The question of how independent a project manager has to be often comes up both in advance of a construction project, and once issues start to arrive.
In Imperial Chemical Industries Ltd v. Merit Merrell Technologies Ltd, the Technology and Construction Court (TCC) gave further guidance on the point.
ICI and MMT entered into a NEC3 standard form, 2005 edition, Option A form contract (the contract). Under the contract MMT was engaged to undertake various works associated with the construction of a new paint manufacturing facility in Northumberland, with a contract sum of c. £1.9m. The plant was to produce two million litres of paint products per week.
In February 2013, the scope of the works was expanded considerably when Projen, a consultancy acting as project manager, issued MMT with an instruction. But later, in October 2014, MMT were instructed to stop all welding due to defects alleged by ICI’s parent company Azkobel. Around this time Projen resigned as project manager, understandably: ICI has required Projen to sign-off on any revision to its assessment of amounts due to MMT without query. A Mr Boerboom, an employee of Azkobel, was appointed in its place.
The court was asked to consider whether ICI's appointment of an employee of Azkobel as project manager was valid. In reaching his decision Mr Justice Fraser considered the two duties of the project manager:
- agency formation - acting on behalf of the employer
- decision-making function – which could involve making decisions on issues where the contractor and employer have opposing views.
Mr. Justice Fraser felt that the latter function required some degree of independence from the employer. He was guided by various propositions from the relevant authorities.
- First, the role of the decision maker will be determined by the terms of the contract.
- Second, generally the decision maker must be regarded as independent of the employer.
- Finally, when performing his decision making function the decision maker must act in an independent, impartial, fair and honest manner.
The last point assisted Mr Justice Fraser in finding that the employer could not, as ICI had effectively attempted, appoint himself as project manager.
Although various factors were considered, Mr Justice Fraser’s focus was on the need for an express term to be included in the contract where an employer wishes to be the project manager. In this instance it was felt the basis of the contract was for the employer and the project manager to be two separate entities. Without this the contractor would lose one of his protections against under-assessment or under-certification. Therefore to allow such an appointment would, in Mr. Justice Fraser's view, "fundamentally alter the basis on which the parties contracted".
This judgment follows and clarifies previous authorities on this point. As a result, it is clear that an employer cannot appoint himself as project manager unless an express term was included to that effect in the contract. In this instance it was felt that such an appointment would undermine the contract and go against the contractual mechanisms included within the contract creating "endless anomalies" and disrupting the ordinary meaning of the agreement.
This judgment therefore shows that if the employer also wishes to take on the role of project manager he should make sure to include an express provision allowing for this in the contract. Parties that might wish to do this at some point but not from the outset would also be wise to consider reserving a right to do or in the event of the resignation of the initial project manager.