The duties of project managers and contract administrators
It used to be thought that, because the project or construction manager himself did not undertake any work, his risk was modest. There were many reasons for this. Typically, his obligation is not an absolute one, partly because there is usually someone else to blame, and partly because of the difficulty that a claimant employer has in showing how matters would otherwise have turned out. However, there have been a handful of cases where this orthodoxy has been challenged. Two of these cases were reported in 2012. In one the project manager was found liable in circumstances where no formal contract was executed; in the other an employer’s agent was not found to be under an absolute obligation to ensure that a contractor provided a bond.
The Trustees of Ampleforth Abbey Trust v Turner & Townsend Project Management Ltd 1
Disputes arose between Ampleforth College and their contractor Kier Northern, which were was settled through mediation. The project manager was TTPM. HHJ Keyser QC noted that there was an implied term of the contract between the Trust and TTPM that TTPM would exercise reasonable care and skill. Following the “Bolam test”,2 that duty is: “the standard of the ordinary skilled man exercising and professing to have that special skill”. The Judge also noted that it may be impossible in any event, to define with precision the expression “project manager”. In general terms, a project manager will act as the representative of the employer for the purpose of co-ordinating the different aspects of a construction project. Here, there was no dispute that TTPM was engaged to perform the full range of duties of a project manager, and these included facilitating, assisting and being involved in the procurement of the building contractor and the building contract.
During the project, the works were carried out under various letters of intent. This meant that Ampleforth had not been able to claim any liquidated damages for delay against Kier. The Trust did not contend that TTPM was wrong to advise that the works be commenced under a letter of intent; it was accepted that, in view of the perceived importance of achieving early completion and, specifically, early commencement of the works, it was acceptable to advise commencing the works under a letter of intent rather than waiting until a formal building contract could be executed. However, the Trust argued that TTPM should have advised the Trust:
(i) Of the limited protection afforded to it by letters of intent as compared with an executed contract, in particular with regard to the availability of liquidated damages and the possibility of holding Kier liable for design defects;
(ii) Of the increasing risk that the repeated issue of letters of intent would make it less likely that Kier would execute the contract.; and
(iii) Of the need to take resolute action to procure the execution of the contract by: (a) taking positive action to remove specific obstacles, (b) identifying, by list, all outstanding matters and maintaining constant pressure on Kier to address them; (c) bringing commercial pressure to bear at a senior level; (d) threatening to withhold payment until all the outstanding matters had been dealt with; (e) threatening not to issue further letters of intent.
The Judge noted that in the performance of TTPM’s role as co-ordinator and guardian of the client’s interests:
“efforts to finalise the contractual arrangements were of central importance. The execution of a contract is to be seen not as a mere aspiration but rather as fundamental. It is the contract that defines the rights, duties and remedies of the parties and that regulates their relationships. Standard-form contracts, such as the JCT contracts, are precise, detailed and structured documents; their elaborate nature reflects the complexities of the projects to which they relate and attempts to address the many and varied problems that can arise both during the execution of the works and afterwards. By contrast, letters of intent such as those used in the present case are contracts of a skeletal nature; they pave the way for the formal contract, once executed, to apply retrospectively to the works they have covered, but they expressly negative the application of most of the provisions of the formal contract until it has been executed. They do not protect, and are not intended to protect, the employer’s interests in the same manner as would the formal contract; that is why their “classic” use is for restricted purposes.”
HHJ Keyser QC held that TTPM was not under any absolute obligation to procure the execution of a formal contract. However, even if the outcome in this case (a project carried on from start to finish without an executed contract) did not of itself dictate the conclusion that TTPM was negligent, it was sufficient to suggest that something went wrong with the project. First, the evidence showed that it is extremely unusual for a building project of this scale to proceed from commencement to completion pursuant to letters of intent. Why, then, was no contract signed? To suggest that a contract should have been in place no later than April 2004 was hardly to suggest unreasonable haste. Works had started in early December 2003; by the expiry of the fourth letter of intent construction had been going on for about four months, and the works covered by the letters of intent accounted for more than 25% of the contract price.
Sweett (UK) Ltd v Michael Wright Homes Ltd 3
MWH engaged Sweett to act as the employer’s agent and provide quantity surveying services for a housing development. It was an express term of Sweett’s appointment that they would: “Prepare contract documentation and arrange for such documents to be executed by the parties hereto”.
Sweett made it clear to the contractor during pre-contract negotiations that a performance bond was required and ultimately it was an express term of the building contract that a bond would be provided. Despite numerous attempts by Sweett to secure the bond, the contractor failed to provide the bond. As a result of unpaid fees, Sweett terminated its agreement with MWH. In September 2008 Sweett commenced proceedings. The parties settled all aspects of the claim, save for MWH’s counterclaim in respect of Sweett’s failure to secure the bond. The contractor then went into liquidation in June 2009. The principal issue before the county court was whether Sweett had acted in breach of its duty in relation to the provision of a performance bond by the contractor.
MWH argued that either Sweett owed an absolute obligation to ensure that the performance bond was provided by the contractor or, even if there was no absolute obligation, Sweett still had a duty to take reasonable care to see that the bond was provided by the contractor. MWH further argued that Sweett should have at least withheld payment from the contractor in order to apply pressure on them to provide the bond. Sweett argued that there was no absolute obligation to ensure that the contractor provided the bond. Its sole obligation was to take reasonable care to ensure that the performance bond was provided, and that by making numerous requests to the contractor they had successfully discharged this obligation.
HHJ Wildblood QC held that Sweett did not owe an absolute duty to ensure that the contractor provided the bond. He considered the definition of “arrange” and found that Sweett’s obligation stopped short of the requirement to “ensure”. Provided it put in place the necessary steps for the bond to be executed (which on the evidence it did) Sweett would effectively have discharged its duty to “arrange” and therefore any breach would be limited to the consultant’s common law duty to exercise reasonable skill and care.
Here the court noted in particular, the extensive steps that Sweett took to try and secure the bond. These included attending several meetings with both MWH and the contractor, and chasing the contractor for updates on a regular basis. This was sufficient to discharge the duty to “arrange” and to act with reasonable skill and care.