Construction Contract Compliance

Dafydd Huw Davies
The reading and understanding of a contract is vitally important if we are to ensure contractual compliance. This article touches upon some of the basic areas every contract administrator, project manager or quantity surveyor should be aware of when managing contracts.

Understanding the meaning of a contractual clause is critical. Sadly, theres no substitute to reading, re-reading and occasionally seeking a third-party view. This practice will remove the pitfalls associated with responding to a query based on memory or personal interpretation, especially if several different contracts are being administered at any one time.

Third party interpretative input is an intrinsic component of each contracting lifecycle; having formed a key part of its evolution from the very beginning. Asking a peer for a second opinion regarding a clause or section can be an excellent way of not only quality checking your understanding of the contract but also sharing learning and best practice. This exercise can also help to validate that the contract is constructed in a manner which you want it to; nobody wants to find out when its too late that what’s written doesn’t accurately reflect the parties’ intention.

Understanding the meaning of a contractual clause is critical.

It’s very easy, having received a contract to administer (and especially when there is a great pressure to get things moving) to take things for granted. Taking the time however, to ensure that all the contractual pre-conditions have been satisfied; and that the contract or any supplementary agreements have been signed by parties who have the necessary authority to do so e.g. power of attorney, is time well spent.

The pitfalls of contracting with an unincorporated joint venture or consortium is also well known, especially when the contract lacks an adequate means of addressing joint or multiple liability. These are obvious and simple steps which are often glossed over; but are essential due diligence measures when seeking to establish the contract's validity, the parties' identities, and what, if any, recourse is available when things go wrong.

Having ascertained the contract’s validity, identifying any prescribed obligations, deliverables, milestones and any other key timescales are other key contractual administrative elements. Failing to deliver your obligations, deliverables and achieve key dates can give rise to the other party potentially making a claim for breach of contract or damages.

Contractual documents vary, as some people prefer to rely on universal templates such as FIDIC (supplemented by particular conditions) with others selecting bespoke agreements. Notwithstanding which format is selected, it’s important from an administration perspective, that the contracts administrator familiarises his/herself with the contract’s unique subtleties. Presuming that clauses have been automatically copied is a courageous position, especially when changes have been made to inherent processes such as those for payment or variations.

Effective contract administration will also identify instances where tasks can be streamlined or made easier. 

Behaviour is often justified on the basis that this is the way we have always done it, but that may not be the way a contract prescribes matters. Unless there has been appropriately documented change which has been agreed to by all parties; follow what the contract says and avoid needless risk.

Effective contract administration will also identify instances where tasks can be streamlined or made easier. The need for multiple and often unnecessary signatures is a classic example. Whilst every party is often required to sign every document is it always clear, apart from customary practice, why parties are signing and if they are, why are they doing so? This also applies to contract procedures within the document where securing a signature can often take time and negatively impact upon the project’s progress. If no real value can be ascertained from a signature, consider if there are more effective ways of achieving the same goal. Using appropriately generated templates for the most frequently used documents such as payments, site instructions or variations, can help to overcome this potential problem.

Faithful+Gould has extensive experience in engaging stakeholders to successfully manage contracts and ensuring contractual compliance. We specialise in traditional contract administration but can also implement bespoke contract administration and project controls systems that can assist in the delivery, reporting and management of contracts and projects.

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