Legal questions: disputes over extensions of time
Extensions of time challenges
7 August 2015
Louisa Donnelly looks at the issues surrounding disputes over extensions of time
I am a project manager on a large infrastructure project. The employer has suggested that I should not issue an extension of time and agree the payment I think the contractor is entitled to. I am reluctant to go against the employer's wishes. What can I do?
Disputes over extensions of time are by no means unusual on major projects, and employers will sometimes press project managers (or contract administrators, architects, engineers) to avoid taking steps that go against their interests. As a project manager, your precise role and duties will be determined by your professional appointment. This will usually enable you to administer the contract on the employer's behalf, for example issuing variations (the governance powers).
However, your appointment will also usually confer powers allowing you to assess and determine issues of importance, such as how much additional time the contractor should be afforded to complete the project, or how much money is due under the contract (the certification powers). It is the certification powers that have been the subject of much debate in recent years.
As a project manager, your precise role and duties will be determined by your professional appointment. This will usually enable you to administer the contract on the employer's behalf...
Given that you will likely have developed a relationship with your employer, it is easy to foresee a situation where they could put pressure on you to issue a certificate recording a decision with which you may not agree. For example, an employer may ask that you do not issue an extension of time.
In recent case law, the court has sought to clarify a project manager's duties, making it easier to determine when you will be required to comply with the employer's requirements, and when you can exercise your own discretion and personal judgment.
The basic principle
A distinction has been drawn between decisions that concern the governance of the contract, and those that require you to exercise an element of assessment and certification. The leading House of Lords case, Sutcliffe v Thackrah , recognised that an architect acting under a RIBA standard form contract has two different functions to perform. In matters concerning governance, the architect would be "bound to act on his client's instructions, whether he agrees with them or not". However, the Lords noted that in "many other matters requiring professional skill he must form and act on his own opinion". It was in these 'other matters' (i.e. the assessment and certification) that Lord Reid believed the architect had a duty to "reach such decisions fairly, holding balance between his client and the contractor".
The current position
More recently, in Costain Ltd v Bechtel Ltd , the court acknowledged that in many of its functions the project manager under an NEC contract will act "solely in the interests of the employer". However, it was also recognised that when performing functions of assessment and certification, the project manager would be required to hold "balance between the employer and contractor".
It was noted that the project manager's certification would not necessarily be determinative, and could be challenged through the dispute resolution procedures of the contract should the employer or contractor disagree with the decision.
These principles were summarised in Scheldebouw BW v St James , where the following propositions were made:
- the precise role and duties of the contract administrator will be determined by the contract, but these are likely to include both a contract administration role and decision making duties
- generally, a contract administrator will not be considered to be independent of the employer
- when performing such a function, the decision maker will be required to act in a manner that is "independent, impartial, fair and honest". This means that a contract administrator must use their professional skills and best endeavours to reach the right decision, not simply one that favours the employers' interests.
What should you do?
Your precise roles and duties will be determined by the terms of your appointment and the provisions of the construction contract. By the nature of your relationship with the employer, you will not be considered wholly independent – it is they that give you instructions as to how to administer your contract.
However, when you are performing an assessment or certification function under the contract, such as determining whether to issue an extension of time, you will be expected to make this decision impartially and to reach a fair and honest decision, notwithstanding any pressure from the employer.
A failure to act impartially could result in subsequent criticism from a tribunal in the event of any dispute. If necessary, you may need to discuss your respective duties with your employer.
Louisa Donnelly is a Construction Disputes Solicitor with Pinsent Masons LLP
Related competencies include: Project administration
This article is taken from the RICS Construction journal (June/July 2015)