Construction Law Bulletin

Understanding the Role of the Project Manager

Introduction

Managing any construction project requires talent in the art of building and maintaining strong relationships and the specialized skills that can only be gained from experience. With money and reputation on the line, it is important for every player in the construction industry to ensure that all the pieces are in place to carry out a project on time and on budget, and to meet or even exceed the expectations of quality and participant satisfaction.

For this reason, many owners are turning to professional project managers to ensure that project goals are met. This article will briefly introduce the project manager as a potential key player in the construction industry, and address some issues facing owners, contractors and design professionals when dealing with a project manager.

So Why Should An Owner Hire A Project Manager?

In every construction project, there is a risk of schedule and cost overruns. An effective project manager can help owners manage that risk. Experienced project managers can help you:

• Avoid expensive claims;
• Evaluate and control risk; and
• Ensure you are receiving value for your investment.

A project manager can ensure that your facility meets time, quality and cost objectives by providing the follow:

• A clear statement of project objectives and limitations;
• Careful monitoring during design for adherence to project requirements; and
• Independent reviews during design and prior to tender: value engineering, constructability and bid document reviews.

Is A Project Manager An Agent Of The Owner?

Not necessarily. Within the meaning typically assigned to "project manager", we are concerned with a person or firm that provides project management services to the owner. We are not concerned with what has been termed a "construction manager": a person or organization that acts as an advisor to the owner at the pre-construction phase, and then becomes the agent for the owner, directly entering into contractual relationships with design professionals and the general contractor during the construction phase.

What Exactly Does A Project Manager Do On A Construction Project?

A project manager may provide services to an owner at every stage of the construction process, depending on the needs of the owner and the qualifications of the particular project manager.

Generally speaking, the functions of project management include the following:

1. At the planning stage: specifying project objectives and plans including defining the scope, budget, schedule, performance requirements, and selecting project participants. In addition, a project manager should provide strategic advice on issues that may affect the project and ways to minimize the impact of outside factors. Examples include advice regarding:

1. scheduling the project and bid closing dates to avoid peak bidding and building periods;
2. compressing the pre-construction phase while ensuring that timelines are achievable;
3. pre-purchasing key, price-sensitive materials;
4. retaining the professional expertise of quantity surveyors or contractors for budget input, and conducting value analysis;
5. creating a funding contingency plan; and
6. taking proactive steps to minimize the risk of owner-caused delays such as obtaining adequate geotechnical investigations and addressing regulatory approvals.

2. At the procurement stage: maximizing efficient resource utilization through procurement of labour, materials and equipment according to the prescribed schedule and plan. Project managers may provide advice regarding the reputation and suitability of design professionals and contractors and may be called upon to administer the bidding processes.
3. At the construction phase: services that may be provided once the project breaks ground, include:

1. implementing and administering the project plan by proper co-ordination and on-going oversight of planning, design and quality;
2. administering the budget and cost controls and provide project accounting services as well as maintain the project records;
3. developing communications mechanisms for streamlined decision making;
4. resolving conflicts among the various participants; and
5. monitoring the schedule and dealing proactively with delays.

4. At project completion: reviewing the project to ensure orderly and timely completion, including development of punch-lists, monitoring implementation, training and warranty periods, resolution of outstanding issues, reviewing claims or disputed issues.

Where Do Project Managers Fit In On A Construction Project?

Generally speaking, project management is necessary in every project, whether it is a new construction or renovation. In many cases, the owner has the resources to manage the project without outside assistance. As a project becomes more complicated, the benefit realized by employing a project manager increases.

Professional project management is not suitable in all situations. The procurement method an owner chooses will determine the appropriateness of hiring a project manager. Though it is possible to find a place for a project manager in all situations, the following are the most common procurement methods in which the services of a project manager are engaged.

Traditional Design/Bid/Build

The traditional Design/Bid/Build procurement model, where the owner contracts directly with the architect and the general contractor, is perhaps the most common scenario in which a project manager may be retained.

