Given the wide spectrum of services that may be provided by an owner’s representative, what are the important considerations for owners when retaining these consultants and structuring their contracts? Here are several important considerations:
(i) Professional Services. Many owner’s representatives, particularly those coming into the business from other segments of the investment industry (either management, finance or even legal backgrounds) sometimes fail to recognize that owner’s representatives provides professional services—in other words those services requiring specialized knowledge, judgement and skill. Accordingly, the owner’s representative must render their professional services in conformance with the applicable standard of care.
(ii) Adequate Qualified Staff. Because owner’s representatives are generally tasked with tracking, monitoring, and evaluating every aspect of the project and project team, a successful owner’s representative should have a thorough understanding of a broad range of technical, administrative, and contractual issues—as well as an effective communication style therefore a fee which does not reasonably includes the compensation for the work of such team of professionals will be at beast a lesson for which the owner shall pay dearly in the investment decisions at best.
(iii) Scope and Authority. Crafting the appropriate scope of services to meet the needs of the owner and align with the professional and technical skill of the owner’s representative is critical to success. Allowing an owner’s representative to perform services that they are not “best positioned” to perform exposes the owner to unnecessary risk, particularly if the owner’s representative undertakes services beyond its contract . Similarly, all project participants should have a clear understanding of the owner’s representative’s authority to act on behalf of the owner and bind the owner with regard to actions and decisions within the agreed scope of authority. The limits of authority should be clearly defined in the contract and consistently implemented in practice.
(iv) Alignment of Dispute Resolution Mechanisms. When contracting with the owner’s representative, it is prudent to ensure that forum and venue selection clauses in the contract are consistent with other owner-held agreements with other professionals being involved in the project. This rule, albeit simple and understandable, is quite often being ignored by the owners. In the end, the main purpose of the owner's rep is to fulfill the task exactly as agreed so this should be in the interest of both of the parties.