In this episode of Talking Legal, we discuss building and construction contract administration. Covid-19 has brought difficult times and it’s important that we’re mindful of the contractual relationships we have and work appropriately according to our contracts.
1. What is contract administration and what does it mean?
Contract administration in the construction industry is the management of the contract between the:
- Builder or principal and subcontractor; and
- Builder and client
Contract administration is a robust and technical job. A construction contract administrator must have the knowledge and skills to apply all of the contract obligations and provisions. They must have the ability to read terms and conditions of the contract and follow them properly.
An important part of contract administration in the building industry is the review, approval and payment of subcontractor invoices.
Depending on the size of the project, contract administration also involves helping a project manager prepare and advance the builder’s claim to his client for the amount of work that has been completed.
2. What is the importance of contract administration in construction?
Contract administration encompasses the entire project and is a very important part of a relationship between a builder and client, and between a builder and his subcontractor.
Administering a contract with the builder’s client or subcontractors involves appropriately making claims for things like extensions of time or variations.
3. Does it really matter? Surely, it’s just about completing a building project.
Contract administration is just as important as the construction of the project itself. A building project isn’t just about the physical building of it – it’s also about how much it costs and how long it takes to build that project.
In the industry, you’ll often hear the term “on budget and on time.” No project ever starts without the parties agreeing to a cost and specifications for the work.
It’s important to monitor and manage the contract and the relationship. This is what separates a really good builder from a good builder. Most builders are good builders and will build a good product, but a really good builder also administers the contract and maintains the relationship with his client by honouring the obligations that they entered into at the beginning of the relationship.
4. What should a builder or head contractor do?
Contract administration must be taken seriously and made a priority. The proper process should always be followed. One process that should be followed critically, but often isn’t, is the practical completion process. There is a requirement to provide your client with a notice that says that practical completion will be reached in a certain amount of time. The parties will review the work, list any defects, attend to how they will work through those defects, then present a final claim for payment. This process should be followed strictly, but quite often, lawyers see just the final claim presented.