Principal Agent for the Built Environment

Built Environment contracts

When a business appoints resources for planning, surveying, design, construction, facilities management or procurement for a project in the built environment (BE), the choice of agreement/contracting terms may turn out to be a point of debate.

Some organisations choose to make use of bespoke agreements. These bespoke options are often remolded versions of established contracts, which does not always suit the application and can turn out to be cumbersome to administer.

There are numerous options of established agreements from national and international organisations such as the Joint Building Contracts Committee (JBCC), the International Federation of Consulting Engineers (Fidic), the UK Institution of Civil Engineers (creators of the New Engineering Contract) and the South African Institution of Civil Engineering (custodians of the General Conditions of Contract for Construction Works or GCC).

The advantage of established agreements is that they have specifically been developed and evaluated and are also continuously being updated to suit evolution in the BE. An added benefit is that they often offer a family of contract options that can be selected from to suit a specific application. Without changing the intent of the terms, it also does not prevent the contracting parties from adding special conditions that are specific or unique to the project or appointment.

The employer’s agent

Whichever route a business takes in contracting with its BE suppliers it is likely that (unless it is itself an operator in the BE) there is not an in-house employee with the experience and time to administer the agreement(s) on behalf of the organization. This is where the employer’s agent, typically known as the Principal Agent (PA), enters and acts on behalf of the organization to discharge particular legal relations between the parties as set out in the agreement(s).

Principal Agent function premise

For the PA function to be successful, the following are considered minimum requirements:

A written delegation of authority by the client (the contracting party), which is clear and aligns with the applicable contract vernacular;

o?? It spells out the limits of the PA mandate and also confirms authority of the PA in those areas that he/she is expected to act.

A practitioner with relevant experience in the BE;

o?? Design or construction experience alone will not suffice, but a suitable blend of general technical knowledge, commercial acumen and communication skills is required.

o?? A professional registration is advantageous and provides the client with some added comfort.

A clear understanding by the PA of the contracting terms and how it is supported by business processes and artifacts;

o?? E.g., it is of no use stating a payment period of 30 days, if inflexible business processes cannot support it.

A “pre-inclusion” review of Special Conditions;

o?? The PA should determine the intention of such conditions and be allowed to evaluate and advise whether the conditions will support project success.

Additional considerations

The Professional Consultants Services Agreement Committee (PROCSA) provides a Principal Agent (only) agreement in their suite, while most of the other organizations mentioned earlier, includes a professional services option in their families of agreements. Although various professional bodies refer to the role of the PA, the scope description thereof and remuneration guidelines vary. Should any of the standard agreements be applied, it must be supported by a clear record of the services to be provided.

Other matters to be agreed between the client and PA includes the need for professional indemnity insurance (and what will be considered as “non-performance”), the timing of the service and the expected attendance of the PA (full-time/part time/ad hoc).

Reniel Engelbrecht - Director - ProjectWay

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