administrator is a key player in managing construction projects because they
make sure that work is delivered in accordance with the employer's demands, standards, and
expectations. However, there are often conflicts between the contract administrator duties and
responsibilities, which causes disputes between the contract administrator, the employer, and
the contractors Gharaie, E., & Soetanto, R. (2019). Even though it is the contract
administrator's job to uphold the employer's interests, there may be times when they must
make choices that aren't in their best interests. Concerns about a conflict of interest may arise
if an employer employs a contract administrator since they may not always have the power to
decide quickly and fairly on claims brought forth by contractors (Klee et al., 2015).

However, there may be issues due to the contract administrator's dual responsibilities as an
agent for the employer and an unbiased certifier. Some contend that the employer should not
foot the bill for an "impartial Engineer" (Bunni, 2018). Furthermore, the FIDIC 1999's
paragraphs 2.5, 3.5, and 20.1 permit the employer to employ the engineer to develop a claim
while also making judgements regarding the contractor's claims, which may restrict the
engineer's freedom of action for all parties (Robinson, 2011).

The concept of an engineer's independence and impartiality in exercising professional

judgement in the FIDIC old red book has apparently come under fire from critics, including civil
attorneys, employers, contractors, and professionals (Ndekugri et al., 2007; Salwa, 2017).
According to Klee et al. (2015), there may be instances where the contracts for the contract
administrator and the major contractor are incompatible, giving the employer extensive control
over the contract administrator. Additionally, the contract administrator's position as an
unbiased arbiter of the contractor's contract may conflict with the employer's power to control
the administrator.

The Institute of Civil Engineering (ICE) has created a new model to address these problems,
breaking down the function of the engineer into four distinct roles: project manager, supervisor,
adjudicator, and expert. The supervisor monitors the work to guarantee compliance while the
project manager manages the contract to accomplish the employer's overarching goals. The
designer develops works and gives instructions; the adjudicator resolves conflicts.

6. Limitations of Contract Administrator:

According to FIDIC 1999; Miller et al. 2012; Murdoch and Hughes 2008; Treasury 2017, the
contract administrator has several duties and commitments under the terms of the agreement.
The contract administrator is not authorised to alter the terms of the agreement, discharge
parties from their duties, or provide orders for unauthorised modifications. Likewise, if he

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accepts contractor bids, directs incomplete work, or goes above and beyond what is expected
of him, his power is restricted. Unless the articles or subclauses of the contract state otherwise,
it is the employer's responsibility to figure unforeseen expenses made without consent.

Wearne (1992) asserts that, rather than the contract administrator, the parties chosen to enter
into a contract retain the right to renegotiate or cancel the agreement. The employer is not
held accountable when contract administrator activities exceed the scope of their authority;
instead, the Engineer is held individually accountable.

7. Critical review, analysis, and discussion

Since contracts are not self-enforcing, contract administration is important to address conflicts
on time (Puil and Weele, 2014), reduce disputes (Abotaleb and El-adaway 2017;El-adaway et
al., 2018), control changes (Islam et al.,2019), maintain relevant records (Iyer and Jha, 2005),
resolve discrepancies or inconsistencies among the several contract documents (Hamie and
Abdul-Malak, 2018), safeguard entities rights (Oluka and Basheka, 2014) and reduce risks
(Joyce, 2014). Due to the rising demand for construction, the post of Engineer to the Contract
or contract administrator is being scrutinised in New Zealand. The Engineer's responsibility is
to oversee the contract on the principal's behalf and make sure that the scope is completed
entirely and also within allocated time frame. When the Engineer must act independently from
the contracting parties, though, difficulties arise, including the tendency to become
entrenched, defensive, and claims focused. The Engineer must fulfil two duties, the
"Principal's Agent" and the "Independent Certifier," both of which might occasionally conflict.
The dual function of a contract administrator—where they concurrently act as both the client
representative and the contractor representative—has been the subject of intense discussion
and criticism in the sector. Others maintain that it generates conflicts of interest and
compromises the integrity of the contractual process, while some saying it can result in
improved efficiency and communication.

One of the key problems with a contract administrator's dual duty is the possibility of conflicts
of interest. The contract administrator is required to operate in the best interests of their
organisation as a client representative, negotiating the best feasible terms and ensuring that
the project is delivered on time and under budget. As a contractor representative, the same
person is responsible for maximising earnings for their company while also completing the job
as swiftly and cheaply as possible. Because of this inherent conflict, the contract administrator
may find themselves split between their two jobs, resulting in biased decision-making and a
lack of transparency.

