The engineer, is he really independent?
01 June 2016
STUART JORDAN* elaborates on how the role of the engineer has been modified in the region, which begs the question whether he can act independently or if he is essentially an employer’s agent.
Continuing with the theme of Middle East practice in amending construction contracts (from last month), let us consider how the role of the engineer is understood and how it is usually redefined by the parties.
There is sometimes a misunderstanding about the parties’ objectives in doing this. We need to be clear about what an engineer is supposed to be doing under a construction contract, and how that might differ from other consultants undertaking roles in contract administration.
Contract administration
It is rare in the Middle East that parties will just go along with whatever the standard contracts provide for in relation to contract administration. Indeed, some years ago, this prompted Fidic (Fédération Internationale des Ingénieurs-Conseils, which in French stands for International Federation of Consulting Engineers) to put out a policy statement specifically to warn of the dangers of going too far. One trend they noted was the splitting up of the job of contract administrator between several individuals or companies.
Roles such as project manager, construction manager and technical supervisor may be allocated alongside the engineer. The rationale behind this is that no single person can be expected to have the skills necessary to deal with the range of tasks including: giving instructions, implementing and valuing variations, valuing works, dealing with time and money claims, reviewing design submissions, inspecting, testing and certifying works.
The problem is that the splitting of these roles tends to create overlap and unclear lines of authority. The Fidic recommendation (and I agree) is to keep to their position, namely to nominate one person as contract administrator and to allow him to be assisted by the specialists needed to cover all the functions. This is backroom stuff – subcontracting – which doesn’t need to show in the construction contract although Fidic mentions delegation by the engineer to competent staff, for whose acts and decisions the engineer is responsible.
We need to remember that the engineer is not a party to the construction contract. Provisions that describe his tasks are only reciting the engineer’s duties set out elsewhere. To make it all work, the employer is required in the contract to appoint the engineer to carry out those duties and the appointment itself needs to include them.
Independent or agent?
This question is fundamental to the role of the engineer. Many published standard contracts recite that the nominated contract administrator shall act independently of the owner in certain decisions. Both the Fidic Red Book (Construction) and Yellow Book (Plant and Design-Build) 1999 provide that the engineer is generally deemed to act for the employer when carrying out his duties or exercising authority but this is subject to a big exception: all of the big questions (including claims for extensions of time and additional money, valuation of variations and all employer’s claims) are subject to agreement or “determination” by the engineer. For these questions, the engineer must:
• Consult each party to try to reach agreement;
• If agreement is not possible, make a fair determination “in accordance with the contract”, taking due regard of all relevant circumstances;
• Notify the agreement or determination to the parties, with “supporting particulars”.
This is quite demanding on the engineer. Other contracts require fairness in the making of certain judgments as contract administrator but Fidic goes beyond this. Here, the engineer is a first-line adjudicator of disputes. In both the process and the approach to his decision, the engineer is required to act impartially and transparently, almost quasi-judicially. This determination is also expressly binding unless and until decided otherwise in the dispute resolution process.
Many of you will be trying to remember the last time an engineer’s decision even looked transparent and fair. That is not (I would hope) an indictment of engineers’ competence or integrity, but simply the fact that the above provisions so rarely survive the amendment process. Employers take the view that they appoint the engineer and pay his fees. They want their guy to bat for them on all matters including (especially!) the big issues of claims, valuations, sign-off etc. This is easy to achieve by amending the above (clause 3.5) and some other provisions relating to limits on authority; the engineer becomes effectively an employer’s agent.
The question is whether this is wrong, that is, bad practice and bad for the industry? Certainly, Fidic is strong in supporting its philosophy of the independent engineer, but we should note that it also publishes the Silver Book (EPC/turnkey) contract which has no engineer. It is set up to be “self-administered” by the employer, who may appoint an employer’s representative but there is no pretence at independence; he is an agent. Interestingly, the employer in Silver Book is also required to carry out “determinations” of those big questions under a similar process to the above and to do so “fairly”, taking account of all circumstances etc. He cannot be independent of himself, and you can take your own view about how seriously any employer can be expected to approach that obligation.
There is nothing wrong with a non-independent contract administrator so long as this status is clear. The Red/Yellow Book engineer can be professional but the idea of independence is illusory because the engineer simply is not independent of the employer.
The industry would benefit more from the availability of quick and cheap adjudication on these big issues, the crucial difference being that the adjudicator is truly independent. Poor quality and biased decisions from employer’s agents are less harmful when the parties have quick means of redress. We have started to see contractors arguing for the joint appointment and joint payment of engineers. This is not too far from the idea of a standing Disputes Adjudication Board and it might be a way forward.
• Stuart Jordan is a partner in the Global Projects Group of Baker Botts, an international law firm. Jordan’s practice focuses on the oil, gas, power, transport, petrochemical, nuclear and construction industries.
