Episode 174 - Employer's Agent

This week we will be talking about the Employer’s Agent role in Design & Build. This episode content meets PC2 - Clients, Users & Delivery of Services & PC5 - Building Procurement of the Part 3 Criteria.

Resources from today's episode:

Websites:

• https://www.rics.org/content/dam/ricsglobal/documents/standards/employers_agent_design_and_build_1st_edition.pdf

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Transcript

Episode 174:

Hello and Welcome to the Part3 with me podcast. 

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I am your host Maria Skoutari and this week we will be talking about the Employer’s Agent role in Design & Build. Todays’ episode meets PC2 & PC5 of the Part 3 Criteria.

And make sure to stay until the end for todays’ scenario.

As you are probably already aware, the JCT Design & Build Contract is appropriate where:

• detailed contract provisions are necessary and employer’s requirements have been prepared and provided to the contractor
• the contractor is not only to carry out and complete the works, but also to complete the design and
• the employer appoints an employer’s agent (who may be an external consultant or employee) to administer the conditions.

Now before I dive into the employers agents roles and responsibilities, something I know can sometimes be confusing, are the role differences between a Contract Administrator, Project Manager and Employer’s Agent:

A contract administrators role is the party specifically identified within the contract as being solely responsible for administering the contract for the employer. Their duties commence at the point the contract is entered into. 

Now a project manager is also specifically identified within the contract and is responsible for managing a team to develop and deliver a project for an employer. Their role often commences from the project inception stage making decisions on behalf of the employer and giving instructions to the contractor. The project manager provides information, controls and manages communications from the team to the employer so that the employer can act as required. 

And now comparing to the employers agent, they are also identified within the contract but the name can be changed within the contract to another party. They are identified as the party who acts on behalf of the employer in all matters as if they were the employer.

Just wanted to provide a quick comparison of the three roles found in construction projects to clearly outline each roles responsibilities. 

Now reverting back to the main subject of todays episode, the JCT Design & Build Contract only has six references to the employer’s agent in the whole contract and the contract requires them to be named within it, although this can be changed should their appointment be terminated and the employer wishes to appoint someone else. The clauses which refer specifically to the employers agent state:

• any notice or other communication between the employer (or employer’s agent) and the contractor that is expressly referred to in the agreement or the conditions shall be in writing
• the contractor is required to keep on-site and available to the employer’s agent at all reasonable times a copy of the employer’s requirements, the contract sum analysis, the contractor’s proposals and various other referenced drawings and other documents
• the employer’s agent and any person authorised by them or the employer shall at all reasonable times have access to the works and to the workshops or other premises of the contractor where work is being prepared for the contract
• a payment notice or a pay less notice to be given by the employer may be given on their behalf by the employer’s agent or by any other person who the employer notifies the contractor as being authorised to do so
• the site manager shall keep complete and accurate records in accordance with any provisions relating thereto in the employer’s requirements and shall make the same available for inspection by the employer and/or the employer’s agent at all reasonable times.

Now, lets look at the role and duties of the Employers Agent:

Their role is relatively simple. They act on behalf of the employer on all matters, unless the employer expressly states in writing to the contractor that they wish to act themself, or to appoint others to act for them on certain aspects of the contract. It is important that the employer allows the employer’s agent to carry out the duties on the employer’s behalf, and does not ‘interfere’ with those duties. 

The fundamental role of the employer’s agent is being able to manage and complete their obligations under the contract and for the contractor to establish correct authorities and instruction. The employer’s agent, for the purpose of any contract, must be one individual that the employer has entrusted their authority to manage the project. They could possibly be an architect by profession but its critical to state that they are not acting in that capacity under the contract. Nor should the employer’s agent attempt to exercise their expertise as a designer in that respect and must not interfere with the contractor’s responsibilities under the contract. Any party or parties being appointed as an employer’s agent should be able to demonstrate that they have the experience and technical ability to carry out the employer’s brief.