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The influence of the dual role on the contractual procedure is another concern. The contract
administrator is in charge of overseeing the entire contractual process, from contract
preparation to negotiating amendments and resolving disputes. However, when the same
person represents both the client and the contractor, maintaining objectivity and ensuring that
the contractual conditions are fair and equitable can be challenging. This can lead to
disagreements and lawsuits, which can eventually delay and increase the expense of the
project.

Proponents of the dual role say that it can improve efficiency and communication.
Miscommunication and delays are reduced by having a single point of contact for both the
client and the contractor. However, detractors argue that this advantage is balanced by the
possibility of conflicts of interest and biased decision-making. It is not a requirement for an
Engineer in New Zealand's building business to have a professional background or to belong
to a trade association. As a result, an engineer can play a dual duty, representing the company
and serving as the engineer. Separating the responsibilities might be a preferable approach
for the successful completion of a project because this dual function may be out of date.
Splitting the function of contract administrator may be advantageous in some circumstances,
particularly on large and complicated projects. For instance, one person or organisation might
be in charge of managing the contract's financial aspects, while another might be in charge of
managing the contract's technical aspects.

While projects are the construction industry's main source of revenue, each project has a
distinct contract that serves as a means of facilitating and enabling cooperation between
parties (Puil and Weele, 2014). Proper construction contract administration procedures are
necessary for every project. According to the research, contract administrator is one of the
most significant difficulties that project stakeholders face (Niraula et al., 2008), and effective
construction contract administration is receiving more and more attention in the construction
sector (El-adaway et al., 2018). The necessity for improved knowledge of and training in
excellent administrative practises is also emphasised by a number of scholars (Ahmed, 2015;
Bartsiotas, 2014; Kayastha, 2014; Niraula et al., 2008; Surajbali, 2016). A trustworthy and
thorough performance assessment model for construction contract administration must be
established due to CCA's subpar performance and its direct impact on the project Murat, G.,
Hesham, A. 2020.

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8. Conclusion
The complexity, nature and magnitude of modern projects are increasing in the construction
sector, indicating that efficient contract administration is critical to project success or failure.
In the construction industry, poor performance of contract administration can lead to delays,
reworks, unnecessary modifications, poor collaboration, disagreements, and disputes for both
employers and contractors. contract administration is a crucial component of every
construction project since it aids in prompt conflict resolution, lowers the likelihood of disputes,
controls changes, keeps accurate records, settles disagreements, protects parties' rights, and
lowers risks. A contract administrator's or engineer to the contract's position is crucial since
they are in charge of managing the contract on behalf of the principle and making sure that
the work is carried out effectively and efficiently.

The dual role of a contract administrator, in which they represent both the customer and the
contractor, has, however, generated a great deal of debate and controversy in the building
sector. The possible conflict of interest that could occur when one individual is in charge of
representing both parties is one of the main worries. Conflicts and legal challenges may arise
as a result of biased decision-making and a lack of openness, which may cause the project to
be delayed and cost more money.

Additionally, a contract administrator's dual role may have an impact on the contractual
process, making it difficult to retain neutrality and guarantee that the terms of the contract are
just and equitable. The risk for conflicts of interest and biased decision-making may outweigh
the benefits of having a single point of contact for the customer and contractor, which can
increase efficiency and communication.

Therefore, it is crucial to build a reliable and comprehensive performance assessment model

for managing construction contracts to guarantee a project's success. This model can aid in
the objective assessment of the contract administrator's performance and offer the advice
required to raise the calibre of their work. Additionally, it can assist in spotting any conflicts of
interest and offering countermeasures, preserving the fairness and transparency of the
contractual process.

In conclusion, the dual role of a contract administrator may be obsolete, and it may be best to
separate the duties for a project's successful finish. The division of the contract administrator's
responsibilities can help to ensure that each component of the contract receives the attention
and knowledge it needs, as well as to prevent conflicts of interest or bias that might develop if
one person or organisation is in charge of every area of the contract. To minimise
misunderstandings or confusion that can result in conflicts or delays, it is crucial to ensure that

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there is clear communication and coordination between the various people or organisations in
charge of contract administration.

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