Geoff Parish as at 4th March 2017

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The Third Party Contract Administrator [TPCA] in the Traditional Contract

[i.e. the Engineer under NZS 3910]

In the traditional form of building contract the Principal employs the Designer under one contract to
design the Contract Works and the Principal employs the Contractor under another contract to
construct the Contract Works according to the design produced by the Designer.

The Designer is usually an Architect or architectural draftsperson, or for larger or complex work may
be a firm of Architects. Specialist designers, for example structural engineer(s), services engineer(s)
and others are also employed. Such specialists may be employed direct by the Principal or employed
by the Architect.

The key point is that the Principal pays for the costs of design, including those who produce that
design whatever their profession.

It is theoretically possible that having secured a design for the Contract Works, the Principal may
then go out to tender to secure a Contractor to construct the Contract Works without any further
involvement of the Designer in the process. In this case the Principal administers the construction
process him/herself [the Principal may have legal personality, e.g. be a limited liability company].

For larger or more complex work the Principal often employs someone to administer the
construction process on his/her/its behalf. This will be a named individual [a natural person, a single
human being, not a legal personality such as a firm or a limited liability company] whose function is
to make sure the Contractor has the necessary information to complete the construction of the
Contract Works. Design work frequently proceeds in tandem with actual construction.

This person, the third party contract administrator [TPCA] should be employed by the Principal
under a contract for services [not under a contract of service] because it is intended that s/he is
capable of independent judgment when resolving issues with the potential for conflict between the
Principal and the Contractor, usually over how much the Contractor should be paid.

The Principal employs the TPCA to administer the work under a contract which the Contractor does
not have access to or knowledge of. But the contract to build between the Contractor and Principal
contains conditions which set out in detail the duties and powers of the TPCA to act as administrator
on behalf of the Principal.

The following shows the contractual arrangement diagrammatically:

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Contractual arrangement for a traditional form of contract employing

a third party contract administrator [TPCA]

TPCA <--- contract to ---> Principal pays <--- contract ---> Designer

--->
administer to design

contract
to build

--->
Contractor

Commonly used forms of contract containing provisions for a third party contract administrator are:

New Zealand Standard 3910:2013 [current edition at time of writing] Conditions of Contract
for Building and Civil Engineering Construction and

NZIA Standard Conditions of Contract SCC 2014 [current edition at time of writing]

Whereas NZS 3910 is in the public domain, SCC 2014 is copyright to the New Zealand Institute of
Architects and its application is restricted to those contracts where the Principal employs a qualified
Architect to act as TPCA. Under NZS 3910 the TPCA is referred to under the generic title of
Engineer who is usually an engineer for civil construction or an architect for commercial and
residential construction. Theoretically s/he could be another construction professional such as a
quantity surveyor but I am unaware of the use of a quantity surveyor as such although a quantity
surveyor would be suited to the role of TPCA in my opinion. Under SCC the generic term, not
surpisingly is Architect who is always an architect.

In most cases the person employed as the TPCA is an employee of whichever firm designed the
Contract Works whether a firm of architects or engineers. If the designer was an individual then s/he
may also be employed as the TPCA.

The main duties of the Engineer under NZS3910 or the Architect under SCC include the
following:

As an independent person to:

-Certify progress and final payments.

-Decide which instructions are variations to the contract [extras].
-Certify the value of Variations.
-Confirm extensions of time, their cause, and duration.
-To decide when all work is complete.
-Settle disputes between the Principal and the Contractor wherever possible [prior to the
adoption of dispute resolution processes involving third parties].

As the Principals agent to:

-Provide the Contractor with all necessary information [drawings, specifications,

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instructions] such as to allow the work to proceed in accordance with the contract
programme.
-Check that the work carried out conforms to contract requirements

The TPCAs powers and duties are limited to those set out in the conditions of contract and can only
be properly understood in detail by reading those conditions.

The TPCA has two types of duties: [1] to act as the principals agent; and [2] to act independently of
both principal and contractor to interpret the contract and determine as and when the contractor is
paid and whether and by how much the contract price can be adjusted.

Negligence:

A potential problem for the principal is that if the design is defective in some way, the contractor
follows it, and the contractor cannot be expected to have noticed that the design was defective, then
unless the principal can show the designer was negligent the principal must bear the costs of repair
itself.

To be negligent is not to apply an adequate standard of care to the work being done i.e. advising the
principal on design requirements.