Mittwoch, 27. Juli 2016 | Home | Studium & Lehre | Forschung | Autoren | Über uns |
GanzRecht > Studium & Lehre > Ausland > Const. Contracts & Arbitration




Sample Essay 1: The Role of the Engineer

von Holger Langer, LL.M.

Discuss whether the distinction between the role of the Engineer as an agent of the Employer and that which makes him independent of the Employer is still useful, and whether and where (and why) it might be abandoned or retained.

The distinction between the role of the Engineer as an agent and that as a person independent of the Employer arises basically out of the nature of the contractual relationships in a construction project. The parties of the underlying construction contract are the Employer and the Contractor. However, the Engineer is not a party to this contract. Clause 1.1.2.4[1] defines the Engineer as “the person appointed by the Employer to act as Engineer for the purposes of the contract”. Accordingly, the Engineer’s contractual relations are solely with the Employer.

In fulfilling his duties “for the purposes of the contract” (between the Employer and the Contractor) he acts as agent of the employer[2]. Prior to the actual performance of the construction work, he is in this capacity regularly responsible for the design of the project, the preparation of the tender documents and advisory of his principal as to the appointment of a suitable Contractor, since the Employer will often be unsophisticated in construction matters. During the performance of the work he represents the Employer towards the Contractor in the supervision of the process and in making planning decisions as to additions, omissions and variations of the work.

In addition, the Engineer frequently has an additional function, that of an administrator of the contract[3].  In this capacity he is, above all, determining the value of the Contractor’s work and issuing corresponding payment certificates[4] as well as deciding upon extensions of time and additional payments in view of variations or delays. Furthermore, the Engineer is in many cases empowered to act as an adjudicator between the Employer and the Contractor as far as disputes between the parties arise. His powers of decision are usually very comprehensive and become final and binding unless challenged in an arbitration procedure within a short period of time. In exertion of this function the Engineer is under an implied duty in common law (where it applies) to act with complete impartiality of judgement or decision[5].

This dichotomy of the Engineer’s roles has been subject to an intensive discussion between lawyers with a common law background, who widely use the described system e.g. by falling back on FIDIC, ICE or AIA Documents, and those with a continental or civil law background, who generally disapprove of this model. The conflict arises out of the fact that the Engineer when dealing with contentious matters between the parties has to perform his two separate and often conflicting roles concurrently[6]. The suspicion of bias in favour of the Employer is very high for various reasons. First of all one cannot deny that the Engineer’s relation to the Employer is very close, since he has already acted as adviser prior to construction and gets paid solely by the Employer. In addition, he might have to consult the Employer or even obtain specific approval prior to making decisions where the contract so provides. For continental judges this close association with the Employer and the corresponding lack of independence preclude him from the role of an impartial adjudicator being given to him under the contract. This suspicion is even enhanced where the matter of the dispute between the parties has a bearing upon the Engineer’s own work. He might for example find a defect due to poor workmanship by the Contractor rather than expose himself to a claim for defective design. Some argue, therefore, that it is rather unlikely for an Engineer to act with independent judgement when there are questions relating to his own duty and almost impossible where a member of the Employer’s staff is appointed as engineer.

