24th Mar, 2023
There is a saying that a principal agent can either make or break a project. We will have a look deeper into what role does a principal agent have under the Joint Building Contracts Committee (JBCC) Principal Building Agreement (PBA) Edition 6.2 May 2018, and how to determine who will be the right candidate for the job.
According to JBCC PBA (the contract) clause 1.1, the principal agent is an entity appointed by the client who has full authority and obligation to act in terms of the contract. The principal agent’s role therefor on a project is to ensure that contractual matters are attended to in the correct manner as they come to light on your project. The selected entity is not a party to the contract, but rather represents the client, the client and the contractor are the only two parties to the contract. The principal agent is responsible for keeping the original signed copy of the contract (as per clause 5.2). Since the entity is not a party to the contract, the principal agent has no right to amend any clauses to the contract. He does however have the authority to make binding decisions on behalf of the client.
When it comes to selecting the right candidate to fill the role the contract doesn’t mention any specific industry or entity to choose. Generally, the role is filled by an entity that is part of the construction industry, and on most projects that we have come across it is either the project manager, the quantity surveyor, or the architect. It is recommended that the appointed entity be a professional registered with their professional council and be part of the construction industry.
The contract does not mention in any instance that the client may not be the principal agent. The problem with this is that the contract stipulates in clause 6.2 that the appointed entity is required to be an independent party that can exercise fair judgement, which is then a risk should the client be appointed. Clause 6.3 also requires the principal agent to declare any form of personal interest that they may have towards the contract. We can therefore conclude that the contract requires the principal agent to be an independent party with no interest towards the contract and is not a party to the contract.
An important thing to note is that even though the principal agent is appointed by the client, it is his duty to remain impartial in decision making, always putting the contract first and not place preference on one of the parties to the contract. Furthermore, the principal agent is responsible for appointing consultants for the project and can request other consultants to issue contract instructions (as per clause 6.2) – this is required for areas where the principal agent requires specialists in their field to issue information that the principal agent is not capable of doing.
When asking why a principal agent is necessary on a project, we can look at some of the main responsibilities the principal agent has. These include, but are not limited to: ensuring that the information required by the contractor to perform the works are issued timeously; ensure the contract has complied with legal formalities; assist with the coordination issues; monitoring of the contractor’s site progress; ensuring contractor’s work as well as consultant’s work are up to standard; scrutinizing of tenders for appointing subcontractors; certifying payment certificates; ensuring payments are made timeously; issuing practical completion certificate and final completion certificate; awarding and assessing extension of time claims received from contractors; dealing with non-compliance issues as they come to light; ensure all compliance certificates and manuals are handed over upon completion.
In the event of the principal agent being required to assess extension of time claims, the principal agent must refer to clauses 23.1 (extension without costs) and 23.2 (extension with costs) of the contract to determine whether the claims area valid. The contractor will have twenty (20) working days to submit a notice of delay (as per clause 23.4.2) and submit within forty (40) working days his claim after becoming aware of the event causing the delay (as per clause 23.5). The principal agent will have twenty (20) working days to respond to such claim (as per clause 23.7). Should the principal agent fail to respond, the claim is deemed to be rejected. The contractor may then issue a notice of disagreement (as per clause 23.8), and the ruling then to be reviewed. Should a claim be awarded, it is the principal agent’s duty to determine the revise practical completion date. The principal agent is also responsible for the adjustment of the contract value (as per clause 26.7) due to claims submitted by the contractor.
Regarding practical completion, the principal agent plays the vital role of inspecting the works diligently before issuing the certificate for practical completion (as per clause 19.3). Practical completion is only reached where the works has been completed and is free from any patent defects included on the practical completion list. Should practical completion not have been reached, the principal agent will issue a complete list of all items that are required to be remedied in order for practical completion to be achieved (this list should be irrefutable and comprehensive, as no additional items may be added onto this list once it has been issued as per clause 19.3.1). A way around this is where the principal agent may issue a contract instruction for works to be repaired (as per clause 19.1.2).
The only time an updated practical completion list may be issued is where the original list has not been completely attended to, or not attended to in a satisfactory manner (as per clause 19.3.2). Therefore, the same items previously listed remain on the list, but no new items added. The contract is clear in that should the principal agent not issue an updated practical completion list within five (5) working days, the contractor should give notice, and thereafter the principal agent has five (5) working days to comply – should he not comply then practical completion is deemed to be achieved upon expiry of the notice (as per clause 19.4). Should this be the case, the client may be affected negatively, and will have a form of remedy in terms of the professional services agreement against the principal agent for any loss, or damages, that the client may face.
Should practical completion be achieved the client will take possession of the site, and the principal agent will issue the practical completion certificate together with a list of items to be completed within an agreed period of time, within five (5) working days of the client taking possession (as per clause 19.6).
After issuing the practical completion certificate, the principal agent is responsible for issuing and signing off the final account within sixty (60) working days from the practical completion date (as per clause 26.10). The contractor will then have thirty (30) working days to accept the final account, or give notice of disagreement should he not accept – should no feedback be received within the time frame stipulated, it is deemed to be accepted. The disagreement needs to be resolved within ten (10) working days (as per clause 26.12). The principal agent will issue the final payment certificate within seven (7) calendar days from which the final account has been accepted by the contractor (as per clause 26.13).
As we have looked a bit deeper into the role and responsibilities of a principal agent as set out above, we can see that the principal agent requires knowledge of all the aspects of a construction project, and most importantly, of the JBCC contract. His responsibilities come quite close to that of a project manager when it comes to the site work itself, and close to that of a quantity surveyor when it comes to the financial aspects of the project. A dedicated principal agent is crucial on a project to ensure that activities happen on time according to the contract and try to prevent that neither party goes into default. It is therefore recommended that the appointed entity be impartial to be fair. In the end the success of a project can be effected by the principal agent, but it is also team work and effort that brings break through.