Introduction
The first edition 1999 and the second edition 2017 of the FIDIC Red and Yellow Book, do describe a very specific role in the Conditions of Contract called ‘the Engineer’.
The fundamental principle behind this role is, that the Engineer shall act ’impartial’ from the Commencement of Work until the end of the Defects Notification Period.
The Engineer has no authority to amend the Contract, but he has the authority to Vary and Adjust the scope of the Contractor’s Work.
It is this impartiality and authority that are causing employers to struggle with the practical execution of the FIDIC role under the Contract and within their internal project governance.
This white paper describes the way of how to implement the FIDIC Engineer role.
The Engineer is appointed and paid by the Employer, however the Engineer shall act ‘impartial’.
The Engineer’s obligations are:
- To administer the Contract on behalf of the Employer.
- To be suitably qualified and competent to carry out his duties.
- To review the Contractor’s Documents [Sub-Clause 5.2].
- The Commencement of Works [Sub-Clause 8.1].
- To instruct the Contractor to execute Tests on Completion [Sub-Clause 9.1].
- To issue the Taking Over Certificate [Sub-Clause 10.1].
- To issue the Performance Certificate [Sub-Clause 11.9].
- To issue a Variation to the Scope of Work [Sub-Clause 13.3].
- To issue the Interim Payment Certificate [Sub-Clause 14.6].
The Engineer’s rights are:
- No authority to amend the Conditions of Contract, however the Engineer can instruct the Contractor to execute scope changes.
- To have access to Site at all times [Sub-Clause 7.3].
- To instruct the Contractor to submit, a revised programme and supporting report describing the revised methods which the Contractor proposes to adopt in order to expedite progress and complete within the Time for Completion [Sub-Clause 8.6].
- To instruct a Suspension of Work [Sub-Clause 8.8].
- To initiate a Variation prior to issuing the Taking Over Certificate [Sub-Clause 13.1].
- To issue a Notice to Correct to the Contractor to make good the failure and to remedy it within a specified reasonable time [Sub-Clause 15.1].
Engineer’s Determination
Sub-Clause 3.5 defines that:
“Whenever these Conditions provide that the Engineer shall proceed in accordance with this Sub-Clause 3.5 to agree or determine any matter, the Engineer shall consult with each Party in an endeavour to reach agreement. If agreement is not achieved, the Engineer shall make a fair determination in accordance with the Contract, taking due regard of all relevant circumstances.”
- This means that the Engineer has the obligation to involve both Employer and Contractor and put an effort in finding a resolution, within the time stated in SC. 20.1 of 42 days.
- In the event that there is no consensus between the Parties, then the Engineer has the obligation to make an impartial decision based on the Conditions of Contract.
Implementation
Now we understand the role of the Engineer, we need to find a way to implement his Duties and Authority into the Employer’s organisation and project governance.
- It is important to appoint two individuals, one has to act in the role of the Employer and one in the role of the Engineer. If these two roles are fulfilled by one person, then there is no way for this person to execute the Engineer’s obligations impartially.
- The person acting in the role of the Employer, shall focus on providing access to site, securing financial arrangements and pay the invoices send by the Contractor.
- The person acting in the role of the Engineer, shall be competent in finding resolutions for issues and find consensus between Parties. The Engineer can be supported by or delegate to Employer’s Personnel (e.g. HSSE, technical, legal and financial) to review Contractor’s Documents, audit the Contractor’s QA system, to witness tests, to assess the Works in accordance with the Contract, prepare Employer’s Claim(s), etc.
- Do not limit the Authority of the Engineer, but make suitable arrangements either within the internal project governance, or in the consultancy agreement. Otherwise the Contractor will start to interact with the Employer and bypass the Engineer.
- Agree on an Employer’s sign off process, for Variations that exceed a certain threshold. This shall not be incorporated in the Contract, but in the consultancy agreement. This process shall respect the contractual timelines, to avoid delay or deemed acceptance.
- Agree on hold and witness points with the Engineer, for which Employer’s Personnel need to be present, in order to involve relevant departments (e.g. Quality, Operations or HSSE) in the construction phase of the project. Any observations or instructions will be given to the Contractor by the Engineer.
→?? The Employer’s Personnel can provide support to the Engineer, however the role of the Engineer or assistance can also be fulfilled / delegated to a consultant to secure impartiality.
Escalation Model
There is a need to escalate disputes in every project, but it is good to avoid the need for setting up a Dispute Adjudication Board or even going to the International Chamber of Commerce (ICC).
It is possible to set up two intermediate escalation levels by:
- Make use of the Project Director (PD) who acts on behalf of the Employer as the first escalation level. As long as the PD respects the Engineer’s Authority and does not interfere with the day-to-day contract management, the PD can find consensus with the Contractor’s Head of projects to avoid directors involvement.
- Make use of the Director who acts on behalf of the Employer as the second escalation level. The Director can discuss a dispute together with the Contractor’s Director in an endeavour to settle amicably, in order to avoid going to the ICC or Court under local Law.
→?? It is of both Parties interest to keep progress of the Works and start operating the asset!
By: Mr. Erik Rozendal, partner at Aratis Groep, Project Director of Windplanblauw and senior FIDIC expert.
For contact regarding FIDIC trainings email with Pauline de Bruijn. [email protected]
