Answer

Yes the employer can negotiate with the contractor to make this change but should he? The contractor carries direct responsibility in relation to domestic subcontractors. Changing such subcontractor to an employer's direct contractor is clearly a total about turn in relation to risk which is switched from the contractor to the employer [9.2.2]. Yes it can be done but the employer must be warned of the consequences of taking this step. In my opinion this option can only be considered where he has the PA’s full support (which I would advise against) and the works are well advanced with practical completion being "just around the corner" making the cancellation of the contract very unattractive

Effectively the PA will have to step into the role that the contractor would normally play in relation to his domestic subcontractors. The additional responsibility, liability and additional work will definitely warrant a fee increase. Further, as this role is not the PA’s "normal" function, it is essential to ensure that your professional indemnity insurer is informed accordingly. Further the PA must ensure that the employer understands that the contractor's works insurances etc will not cover the actions of direct contractors and that the contractor could have a claim for expense and loss caused by them [22.4]