Can the NEC Project Manager inadvertently act against the interests of the Employer?

Is there a potential gap in the NEC Project manager’s duties?

The starting point is, what is good practice?

The NEC form of contract states, “The Employer, the Contractor, the Project Manager and the Supervisor shall act as stated in this contract and in a spirit of mutual trust and co-operation”. However, the term ‘mutual trust and co-operation’ is not itself defined or clarified, and honesty, fairness and openness is presumed.

The parties to the contract are the Employer and the Contractor. The Project Manager (PM) and the Supervisor support the parties and are the facilitators for applying the contract conditions or contract administrators. They, and in particularly the PM, are provided with extensive and wide-ranging powers under the contract. The NEC form of contract assumes a client may have little or no contractual knowledge or experience, and so specifically empowers the PM to act independently across a broad range of matters. Consequently, this means that the PM should be competent, experienced, knowledgeable and trustworthy in the administration of the contract.

In most instances this arrangement is entirely satisfactory, and the contract will be administered efficiently and effectively between the parties. However, there can be cause for concern where the PM, acting independently of the Employer, exercises their powers without reference to, or the knowledge of the Employer.

The NEC Contract places clear duties on the Project Manager: if followed to the letter the Project Manager may mistakely compromise the Client.

The NEC form of contract section on Communications (Clause 13) specifies that the PM only sends his certificates to the Employer. All other communications are described as being between the PM and the Contractor or the Supervisor with no mention of the Employer, or wider project team,being included. In most cases, good practice and ‘in a spirit of mutual trust and co-operation’ would suggest the Employer would be kept abreast of all contractual exchanges, notices and decisions; but there is no obligation upon the PM to adopt this practice.

For example, consider that the Supervisor identifies a material or component that is not in accordance with the specification in the Works Information, andthe PM duly raises an Early Warning to only the Contractor highlighting the issue as a defect. In ignorance of the original design criteria the Contractor responds to only the PM requesting that the Works Information should be changed, so that the defect does not have to be corrected. Again, in ignorance of the original design criteria, the PM accepts this proposal and agrees to change the Works Information without reference to the Employer. This action, correctly dealt with under the contract and however well intentioned, could have serious consequences at a later date for the Employer if the specified material or component was critical to the eventual functionality of the building or process to be carried out therein. This could result in remedial works being required, additional expenditure, or loss of use, production and profits.

Had the PM kept the Employer, or the project team, informed of the request from the Contractor, or of their eventual decision, then the resultant mistake may have been highlighted and avoided. The underlying principle of the above example can also be made for the PM when complying with their duties in issuing any instructions, agreeing revised programmes, or approving designs and compensation events, as all of these contractual interactions could eventually lead to additional risk, cost or time for the Employer.

Keep your friends close, and your enemies even closer.

So how can the Employer ensure the PM does not, inadvertently, expose them to greater risk?

One solution is to look to the NEC Z Clauses to try and control the actions of the PM. However, any proposed amendment should not compromise the PM’s ability to act fairly and independently. Inserting an NEC Z Clause that states, ‘The Project Manager shall ensure the Employer and project team (identified as required) is copied into all contractual communications as they occur.’, would provide a simple and effective solution to the issue. This, of course, assumes the Employer has the capability to understand and deal with, what may be, a significant amount of detailed and technical information. But should they not, the other consultants should identify any issue and advise the Employer accordingly.

Simple and effective solutions are available to mitigate the issue: Understanding the PM’s powers and making the right choices early in the contract preparation will help avoid disputes at a later date.

This simple additional clause would not compromise the PM’s powers but would assist to reinforce best practice. For extranet based projects (web-based contract administration) the use of pre-determined templates and mandated circulation lists is another straightforward way to achieve the same result. Alternatively, the requirement could be placed within the PM’s appointment document, provided the form of contract is known when the appointment is being drafted and agreed. However, it is always best to consult with your legal advisor or seek professional advice before looking to amend any standard form of contract or appointment.

Furthermore, this additional obligation for the PM would not only benefit the Employer. It would also bring greater clarity and reassurance to the Contractor, Supervisor and designers that decisions are being made fairly and openly with the shared and mutual understanding of the project team. Simple preventative actions, such as described above, benefits all of the participants to the contract and helps avoid unnecessary and potentially expensive mistakes and disputes.

The issue, example and potential solutions noted above are applicable for either NEC3 or NEC4 forms of contract.

By understanding the extent of the powers and obligations of the PM under the NEC form of contract, and making sensible and appropriate adjustments where necessary, will help the Employer ensure that the NEC Project Manager is their friend, and not their foe.

The NEC form of contract states, “The Employer, the Contractor, the Project Manager and the Supervisor shall act as stated in this contract and in a spirit of mutual trust and co-operation”. However, the term ‘mutual trust and co-operation’ is not itself defined or clarified, and honesty, fairness and openness is presumed.

Fergus Taylor, Technical Director