contract administration

Do I need a contract administrator for my construction project?

9th March 2021   |   Jamie Barrett   |   Reading Time: 5 minutes

If you are questioning whether you need a contract administrator for your construction project then you have probably already done some research and planning. It may be that you are looking to include all the necessary professional fees in your development appraisal, or you have recently obtained planning permission and are preparing for the delivery stages of the project. 

Whatever your reason, the answer to whether you need a contract administrator will come down to a number of factors including:

  • type of contract, 
  • contract requirements, 
  • in-house capability and resources, and 
  • whether there is a specific need for an independent party.

We will consider the above and other related matters in this guide. 

What is contract administration? 

Contract administration is the management of the contract between the employer (also referred to as the client) and the building contractor. The role of the contract administrator does not technically start until a building contract is in place between the employer and building contractor. However, in practice the contract administrator is usually appointed at the tender stage when procuring the building contractor.  Additional activities may also include the method of procurement, determining the type of contract and dealing with the contract particulars and associated documents e.g. bonds, warranties, insurances, etc. 

What does a contractor administrator do? 

As we have established, the contract administrator manages the contract between the parties. This should be carried out in a way that ensures contractual procedures are correctly followed and accurately recorded. Although the contract administrator duties may vary from one building contract to the next, the Joint Contracts Tribunal (JCT) contracts typically consist of the following tasks:

  • Record keeping – maintaining notes of site inspections, office files and site photographs.
  • Site inspections – regularly visiting the site to review progress and monitor quality while keeping a record of the visit and observations.
  • Meetings – chairing and minuting meetings on a regular and consistent basis.
  • Reporting – providing regular status reports covering items including quality, time, cost, risks, health, safety and environmental matters. A record of the estimated final adjusted contract sum should also be included in the reports.
  • Instructions – taking the employers instructions and completing and issuing the necessary paperwork required under the building contract.
  • Time – monitoring progress and ensuring completion is achieved in accordance with the building contract.
  • Interim valuations – preparing valuations and issuing the required payment notices necessary under the building contract.
  • Contract instruction/variations – managing any variations and issuing the necessary instructions required under the building contract.
  • Contract completion date, extension of time, partial possession, and practical completion – following the contract procedures in respect of timings and handover requirements as well as the issuing of notices and certifications required under the building contract. 
  • Loss and expenses – reviewing any loss and expense claims in relation to deferred possession or other matters such as an extension of time award,
  • Adjusted contract sum/final account – keeping an accurate and up-to-date record of the final estimated adjusted contract sum during the project, and preparing and agreeing the final account following practical completion.

Is a contract administrator required under the building contract? 

The role of contract administrator is used in the JCT Minor Works, Intermediate and Standard building contracts. The JCT Design and Build contract also introduces the role of employer’s agent. Although the tasks and responsibilities of an employer’s agent differ from the contract administrator in the aforementioned contracts, the role is predominantly one of a contract administration. NEC4 contracts (provided by New Engineering Contracts – NEC) recognise the project manager, acting on behalf of the employer, as the contract administrator.  

Can the employer undertake the role of contract administrator? 

In principle there is nothing to prevent the employer and building contractor from agreeing that the contract administrator is an employee of the employer. However, this is highly unusual and fraught with difficulty as this can potentially cause a conflict of interest when needing to exercise professional skill in a fair and unbiased manner. For example, when issuing payment certificates or reviewing extensions of time, the employee will have a natural, possibly unconscious, loyalty to their employer. You should therefore consider whether or not the employee would, in the event of a conflict between the employer and building contractor, be able to act impartially, If the answer is no, or you are unsure, then appointing an independent contract administrator would be the safest course of action. 

Under the Design and Build contract, it is not unusual for the employer to appoint an in-house project manager from their own company to be their employer’s agent. In essence the role of the employer’s agent is to act on behalf of the employer in all matters, effectively as if the employer’s agent was the employer. Similar to the project manager under the NEC4, the employer’s agent should act impartially in carrying out certification and decision making functions. 

A further consideration before undertaking the role of contract administrator, employer’s agent or project manager under the intended building contract is whether they are adequately insured.

Why is there a need for an independent party to act as contract administrator? 

There are many reasons why an employer should have a contract administrator from an independent company. For example, the employer may have a good relationship with the building contractor and would prefer not to put this at risk by putting them in the position of making difficult decisions on payments, certification etc. Or perhaps the employer may not have yet established a suitable relationship with the building contractor, they may not have in-house capability or capacity, or perhaps they simply value the skills and expertise of an independent party. Whatever the reason, be sure to make sure whoever you intend to appoint possesses the following qualities: 

  • Knowledge, skill, experience, and capability to understand the contract and associated provisions, and apply them.
  • Be able to act independently, impartially and fair in their decision making.
  • A good knowledge of construction and operational procedures.
  • Systems and processes in place for administering the building contract together with the necessary forms for issuing notices and certification.
  • Knowledgeable on construction programmes, the critical path and delay analysis.

How do I appoint a contract administrator? 

Once you have identified a suitably qualified and experienced company to undertake the role of contract administrator or employer’s agent, you should establish the scope of services required to ensure they meet your needs. There are industry standard schedules of services which can be accessed and reviewed to assist you with establishing your requirements e.g. RICS contract administration services.  At this stage you should consider any specific requirements relating to your project, the potential need for services that are usually outside of the standard scope of the contract administrator and the level of professional indemnity insurance needed. 

If you are not sure of your exact requirements, or some of the technical aspects of appointing a contract administrator are not clear, ask the companies under consideration to run through with you

  • what services you are likely to need, 
  • what levels of insurance are advised for value of your project, and 
  • whether collateral warranties are needed based on the structure of your project. 

This will give the companies you are talking to sufficient information to be able to provide you with a fee for contract administration services and you the assurances that your requirements will be met by the contract administration service. Consider appointing your contract administrator using an industry standard appointment document such as the RICS Standard or Short Form of Consultants Appointment or the CIC Consultants Contract Conditions.

What fees do contractor administrators charge?

Contract administrator’s fees will inevitably vary depending on location, services, size, complexity, duration, and construction value. However, as a guide based on averages fees for full contract administration services during the construction stage of the project, you should expect to pay fees between 0.7% and 2.25% for construction values between £1m and £10m. During the construction stage, fees can typically be anywhere between £1,800 and £2,100 per month. 

Construction period (months)Construction value (£)Fee(%)Fee (£)Average monthly fee (£)
Overall average per month (mean)1,963

Based on a £5m residential development in London with a construction period of 24 months, you should budget approximately £47,500 with an average payment of £1,979 per month. 

For further information on how much contract administrators charge, you can read our article on the subject here

Evolution5 provides contract administration services for clients in the South and London. If you would like to find out more you can browse our Contract Administration and Employer’s Agent services, see our projects, or to talk to an expert, please click the get in touch button below or call 02380 405073.