Though the owner is in a direct contractual relationship with the designer and general contractor, it may be advantageous for the owner to engage a project manager if the owner does not have the in house resources or experience necessary to effectively plan in advance of and administer the construction.

One concern about the introduction of a project manager into any process is that the introduction of an additional party into an already crowded operation. Between the owner, architect, various engineers, and the general contractor (not to mention the subcontractors), some may say that a project manager may serve to confuse matters if the parties are not clear as to whom or on what basis they are to deal with one another. However, where the relationships are set out clearly, and a coherent communication structure is put in place, the project manager will be an invaluable part of the project, providing careful monitoring of costs and schedule and continuous oversight that will ensure that the project is managed effectively.

Design/Build

In design/build arrangements, the owner contracts with a design/builder, or construction manager, who then contracts with and oversees the design professionals and the general contractor. In this case, the design/builder has a very prominent role wedged in between the owner and the parties actually designing and performing the construction work.

When using this procurement method, it is often thought necessary to engage an independent third party professional advisor because of the perceived conflict of interest that arises when a single entity, the design/builder, is responsible for the total package of design and construction on behalf of the owner, with no one to protect the owner's best interests.

As a result, many owners find it useful to engage a project manager as their independent third party professional advisor for the purpose of advising on the design at the pre-contract state and to supervise construction to ensure compliance with the owner's requirements, among other services.

The concerns relating to project management in this context are similar to those expressed elsewhere, namely that the introduction of a project manager will serve to complicate relationships and introduce another level of bureaucracy. Once again, clearly setting out relationships and processes, and ensuring that contractual relationships are created with the project manager's role in mind may neutralize this criticism.

Conclusion

Project management is a service that owners must be aware of in order to ensure that they are achieving their project goals in the best, and most cost effective way. The professional advice and services received are of particular importance for owners lacking the in house staffing levels, expertise or depth of experience necessary design and carry out high level planning, coordination and implementation strategies.

It is important to thoroughly investigate the background of any project manager to determine their level of skill and reputation in the construction community. No matter how beneficial a project manager may be for a project, those benefits are only achieved in the context of a project manager capable of performing this role.

When considering employing a project manager in your construction project, it is important to ensure that relationships between the owner, design professionals and the general contractor are thoroughly set out and incorporated into all contracts and documentation. Standard contracts provided by associations such as the Canadian Construction Association and the Canadian Construction Documents Committee may not make adequate provision for the role that a project manager is to play in your project and amendments may have to made accordingly.

If you have any questions or require any assistance in the preparation of your contract documents, please contact Samantha Ip, or any member of the Construction Group.

Michal Jaworski and Samantha Ip

Frequently Asked Questions

REMOVAL OF CLAIM OF LIEN

How do you remove a claim of lien filed on the wrong property?

If the lien claimant refuses to remove a claim of lien filed against the wrong property, an Owner can apply to Court to have the claim of lien removed. The Owner must provide adequate evidence to satisfy the Court that the lien does not relate to the land against which it was filed.

FEDERAL AND PROVINCIAL CROWN LANDS

Can a claim of lien be filed against land owned by the federal government?

No. The Builders Lien Act is provincial legislation, and does not apply to land owned by the federal government. However, often times in federal projects, there is a bond in place against which unpaid subcontractors can claim for payment.

Can a claim of lien be filed against land owned by the provincial government?

Generally, yes. However, the Act specifically exempts highways and forest service roads. In addition, the improvement must be at the express request of the provincial government as the deemed authorization provisions of the Act don't apply to land owned by the provincial government.

CERTIFICATES OF COMPLETION

What is a certificate of completion?

A certificate of completion is a form issued by the payment certifier which confirms that a particular contract is complete. Usually the issuance of the certificate starts the time period for filing a claim of lien. However, a certificate of completion can't be issued to provide lien claimants with more time to file claims of lien where the head contract has been completed, abandoned or terminated or, where the improvement has been completed or abandoned if there is no head contract.

Who is the payment certifier?

The payment certifier is the architect, engineer or other person specified in the contract. If no such person is specified, then the payment certifier is the Owner, in relation to amounts due to the contractor, and it is the Owner and the contractor acting together, in relation to amounts due to subcontractors.

