The benefits of effective contract administration
Contract administrators can prevent countless hours and amounts in construction disputes if companies employ their services from the outset
Contract administration is the procedural management of a contract during the execution of a project. A contract administrator should ensure compliance with contractual provisions related to the flow of adequate information, submission of notices, valuations and payment assessments, submission of claims for additional payment, and extensions of time.
Good contract administration is fundamental to the effective functioning of any construction contract; however, the role of the contract administrator is often given inadequate attention until a serious problem arises.
To be effective, contract administration must be prioritised from the outset of the project. Knowing and understanding where your risks lie under a contract enables a party to ensure, or at least endeavour to ensure compliance with contractual obligations and manage risks. However, contract administrators are often appointed later in the project than they should be, at which point a party may have already failed to comply with numerous obligations under the contract.
Depending upon the state of the market, a party may sign up to an overly-onerous contract to fulfil objectives of their company. It is at times like these when contract administration is paramount to the successful completion of the project.
A good contract administrator will ensure compliance with contractual obligations, so in case events or disputes arise, there are adequate records to support the party’s position.
One of the most prevalent issues when it comes to contract administration is compliance with contractual obligations, particularly notices and time bars.
An effective contract administrator will ensure all parties are aware of how the project is progressing, including any shortfalls by either party and any areas of concern which may have an adverse effect upon progress.
A contract administrator must regularly liaise with the other members of the project team to tackle problems immediately and resolve them in a timely manner, using the correct mechanisms provided by the contract rather than allowing them to escalate.
Late compliance with contractual obligations can result in the contract taking longer than anticipated thereby incurring additional costs.
This may lead to claims and disputes if left unresolved. By ensuring compliance with contractual obligations, a contract administrator helps keep disputes to a minimum.
In the event that a claim or dispute does arise helps to limit the risk that his employer will lose a dispute because of a lack of supporting records.
Given that construction claims can be extremely complex and involve substantial amounts of money, the importance of a contract administrator being appointed from as early as the receipt of the invitation to tender cannot be overstated.
Poor contract administration is likely to result in problems with the project, dissatisfied parties, and ultimately, claims and disputes, whatever the form of contract. The amount of money involved in such claims and disputes can be enormous.
The outlay on a contract administrator might seem to be an unnecessary expense at the beginning of a project when a contractor is seeking to keep the tender price competitive. However, an effective contract administrator can be the difference between a successful project and a failure resulting in disputes that drain time and money.
A contract administrator could therefore be said to be the first line of defence in a project’s dispute avoidance system, or alternatively, a priceless asset in the event that a dispute does arise. As such, the need for an efficient and pro-active approach to contract administration and management throughout the project lifecycle cannot – and should not – be underestimated.
Gerard Kelly is a managing consultant in the claims department at Hill International’s Dubai offices.