The employer’s agent cannot act in any role where it could be seen that confidential information or communication between the employer’s agent and the employer could be provided to the contractor.

So in terms of the employers agent specific duties, these are summarised within the contract to receive and issue:

• applications
• consents
• instructions
• notices
• requests or
• statements

and otherwise to act for the employer under any of the conditions.

A key point to clarify, however, is that the employer will always retain some of the responsibilities, such as:

• providing possession of the site – as the site belongs to the employer
• making payment to the contractor in compliance with payment notices – as the employer and the contractor are the contracting parties – no-one else can pay the contractor and
• issuing a notice to the contractor following the issue of a non-completion notice stating that the employer may require payment of, or may withhold or deduct liquidated damages. The role of the employer’s agent is to issue payment notices without deduction for liquidated damages, though the employer’s agent must advise the employer of their rights and responsibilities in this respect.

So when considering the role and responsibilities of the employer’s agent, the law of agency must also be considered relating to confidentiality and duty of care. Similar to solicitors, the employer’s agent must hold any information received from the employer as confidential, warn the employer of any potential breached in the contract and has an obligation and a duty not to allow the employer to fail in their contractual obligations, not to cause damage or loss to the employer, and to act in the employer’s best interests by providing them with advice based on their knowledge and experience to assist the employer in making informed decisions. 

The employer’s agent is also obligated not to hinder or obstruct the contractor in the execution of their contractual obligations. The employer’s agent is only responsible for checking or testing that the contractor has complied with the contractor’s obligations, that is to complete the contract in accordance with the employer’s requirements, contractor’s proposals and any instructions. Therefore, any action must not be construed as managing the contractor’s team, or interfering in the contractor’s attempts to act diligently in carrying out the works. However, the employers agent does have a duty to warn the contractor of any non-compliance observed as soon as its noticed. 

While the employer’s agent is bound to the employer in their actions, they are required by the law to remain impartial with regard to the valuation of the works, processing of claims, and duties relating to certification.

Now, when would an Employer’s Agent be appointed within a projects timeline:

Some clients decide to appoint the employer’s agent at the inception of a project advising on pre-tender planning, finance, contractual and tender documentation. Thereafter they would then act as the employer’s agent under the contract once the contractor is appointed. However, this is more of a project management and/or quantity surveying role and should not be seen as the role of an employer’s agent who ideally should be introduced to the project at tender stage, or later, but always prior to the appointment of the contractor.

Where a two-stage tender process has been employed, a pre-construction service agreement may be entered into between the employer and the contractor. The employer’s agent should be identified in this document and the extent of their role and authorities should be appended.

Their appointment tends to firstly consist of: 

• Outlining the project brief to which the employer’s agent will be appointed alongside a description of the employers objectives, any programme and budget information. 
• Then it would include a detailed breakdown of the activities they will be carrying out split into pre-construction, construction and post-construction making allowance for inspection and testing of compliance. Sometimes employers may wish to include an allowance for checks to be made by third parties reporting to the employer’s agent, or may wish for them to organise and manage these themselves.
• The appointment should also identify what authorities the employer is passing to the employers agent, such as agreement of fees of other consultant, agreement of costs, claims, agreement to change instruction resulting in a financial, programme, specification or design change, authority to act on behalf of the employer to avoid a contractual breach by the employer, stated authority should be provided to all parties involved in the project in order that there is no ambiguity and many more. 

So, relating to the pre-construction scope of services of an employers agent prior to the appointment of the contractor, these can include:

• establishing reporting and recording procedures
• establishing procedure for convening, chairing, attendance, function, frequency and responsibility for recording of meetings and circulation of information
• liaise with the employer and employer’s legal advisers on the form of contract, performance bonds, parent company guarantees and collateral warranties and check that the contract documents are completed accordingly
• preparing a preliminary list of prospective tenderers
• preparing tender documentation in conjunction with the employer, the consultants and the employer’s legal advisers
• Checking that the wording of all novation agreements, if applicable, is established and agreed with consultants before going out to tender
• in conjunction with the employer and the consultants, coordinating and monitoring the preparation of the employer’s requirements, the form and content required for the contractor’s proposals and the contract sum analysis and other tender documents
• arranging and attending tender interviews
• arranging delivery of tender documents to tenderers
• assessing tender submissions for compliance with the employer’s requirements level of pricing and pricing policy
• advising on discrepancies found within the employer’s requirements or the contractor’s proposals
• advising on tenderers’ programmes of work and method statements
• preparing a report on tenders with recommendation
• receiving final copies of the contractor’s proposals and completed contract sum analysis for incorporation in contract documents
• in conjunction with the employer’s legal advisers, preparing a form of contract and other documents for inclusion as contract documents, arranging for signatures of parties to the contract and
• requesting from the contractor the relevant insurance policy or policies and premium receipts and details of the level of any uninsured excess, for inspection by the employer and their insurance advisers.

It is also the responsibility of the employers agent at pre-construction to check that the employers requirements cover all the relevant information required, including:

• The details of the site, its boundaries, and any site surveys or reports
• The project description including any drawings/specifications already prepared
• The purpose for which the building is to be used
• statements of functional requirements, for example the kind and number of buildings, density and mix of accommodation, schematic layouts and/or drawings
• specific requirements as to finishes and any other elements
• bills of quantities (if supplemental provisions apply)
• requirements regarding submission of the contractor’s drawings (if supplemental provisions apply)
• requirements regarding records the site manager is to keep (if supplemental provisions apply)
• requirements for ‘as-built’ drawings
• functions to be carried out by the employer’s agent and any other members of the employer team
• confirmation of whether Alternative A (stage payments) or Alternative B (periodic payments) will be used
• details of any provisional sums
• statement of any planning restraints, e.g. restrictive covenants, and any permissions already granted
• access restrictions
• availability of public utilities
• form of contract and any amendments, and any legal documents
• method of presentation of the contractor’s proposals
• various other information to be included in the contract, e.g. project control requirements and templates and
• any other matters likely to affect the preparation of the contractor’s proposals.

Then at construction and post-construction their duties will namely consist of making allowances for inspection and testing of compliance as well as issuing instructions, certificates, notices and so on.

As employer’s agent, any action taken on behalf of the employer must be to the employer’s benefit, and must not make the employer’s position worse without direct approval, but recognising the need to remain impartial in respect of certification and payments. Therefore, it is possible to assume that the employer’s agent, while acting within the appointment brief can act with the full authority of the employer where no specific statement to the contrary applies.

So how should various matters during the construction period be handled by the employers agent as the contractor progresses through the works:

Well, starting with site progress meetings, these are required to be held as per the agreed intervals. The contractor should then report to the employer’s agent, who in turn reports to the employer on the project progress. Attendance of any specialists or interested parties should be by the agreement of the employer’s agent. It is critical that the employer’s agent verifies that the progress, and any other matters reported by the contractor are true and accurate statements, the employer’s agent could be held liable to the employer if they passed the reports to the employer without checking them. It is also critical that the employer’s agent monitors progress and identifies if lack of progress by the contractor could put the completion date in jeopardy.

That’s why its important for employers agents to provide project status reports and hold regular meetings with the employer in order to be able to report against contract deliverables, discuss issues and take instructions. Such meetings should be confidential of course between the employer and employers agent. 

Now when it comes to instructions, the contractor must comply with the instruction issued by the employer or the employers agent if they had that authority and it must be provided in writing. The contractor must comply within seven days or others may be employed at the contractor’s expense. The contractor has no right to refuse to comply with an instruction until a price is agreed.

Now relating to inspections, the employer’s agent should be carrying out regular inspections of the work and on issuing the practical completion statement whereby the employer’s agent is confirming that the contractor has complied with the contract. In some cases, the employer may appoint a separate and specialist consultant to carry out inspections on their behalf. A major challenge that the employer’s agent has in a Design and Build Contract is establishing that what the contractor has designed and built is in accordance with the employer’s requirements. The function of certifying compliance to quality standards should only be performed by an employer’s agent who has the necessary skills and experience as well as the required PI insurance.

