Role of the Employer's Agent
Updated: Aug 31, 2020
Construction projects are busy, intense and demanding, requiring daily attention by both the professional agent and the contractor. For the contractor, building and constructing projects are what it does, its expertise and raison d’etre. The contractor’s staff can give full attention to the construction works on an ongoing basis.
For the employer, on the other hand, construction is not normally its main line of business. The employer may be a mining company, a property developer building a new shopping centre, or the State requiring new national roads. The employer is primarily concerned with getting its project completed in the soonest possible time, at the lowest possible cost and the built to acceptable quality standards. The employer’s main business is not the construction. Consequently, owners employ architects to design their business buildings, or consulting engineers for the design of large infrastructure projects. Traditionally, the architect or the consulting engineer, also direct or project manage the construction of works. In this role they become the professional agents prescribed the relevant construction contract. In recent years however some employers have taken to appointing professional project managers to project manage the construction works, as distinct from the architects or engineers designing and engineering the works.
The four standard forms of contract recognized by the South African CIDB are the FIDC, NEC, JBCC and GCC 2000 series all provide for this eventuality and detail at some length the the role of the respective professional agent.
In the JBCC form of contract the employer’s agent is called “the Principal Agent”.
The NEC refers to this person as “the Project Manager”
The FIDIC and the GEC refer to “the Engineer”.
I shall, in the interests of simplicity, use the generic term “professional agent” for the remainder of this article.
The Appointment of the Professional Agent
The appointment of such employer’s agent either falls under a contract separate to the architect or engineer, or otherwise incorporates the role of the professional agent into the architect or engineer’s professional services contract. (PSA. It is important to note here, that when we talk about “the Architect”, “the Engineer”, “Project Manager” or Principal agent we are not necessarily referring to an individual, but to a firm of architects, ,consulting engineers or project managers. In which case we say that the architect or the engineer is a juristic person, as opposed to a natural person. Of course, once work commences on site the firm will appoint a designated person to be the natural person acting on behalf of the firm. It is important that this person is properly appointed in writing by the respective firm and a copy of the appointment forwarded to the employer. The employer should always be notified whenever this person is replaced.
Alternatively, the employer is at liberty to employ a natural person as the professional agent.
The contract between the employer and the professional agent is a Professional Services Contract (PSA). The construction contract affords the Employer’s Agent considerable authority but no more authority than the contract ascribes to it. The professional agent is not a party to the construction contract and has no power to change the construction contact. For example, in one recent contract, the contractor was delayed due to reasons of its own making. The contractor then tried to make up for lost time but failed. It then nevertheless applied for an extension of time. The principal agent allowed the EOT on the basis that the contractor had put in a valiant effort to make up for lost time. The effect was to extend the completion date of the contract. The Principal Agent, however, is not party to the contract, and has no authority to amend the contract, no matter how sympathetic towards the contractor. The contractor was clearly late in this instance, was unable to make up time and was thereby in breach. The principal agent had no contractual authority to grant an arbitrary extension of time, which is an amendment to the contract, simply because he felt the contractor deserved some leeway. There is a danger for the principal agent here. The employer could well plead that the professional agent was in breach of the PSA and claim restitution damages from the principal agent.
Not infrequently I find the quantity surveyor carrying out the duties of the principal agent without having authority to do so. In most of these cases the principal agent has absconded his duties to a quantity surveyor. This often happens where the principal agent is simply absent and the QS, with good intentions, assumes the principal agent’s functions. Neither party has the authority to permit that and in the event of the QS incurring a loss for the employer, both the QS and the principal agent could be liable for damages. There is no reason why the employer could not appoint the QS as the principal agent, but unless the employer has done so in writing, the QS is constrained from taking over the duties of the principal agent. On top of which the wily contractor will play both ends against the middle.
Express Authority and Implied Authority
The different standard forms of contract provide the employer’s agent with express authority to perform the functions designated to the professional agent in the contract. In addition to this the agent derives implied authority to do whatever is normally and reasonably incidental to the performance of any act which she/he has been employed to do in the course of her/his profession. Where the professional agent is also the architect or engineer and he/she has express authority to supervise construction as the principal agent, he/she has implied authority to give instructions regarding constructional details.
On the other hand, the mere fact that an employer’s agent has been appointed does not mean that such agent has implied authority to act on behalf of the employer regarding matters arising in connection with building operations unless the PSA or construction contract specifically affords the professional agent such authority.
It has been decided in law that a principal agent has no implied authority to:
to appoint a quantity surveyor, nor to employ an engineer or other consultants,
enter a contract on the employer’s behalf,
to pledge the employer’s credit,
to warrant that plans and specifications are correct, and that work can be carried out in accordance thereto,
to vary or modify the design or the quality or quantity of materials,
to alter or waive the conditions of contract regarding the manner of ordering extras, and if the contact does so provide, that extras shall only be ordered in writing and the professional agent’s authority is limited to that extent.
Where the employer’s agent has been given express authority to order variations of the work to be fully performed, it can only do so within the general scope of the contract and cannot order such variations as to change the whole scheme.
Furthermore, it would seem that a principal agent has no implied power to alter the time fixed for the completion of the work. Such authority can only be awarded to the professional agent in terms of the PSA or the construction contract.
Modern construction contracts contain many provisions specifying the provisional agent’s activities. A number of these provisions specify time periods in which the activity must be performed, failing which a party may be time barred or lose some entitlement. A professional agent ignores such provisions to its detriment.
At one time it was argued that the professional agent must be neutral. Today it is now largely accepted that such a view is unrealistic. The professional agent is employed by the employer, is paid by the employer. The professional agent is however expected to be fair to the contractor.
An example: I know of an instance where the executive project director of a mega-project with multiple contracts, overheard the professional agent of one of the larger contracts announcing gleefully to his colleagues that the contractor had just a few days left before being time barred from claiming for an extension of time plus costs. The project director took the professional agent aside and informed him in no uncertain terms that the professional agent’s primary function was to remove barriers ahead of the contractor, not create barriers, nor hinder it nor cause resentment. That in the interests of effective project execution the professional agent should have reminded the contractor that it was approaching a time bar date. The project director (who was the Employer’s Representative) summarily removed the professional agent from the project.
The professional agent is not the employer’s representative. Professional agents may not stray outside of the provisions of the PSA and the construction contract. Should they do so they will be in breach and may find themselves liable for damages.
The wise professional agent will familiarise him-/herself with the terms of the PSA as well as the construction contract. And check weekly, at least that he/she is compliant. Alternatively develop a separate programme or schedule for his/her own obligations. If in doubt consult with the employer or the employer’s representative and ensure that such meeting is recorded in writing.
Reg Reynolds. Pr.Eng; FAArb; FBIArb; AMSAICE