The disappearance of the impartial engineer

Chau Ee Lee, international construction lawyer of Reed Smith, discusses fundamental changes to the engineer's role in standard contracts.

COMMENT, Human Resource

Chau Ee Lee, international construction lawyer of Reed Smith, discusses fundamental changes to the engineer's role in standard contracts.

The Conditions of Contract for Construction for Building and Engineering Works Designed by the Employer, one of FIDIC's "new" 1999 suite of standard form contracts, sometimes known as the New Red Book, is used regularly in this region. In the foreseeable future, it will presumably replace the famed FIDIC 4th as the most commonly-used standard form of construction contract.

In fact, just last year, the New Red Book was one of two FIDIC standard form contracts in the 1999 suite (the other being the New Yellow Book) adopted with slight modifications as the 2007 Abu Dhabi standard form of construction contracts for use between government entities
and contractors.  This has led to much debate concerning the institution of the engineer, given that the FIDIC 4th and the New Red Book both involve engineers.

Institution of the engineer

The engineer's role envisaged in FIDIC 4th has always been criticised. The engineer is required to make decisions on the day-to-day problems relating to the contract's administration. However, the engineer's neutrality is often questioned, given that the engineer is paid by the employer.

The engineer in FIDIC 4th is considered as impartial, not least given that Sub-Clause 2.6 [Engineer to Act Impartially] states that the engineer shall exercise his discretion "impartially within the terms of the contract and having regard to all the circumstances."  Such discretion is required in regard to giving his opinion or consent, expressing his satisfaction or approval, or otherwise taking action, which may affect the rights and obligations of the employer or the contractor.

The New Red Book has however sought to bring about a fundamental change to the engineer's role. The engineer is now "deemed to act for the employer" under Sub-Clause 3.1 (Engineer's Duties and Authority). In Part I General Conditions of the New Red Book, the employer's personnel is defined in Sub-Clause 1.1.2.6 (Parties and Persons) to include the engineer and his assistants. Therefore, the engineer can no longer be considered   "friendly" or impartial.

Bearing in mind the engineer is "deemed to act for the employer," it is hardly surprising then that Sub-Clause 16.2(b) entitles the contractor to terminate a contract in the event that the engineer fails, within 56 days after receiving a statement and supporting documents, to issue the relevant payment certificate.

Fair determination

Just as one begins to miss the impartial engineer, he returns in the New Red Book under the guise of Sub-Clause 3.5 (Determinations). Sub-Clause 3.5 states that the engineer is under a contractual duty to exercise "fair determination" in circumstances where there is a particular Sub-Clause which requires him to act in accordance with Sub-Clause 3.5. What may not be too apparent is that there are 25 such Sub-Clauses where the engineer is bound to act with 3.5.

What the term "fair determination" means is often subject  conjecture. This is probably at the point when the engineer moves from being an employer's agent to being an independent consultant to both employer and contractor. Perhaps then, there is some respite for those who feel that under the New Red Book, the engineer is no longer impartial. However, it is worth reminding ourselves that this Sub-Clause 3.5 determination by the engineer is still subject to revision under Sub-Clause 20 (Claims, Disputes and Arbitration) of the New Red Book.

Dispute Adjudication Board

Under Sub-Clause 20, it has to be highlighted that any dispute under the New Red Book is now dealt with, in the first instance, by an adjudication board. As you may be aware, this was really in response to criticism of the engineer's role as an adjudicator or perhaps a quasi-arbitrator under Sub-Clause 67 (Settlement of Disputes) of FIDIC 4th. (Note that in FIDIC's 1996 November Supplement to the FIDIC 4th, there was provision for an adjudication board process as an alternative to the engineer's role under Sub-Clause 67.1). Curiously, there is no mandatory requirement that the engineer cannot be a member of the adjudication board, even if the employer and the contractor agree. This may not be an unlikely scenario.

Replacing the engineer

In the New Red Book, the employer can now replace the engineer only if there is no reasonable objection by the contractor with supporting particulars, as stated in Sub-Clause 3.4 (Replacement of the Engineer).  Sub-Clause 3.4 in effect states expressly what is implicit in Sub-Clause 1(1)(a)(iv) (Definitions and Interpretations).

Amendment and modifications

In both standard forms, the engineer plays the roles of employer's consultant and agent, depending on the function. The engineer has indeed become less impartial.  There are means by which neutrality can be re-established.  It has been suggested that engineers could be jointly selected (and paid) by the employer and the contractor. Ultimately, Part II of the New Red Book should reflect the employer and contractors' agreed amendments and modifications, which the employer and the contractor would have agreed.

Chau Ee Lee, MSc Construction Management (Project Management), international construction lawyer.

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