Its important to highlight that the contract doesn’t establish specific requirements to the level of quality for the works expected other than those specified within the documented employer’s requirements, the implementation and interpretation of these being solely at the discretion of the employer’s agent or employer. There is also no fixed contractual period for the inspection period to take place in  advance of the practical completion inspection. The contractor may, therefore, not wish to provide the project for quality inspection/ snagging until the date for practical completion. If the employer’s agent cannot fully inspect the works, they cannot issue the practical completion statement. This means the employer isn’t liable for delay costs, and the contractor can’t claim the notice is being unfairly withheld as the employers agent would be in breach of contract if they signed it without a full inspection.

Now in terms of payments, relating to the Design and Build contract, the contractor must submit detailed interim payment applications based on either stage completions (Alternative A) or specified periodic dates (Alternative B), as outlined in the contract. After each application, the employer’s agent must issue a payment notice within five days of the due date. Payment to the contractor is required within 14 days or as otherwise specified. If the employers agent disagrees with the payment application, they must notify the contractor in writing within five days. The contract also allows the employer to withhold payments via a ‘pay less notice,’ which must be issued at least five days before the final payment date to be valid. 

In terms of completion, under Design and Build, if the contractor fails to complete the works by the completion date, the employers agent is the one that will issue a non-completion notice which then triggers the contractor being liable for liquidated damages if the employer or the employer’s agent has also notified the contractor in writing to that effect. The issue of that written notice, which should be by the employer, not the employer’s agent, as it is the employer who makes the deduction. The employer’s written notice is a condition precedent, in addition to the non-completion notice, to the deduction of liquidated damages and in that case must be issued prior to the deduction. The employer  is under no obligation to issue the notice if they do not wish to deduct the liquidated damages. So once Practical Completion has been deemed to be achieved, the employers agent must inspect all of the works in order to issue the Practical Completion statement. The employer’s agent is unable to sign the notice unless only minimal defects remain. Once the employer’s agent has inspected the works, verified any documents required in order that the project can be operated by the employer safely and in the manner for which it has been intended and satisfied that the contractor has completed the works in accordance with their obligations, then the employer’s agent may sign and issue the practical completion statement. If they are unhappy, however, with the works, the employers agent will have to issue a non-completion notice. Where the project is not complete, the employer’s agent may wish to discuss with the employer and contractor the option of taking beneficial access of the building. This should be done using the partial possession provisions within the contract.

Now lastly, relating to post-completion activities, once Practical Completion has been granted and the rectification period has ended, the employers agent will be required to inspect the works again but on this occasion may only issue the notice of completion of making good if all outstanding non-compliant works have been remedied and the contractor has completed the works fully in accordance with their obligations under the contract.

To sum up what I discussed today:

• The JCT Design & Build Contract requires an employer’s agent to act on the employer’s behalf for contract administration, including issuing instructions, notices, and certificates, but the employer retains key responsibilities like site possession and payments.
• The employer’s agent must act impartially in certification and valuations, maintain confidentiality, and always act in the employer’s best interests without interfering with the contractor’s design or construction obligations.
• Appointment of the employer’s agent should occur at or before the tender stage, with clear authority and scope defined to avoid ambiguity in their powers and responsibilities.
• Pre-construction duties include establishing reporting procedures, preparing tender documentation, coordinating employer’s requirements, and ensuring all legal and contractual documents are in place.
• During construction, the employer’s agent oversees progress meetings, verifies contractor reports, issues instructions, conducts inspections, and ensures compliance with employer’s requirements before certifying practical completion.
• On completion, the employer’s agent issues non-completion notices if deadlines are missed, and only certifies practical completion when all contractual obligations are met and defects are minimal.
• And at Post-completion, the employer’s agent inspects works again to confirm all outstanding issues are resolved before issuing final completion notices.