Whose side are you on?

Mr Justice Jackson was a bit of a spoilsport in Costain vs Bechtel. He decided that the project manager in the contract document wasn’t quite what he had been made out to be. Let me explain.

Twenty years ago, the New Engineering Contract kerplonked in our midst. Pundits shouted “its different”. It was; it is. The NEC salesman’s patter to client was plain. He said: “The project manager in this document is on the employer’s side.” Tricky point though, because many a building contractor heard the same message, and as a result the NEC document wasn’t really trusted on their side of the fence. That didn’t really matter, though. Why? Well, if the project manager shortchanged a payment certificate, the main contractor would shortchange the subbies. And, if the subby didn’t like it, they would take it out of the job.

Anyway this silly selling point survived. Then Mr Justice Jackson was asked a $64,000 question by Costain and Bechtel: “When assessing sums payable, is it the project manager’s duty to act impartially as between employer and contractor or to act in the interests of the employer?”

At first glance his decision doesn’t matter. That’s because the contract document on the Channel Tunnel Rail link at St Pancras uses a beaten-up NEC form of contract. But that fact is of little importance. The principles in the judgment apply equally to the NEC (now Engineering and Construction Contract) family of forms. In short, if you think that the project manager in the NEC document is allowed to be biased when certifying funds, think on. You are wrong. Good job, too!

About 10 years before the NEC came along there was a building case that went all the way to the House of Lords: Sutcliffe vs Thackrah. It asked about the role of the architect under what we used to call the “RIBA” Contract (JCT1963). The architect has two functions said the court. In many matters they are bound to act on their client’s instructions whether they agree with them or not; but in matters requiring professional skill, they must form and act on their own opinion. If they think the builder should be paid loss and expense or allowed extra time, or has reached practical completion then what they think goes. The employer and contractor have contractually agreed to obey these fair and unbiased decisions. The architect “holds the balance between his own client and contractor”. And woe-betide any architect or contract administrator for that matter that is lop sided. They will simply lose all credibility with today’s adjudicators.

Credit: Tom Gauld

Yes, yes said counsel in this Costain and Bechtel affair, that’s all correct for conventional contracts, not so about what happens under this particular NEC document. It was argued that the detailed words in the document do not confer on the project manager any of the “discretion” in the JCT form so there is no need for any implication of a promise of impartiality. In any case, argued the barrister, the whole idea is to refer any disputed decision of the project manager to an adjudicator. Besides, the project manager is specifically employed to “act in the interests of the employer”. The judge didn’t agree. This special document “and indeed the New Engineering Contract on which it is based” contains many instances where the project manager has to exercise their own independent judgment in order to determine what precisely should be paid to the contractor. When it comes to the exercise of his discretion in those areas “I do not understand how it can be said that the principles stated in Sutcliffe vs Thackrah do not apply.”

He added: “It would be a most unusual basis for any building contract to postulate that every doubt shall be resolved in favour of the employer and every discretion shall be exercised against the contractor.” As for suggesting that it was all right for the project manager to be partial and biased because the adjudicator would always be impartial and unbiased, well he said: “I do not see how that arrangement could make commercial sense.”

So, there we are. It has taken 20 years to tell us that the project manager under the NEC contract is to be impartial, unbiased, even handed and fair. In other words just like every architect and every contract administrator under the JCT contract, I think.

Tony Bingham is a barrister and arbitrator

If you think that the project manager in the NEC document is allowed to be biased when certifying funds, think on. You are wrong