When can a certificate of completion be issued?

A certificate of completion can be issued when the work remaining to be done under the contract or subcontract to which the certificate of completion relates can be completed/corrected for less than:

1. 3% of the first $500,000 of the contract price;
2. 2% of the next $500,000 of the contract price; or
3. 1% of the balance of the contract price.

This is called the "3-2-1 Formula". As an example, if a contract price is $200,000, a certificate of completion can be issued when the work remaining under that contract is valued by the payment certifier to be less than $6,000.

Who can request a certificate of completion?

The Act provides that either a contractor or a subcontractor can trigger a payment certifier's responsibility to determine whether a certificate of completion can be issued. As such, an excavation or demolition subcontractor, for example, need not wait for the head contract to be nearing completion to request a certificate of completion in respect of his/her subcontract.

One interesting note, the Act is silent as to whether an owner can request a certificate of completion or whether a payment certifier can issue a certificate of completion of their own accord although in practice this is done frequently.

Adam Zasada

Understanding ADR: The Alternative Dispute Resolution Process and the CCDC 2

Introduction

In the context of legal disputes, "ADR" stands for "alternative dispute resolution". This acronym has been coined to denote a variety of processes aimed to allow parties to resolve disputes before the necessity costly litigation where issues are determined by a judge who is required to consider volumes of documentary and other evidence in a lengthy trial.

In the context of construction, disputes between owners and contractors often arise during a construction project. The CCDC 2 – 1994 standard form construction contract ("CCDC 2") provides the parties with an ADR process that employs the following methods:

• Negotiation;
• Determination of a dispute by the consultant;
• Mediation; and
• Arbitration.

What Is The Difference Between Negotiation, Mediation and Arbitration?

Negotiation refers to any communications between the parties themselves or their representatives, such as their legal counsel, in an attempt to resolve the dispute that exists between the parties. Mediation is a more formal negotiation process whereby a neutral third party, the mediator, assists the parties with negotiations towards an agreement for resolving the dispute. Arbitration, on other hand, does not involve negotiations, but rather is a process that involves a neutral third party, the arbitrator, acting as the adjudicator of the dispute. An arbitration is similar to a trial, where an uninvolved party is asked to consider the evidence of the involved parties and then to make a binding decision, essentially, on which party is right.

ADR and the CCDC 2

Owner and a Contractor in Part 8 of the general conditions. Negotiation, mediation and arbitration are all available in the CCDC 2 ADR process. The final step in the process is arbitration and, depending on what the parties decide prior to the arbitration, the parties may or may not be able to appeal the arbitrator's decision to the courts. If the time lines set out in the CCDC 2 are strictly observed, the parties could achieve resolution of a dispute (from a decision of the Arbitrator) within three months, or possibly less, after the dispute arose.

The ADR process in the CCDC 2 can be summarized as follows:

Step 1: Negotiations between the Owner and the Contractor

The first step in the dispute resolution process is for the Owner and the Contractor to attempt to resolve their dispute on their own. The CCDC 2 encourages resolution by expressly requiring all parties to make "all reasonable efforts to resolve their disputes by amicable negotiations" (GC 8.2.3).

Step 2: Determination By The Consultant

If the Owner and the Contractor are unable to resolve the dispute themselves, then the next step is for the dispute to be referred to the Consultant. The Consultant has the authority to resolve all claims, disputes and other matters in question relating to the performance of the Work or the interpretation of the Contract Documents, with the exception that the Consultant has no authority with respect to financial information required from the Owner.

Both the Owner and the Contractor are entitled to refer a dispute to the Consultant. The procedure for referring a dispute to the Consultant is set out in GC 2.2.7 and it requires that written notice be given to the Consultant and the other party. The Consultant will investigate the dispute and make a finding. During this process, the Consultant must act as an unbiased adjudicator of the dispute. The Consultant will then inform the parties in writing of that finding within a reasonable amount of time.

