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NEC – TAKING SIDES – A LOOK AT THE NEED FOR PROJECT MANAGER IMPARTIALITY

This is the third in a series of articles on the NEC standard form of contract, this time dealing with the requirement for Project Manager impartiality.

The NEC standard form stipulates that the main contributors to the Project shall behave in a particular manner.  This is contained within Clause 10.1, which 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.”

The Project Manager administers the contract as a manager, gives instructions, assesses and implements Compensation Events and approves the Contractor’s submitted Programme.  The Employer will clearly expect his interests to be protected through this process.  The Project Manager is appointed by the Employer and in some cases may also be a direct employee of the Employer’s organisation.  This can clearly lead to the Project Manager feeling they sit squarely in the Employer’s camp and presents the risk of the contract being administered in the interests of the Employer, whilst at the same time to the detriment of the Contractor, especially in cases where the Project Manager feels pressure to comply with the wishes of his/her paymaster.  The question in such cases, should the Project Manager exhibit bias, is whether he/she is fulfilling their obligations under the contract and at law.  The simple answer is a resounding no.

The issue was already clarified for JCT forms of contract in Sutcliffe v Thackrah [1974] AC 727, where the court stated that the Architect had two strictly separate functions, one under which they are bound to act upon their client’s instructions and one under which they must act upon their own opinion, the latter being under their role as Contract Administrator.  The NEC standard form had, however, been sold to a large degree on the fact that the Project Manager was acting solely in the interests of the Employer and it took many years for the court to expressly clarify that this was not the case.

Clarification came in the decision handed down by Mr Justice Jackson in Costain Ltd v Bechtel Ltd [2005] EWHC 1018. The decision in this case was that the principles regarding impartiality in acting as a contract administrator brought out in Sutcliffe v Thackrah were just as relevant under NEC as they were under JCT.

Arguments were put forward by counsel in this case that as any dispute between the Parties could be referred to adjudication, then the adjudicator would redress the balance through his/her impartiality, suggesting there was no requirement for a Project Manager to be unbiased.  This was not accepted by Mr Justice Jackson, who stated that there were many instances within the NEC standard form where the Project Manager was required to exercise their own independent judgement and as such there was no reason why the use of such discretion should exclude the principles brought out in Sutcliffe v Thackrah.

And so at last clarity.  In administering an NEC standard form the Project Manager is under an obligation to administer on behalf of the Employer but in the interests of both the Employer and the Contractor, equally and fairly.  Clause 10.1 confers an obligation on the Parties to work together and effectively upon the Employer not to interfere with the Project Manager’s duty of impartiality in administering the contract.  It may however still be difficult for some Project Managers to separate the two clear functions and refuse to comply with certain express wishes of the Employer.  Any Employer and/or Project Manager working within a framework where there is a real danger of bias being evident should not take this lightly.  Should bias be proven there is a real risk that all previous decisions of the Project Manager could be challenged, resulting in the Project Manager’s position being no longer tenable and potentially throwing a project into chaos.  The moral of this tale is that sometimes “sitting on the fence” is not such a bad place to be.

About the Author

John Blackshaw is a dual qualified specialist construction law lawyer who worked as a commercial manager, project/programme manager and contracts manager before qualifying as a solicitor. John has worked internationally for in excess of 25 years in North America, South America, and in Western, Central and Eastern Europe on a wide range of projects across the energy, nuclear, roads, rail, marine, infrastructure, automotive, industrial, residential and commercial sectors, both with Employers, and with Tier 1/Tier 2 Contractors as well as in-house.

Prospect Law is a multi-disciplinary practice with specialist expertise in the energy, infrastructure and natural resources  sectors with particular experience in the low carbon energy sector. The firm is made up of lawyers, engineers, surveyors and other technical experts.

This article remains the copyright property of Prospect Law Ltd and Prospect Advisory Ltd and neither the article nor any part of it may be published or copied without the prior written permission of the directors of Prospect Law and Prospect Advisory.

This article is not intended to constitute legal or other professional advice and it should not be relied on in any way.

For more information or assistance with a particular query, please in the first instance contact Adam Mikula on 020 7947 5354 or by email on adm@prospectlaw.co.uk.

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