ICPMA Annual Meeting 2005 PRAGUE, the Czech Republic

Friday 13th May 2005

Legal position and authority of PM COUNTRY REPORT: SPAIN

Recognition of figure of PM in Private Law (including bills)

Incredible as this may sound the Spanish construction law does not explicitly recognize the figure of the project manager as a construction agent.One cannot even say that this law is culpable for being old or ancient, rather the LOE was inducted into the legal structure in 1999.

The construction process and the liability of the agents who take part in it, are regulated in Act 38/1999, of November 5th, of Construction Planning (hereinafter, the “LOE”) and of section 1,591 of the Civil Code.

In other words the law tends to take a wide angle view of the development and construction process, and, in the ultrimate aim of defending the end user consumers, tends to “lump” all the participants together- it fails to allocate and divide responsibilities clearly.

Just a little background on the Spanish development team structure:

In Spain the main participant responsible under law for the design and execution of a project is the architect. He may include engineers into the design and execution process for engineering aspects. On the site a technical architect acts to ensure that the construction proceeds according to the architects plans and according to law and best practice, and certain technical architects also perform the role of health and safety invigilator. These team members liaise and coordinate with the construction manager, generally of the main contractor.

So the project manager generally intervenes in the process as a representative of the owner, to coordinate and plan and review the whole process.

Section 8 of Chapter III of the LOE defines as construction agents (the “Construction Agents”) “all the persons, physical or judicial, who participate in the construction process”. In sections 9 to 16, it identifies individually each of them: (1) developer, (2) designer, (3) building contractor, (4) director of works ( who is more often than not the architect), (5) the technical architect ( who partners the architect in his direction of works activities), (6) control entities and laboratories, and (7) product suppliers; and it defines their functions and obligations. As you can see, nowhere is the figure of Project Manager specifically mentioned. But before throwing a party in celebration that we could be considered as working in the Wild West and be

left completely faceless and free of responsibilities, one should take a long, deep breath.

In 2002, AEDIP gave the task of a survey to office Clifford Chance, who decided that the project manager, although not explicitly regulated, is implicitly recognized in the wide definition of Construction Agents. The project manager is responsible according to section 1591 of the Civil Code and the obligations that arise from their contract of service.

In Spain, the construction process is complex, and there are more agents intervening than are mentioned by law, and all of them are responsible for their functions, though the law does not explicitly mention all the specialities.

This can attract some apparently strange and apparently dangerous situations

Recognition of figure of PM in Public Law (including bills)

The Spanish public law does not explicitly recognize the figure of the project manager. Nevertheless, the contract of project management is a consultancy contract under the Spanish public law.

The contracts made by the Public Administration are subjecto to the revised text of the Contract Law for Public Administration, passed by order in Council 2/2000, of June 16th.

According to section 1 of the Act, this is applied entirely to the following entities:

The General Government Administration.

The Administrations of the Autonomous Communities.

The entities that are part of the Local Administration.

The autonomous institutions

As regards the public companies (those whose capital have, directly or indirectly, a majority shareholding by the Public Administration and the other entities of that kind), the Act is not applicable in a direct way, but those companies “will adjust their activity to the principles of publicity and concurrence”.

Contracts for Project Management are contracts of consultancy and assistance (sections 5.2.a and 196 and the following of the Contract Law of the Public Administration).

The project manager assumes roles of supervision, coordination, distribution of the work between suppliers and subcontractors, the

selection of the subcontractors, drafting of contracts and the administration of such contracts, supervision and coordination of the building work, with the aim of obtaining the minimum cost and implementation period, always within the budget, quality and set period of time.

They are services of assistance and consultancy to the Owners in the whole construction process from its very beginning. A logical consequence of the abovementioned is that the project management contracts are “typical” administrative contracts (section 5.2.a LCAP) and, therefore, contracts fully subject to the administrative law in all its stages, that is to say, the preparation, award, content and effects of the contract relationship.

- Weaknesses of legal framework

In AEDIP we considered it is advisable for the State to regulate the figure of the project manager in Act 38/1999, of November 5th, of Construction Planning (LOE), so that there is no judicial speculation about their responsibility.

We also think that the Public Administration has to design some contract models for contracting project management, such as those of other countries, so that their roles are clearly defined and they are not mistaken for value engineering or other kinds of consultancy. Besides, the regulation of the figure in the public sector would act as an incentive to the increase of contracting.

There is almost NO jurisprudence that has developed the figure of the project manager and the project manager’s responsibility. We know a first sentence of 2004 where they analyze the joint and several liability of project managers when, apart from their role, they assume other functions such as managing the building work

In this interesting case, the background is based on the appeal to a previous judgement where the owners lost the initial case. The Owners alleged that the project had gone over budget by 30% and that they believed that a project manager should not only control the project itself, but the EXECUTION of the project, even though in Spanish law that reponsibility clearly belongs to the architect, technical architect and builder. The project manager´s defence revolved around the fact that the overspend had to do with the architect´s erroneous design and the technical architects poor “direction of works”. Nevertheless, this judgement follows the general tendency of “lumping responsibilities together” and found the project manager guilty.

- How PM Companies regulate PM contracts

This contract of consideration of services is generally made by Developer and Project Manager and within it they define exactly the roles of the Project Manager in the construction process and they usually regulate a specific responsibility framework.

Although the Project Management contract is a valid and binding instrument to determine the possible responsibility of the Project Manager to the Developer, it does not happen the same as regards the responsibility of the LOE. Therefore, the responsibility regime of the LOE is not, in general, dispositive, that is to say, it can not be modified or excluded by wish of the parties.

With the aim of avoiding the risk of participating of the responsibility of the LOE, it is not unusal that in contracts of Project Management: the services of Project Management are defined so that, as far as possible, they avoid the possible coincidence with the obligations and responsibilities of the Construction Agents.

It is always advisable to define the services as clearly as possible, as these functions are different from the obligations of each Construction Agent.

In conclusion then:

1. The project manager is not officially recognised yet in Law 2. However, the project manager must perform well if he is not to face

being included as co-respondent in a claim 3. Special care and attention to detail must be taken to the writing of the

consultancy contracts and conditions held with the owners 4. With a little luck and some hope our situation will be recognised at

some date in the future as an addendum to the current LOE.

Mark Lawson for the ICPMA General Meeting, Prague.