Step 3: The Project Mediator – Mediation

If either the Owner or the Contractor, or both, are dissatisfied by the Consultant's finding, then each party is entitled to dispute it. This dispute is referred to the Project Mediator who will facilitate negotiations between the parties in a mediation. In addition, any matter that is in dispute and is outside the scope of the Consultant's authority bypasses the Consultant and is referred directly to the Project Mediator.

The Owner and the Contractor must appoint the Project Mediator within 30 days after the Contract is awarded or, if that was not done, within 15 days after the Owner or the Contractor gives written notice to the other requesting that a Project Mediator be appointed (GC 8.2.1).

In order to refer the dispute to the Project Mediator, either the Owner or the Contractor, or both, must provide written notice to both the Consultant and the other party within 15 working days after being informed of the Consultant's decision (GC 8.2.2). If notice disputing the Consultant's finding is not given within the 15-day time limit, then a party is deemed to have accepted the Consultant's finding and to have released the other party from any claims regarding the matter that was referred to the Consultant (GC 8.2.2). If notice disputing the Consultant's finding is given within the 15-day time limit, the other party is then required to send a written reply within 10 working days after receiving the notice of the other party's dispute of the Consultant's finding (GC 8.2.2). The parties must then, within 10 working days after the reply is received, request the Project Mediator's assistance in resolving the dispute (G.C. 8.2.4). This 10-day window allows the parties to once again try to settle the dispute themselves.

The mediated negotiations that take place after the Project Mediator becomes involved are governed by the Rules for Mediation of the CCDC 2 Construction Disputes (GC. 8.2.4). The Project Mediator has 10 days, or longer if the parties agree, to assist the parties in ending the dispute (GC 8.2.4). If the dispute is not resolved during that time, then Project Mediator will give written notice to the Owner and the Contractor indicating that the mediated negotiations have ended (GC 8.2.5).

Step 4: Arbitration

If the Project Mediator has terminated the mediated negotiations, both the Owner and the Contractor have the right to refer the dispute to an arbitrator. In order to refer the dispute to an arbitrator, the party who is seeking the arbitrator's involvement must give written notice of that intention to the other party within 10 working days after the date on which the Project Mediator terminated the mediated negotiations (GC 8.2.6).

The arbitration process is governed by the Rules for Arbitration of CCDC 2 Construction Disputes. Depending on what the parties agree to before the arbitration, the parties may or may not be able to appeal the Arbitrator's decision to the courts. The arbitration process is quite formal and has many of the same elements as a court proceeding in that a hearing is conducted and written and oral can be presented. Although the CCDC 2 or the Rules for Arbitration do not impose any limits on the types of disputes that the Arbitrator can deal with, the Arbitrator likely does not have jurisdiction to remove or enforce a builders lien.

If either party wants the arbitration to be conducted immediately, that party must give written notice to that effect within 10 working days of the date on which that party gave or received notice that the dispute was being referred to arbitration (GC 8.2.8). If neither party gives notice requesting that the arbitration be held immediately, then any disputes that have been referred to arbitration will be dealt with in one arbitration proceeding that will be held after the contract has been substantially performed, terminated, or abandoned by the Contractor (GC 8.2.8).

The Courts

The rights and remedies available under the CCDC 2 and the other Contract Documents are in addition to any rights and remedies available by law, except where the CCDC 2 or other contract documents state otherwise. Therefore, both the Owner and the Contractor have the normal legal remedies available to them, in addition to the remedies available through the ADR process.

If the dispute is referred to, but not resolved by, the Project Mediator and neither of the parties provides the notice required to refer the matter to arbitration, the parties are free to resort to a court proceeding or any other form of dispute resolution they have agreed to use (GC 8.2.7).

Conclusion

The CCDC 2 provides for a number of ADR processes that commences by encouraging the Owner and the Contractor to resolve their dispute themselves and ends with arbitration proceedings that are similar to court proceedings in many respects. As an Owner or a Contractor, it is important to be aware of the various ADR methods that are available and the requirements, especially the time limits, for engaging such methods.

Julie D'Avignon and Samantha Ip