Contract Administrator 3

The Administrator: Part 3 – The root causes for contract administration problems and how to avoid them

November 29, 2021

A contract administrator needs to be able to recognise parts of contracts can cause incredible harm to a project and to the parties working together on a project. Some elements of every contract deserve particular attention.

 

How to spot these ‘killer clauses’ and what to do about them during the construction process is vital to keeping the project team on task and delivering the product. Every contract administrator needs to recognise and understand the following clauses in a construction contract:

  1. Notice clauses;
  2. Payment clauses;
  3. Indemnity clause;
  4. Liquidated damage clause;
  5. EOT clause;
  6. Variation clause;
  7. Termination clause; and
  8. Waiver clauses.

 

Waiver clauses are particularly fatal to lazy contract administrators i.e. any clause that states that if notice is not given with the prescribed time period set forth in the contract, then the contractor waives all future claims for increased time or money.

 

Listed below are the types of contract administration problems seen in practice:

Contractual Risk and Contract Administration Problem Example
(a)   Unclear scope of work This is often referred to as a proposal risk whereby ambiguous specifications lead to disputes over required performance and/or acceptance.
(b)   Surety and Liability risk This is where the contract provides inadequate bonds and insurance to cover contractor failure.
(c)   Contractual change This is where there is a change in the scope of work (additional work, money, time) after contract award.
(d)   Dispute resolution This involves a disagreement between the parties that cannot be easily resolved. The dispute can involve scope of work, materials supplied, payment schedules, or any other aspect of the contract.
(e)   Definition of acceptance This is a performance risk whereby completion of the project is delayed due to non-acceptance of final product. For example, this could be a difference in either party’s definition of what was supposed to be delivered or provided
(f)    Poor performance This is a performance risk whereby the contract clearly states a level of expected performance, and the quality of the contractor’s performance is called into question.
(g)   Risk of failure This is a performance risk whereby the project has a high risk of failure i.e. new equipment, new contractor, tight timeline or budget.

 

The root causes for contract administration problems often stem from the contract administrator’s failure to understand the operation of the contractual terms and to understand the risk to the project that those contractual terms have.

 

Being able to identify the root cause of contract administration problems, successful contract administrators can develop strategies to minimise their impact and/or eliminate them altogether. A contract administrator must not have the attitude ‘you’ve seen one, you’ve seen them all’ attitude’ as, particularly in Australia, construction contracts are often heavily bespoke.

 

Our Team at Lamont Project & Construction Lawyers have the knowledge and experience to assist both principals and contractors with any question pertaining to contract administration or any related issues. If you would like to discuss any matters raised in the article as it relates to your specific circumstances, please do not hesitate to contact Peter Lamont ([email protected]) or myself ([email protected]).