Whether the Engineer in performing his duties should be regarded as an agent for the Employer or as an independent person towards both the Employer and the Contractor cannot be answered in general. One has to keep in mind that construction contracts with an international dimension tend to be very complex and the parties to such a contract frequently commit themselves for a long period of time. At the time of the conclusion of the contract it is very unlikely that the parties know with certainty all the details of the work. Variations, omissions and additions are common, since the projects are tailored to the individual conceptions and requirements of the Employer. They can result either from economical or technical obstacles that are encountered during the actual construction work or from a simple change of the Employer’s concept. Once encountered they require immediate corresponding decisions on the part of the contract partners to secure an unhindered construction progress. An Employer who wished to retain the power to issue instructions to the Contractor himself could easily do so by changing or amending the conditions of the contract. However, the question remains, whether this should be done for the benefit of the work to be carried out. To authorize the Engineer with such decision-making powers before it actually comes to disputes would be the more reasonable way of serving these needs. But whether the Engineer shall in this context be regarded as an independent person can be doubted for various reasons. One could of course conclude, that the Engineering profession bears a certain integrity that may give both parties confidence that such decisions will reflect basic elements of professional fairness. Nevertheless, it is most obvious that the Engineer is the person best equipped with the skill to make decisions that will successfully implement the objectives of the owner, since he was responsible for the design prior to the actual construction as an agent of the Employer. One could therefore say that the Engineer’s role in this context is nothing but a continuation of his design role on behalf of the Employer. Furthermore, the need for an impartial certification usually arises, when the Contractor feels entitled for extra payments caused by variations, additions etc. Since there is a more and more increased use of contracts on a lump sum basis in public works, where the Contractor’s claims for extra payment are very limited, the need for an independent certification becomes less important.

Once disputes arose between the Employer and the Contractor it was one of the Engineer’s duties under the former edition of the FIDIC Conditions of Contract (clause 67) to act as an adjudicator and to decide impartially upon the matter. Unless revised by an amicable settlement or an arbitral award this decision would have been binding upon the parties under clause 67.1 of the FIDIC Conditions of Contract (1989). In view of these provisions there was a clear and unambiguous need for an independence of the Engineer from either of the parties to the contract. Nevertheless, this role has been taken over by a Dispute Adjudication Board (DAB) in the new FIDIC Conditions (1999). Under clause 20.4 the DAB decides disputes of any kind whatsoever that arise between the parties “in connection with, or arising out of, the contract or the execution of the works”, including any dispute as to certificates, determinations, instructions, opinions and valuations of the Engineer before the commencement of arbitration procedures. The DAB shall be appointed by the parties and shall comprise either one or three persons. The Engineer is not excluded from the potential members of the DAB, so that it can be said that he is still very likely to be entrusted by the parties in adjudication of disputes between them. However, the mechanism by which the Engineer was automatically empowered to decide upon disputes under the former FIDIC Conditions has been removed. That can possibly be seen as evidence for the more and more decreasing role of the Engineer to act in an independent capacity between the Employer and the Contractor.

As a general conclusion one might therefore say that the distinction between the Engineer acting as an agent for the Employer and acting independently from the latter has become less significant, since the duties in which he acts independently are more and more diminishing. As far as decisions during the construction period are concerned it is more appropriate to regard the Engineer as agent of the Employer,  for he is first of all continuing his role as a designer once the actual construction work has started. As far as the issuance of certificates and the adjudication of disputes are concerned the Engineer’s role has become less relevant, as there is a perceptible tendency towards both an increased use of lump sum contracts that require less certification and an involvement of third parties for dispute resolution other than the Engineer.

However, the involvement of third parties might prevent a quick decision and might cause higher costs, so that a biased but quick and pragmatic decision might prove more favourable for both of the parties. If the Employer and the Contractor take this into account and voluntarily designate the Engineer to make certain decisions and judgments and agree that these decisions shall be binding on the parties, the law should give effect to such an agreement.

 

Essay evaluation: 60 % (merit)


[1] Except as otherwise stated the cited clauses refer to the FIDIC Conditions of Contract for Construction (1999 edition).

[2] See Powell-Smith / Stephenson, Civil Engineering Claims, 2nd ed., p.11 referring to the same wording in clause 1(1)(c)of the ICE Conditions.

[3] See Nicklisch, [1990] ICLR 322, 325.

[4] See for example Sutcliffe v. Thackrah [1974] AC 727, 1 All ER 859.

[5] See Bunni, The FIDIC Form of Contract, 2nd ed., p. 81. In FIDIC, Guide to the Use of FIDIC (Red Book), 4th ed. this function is described as a fundamental principle on which the Conditions as a whole are based, cf. p. 35. In view of the ICE Conditions, see Institution of Civil Engineers, Guidance Note 2A: Functions of the Engineer under the I.C.E. Conditions, para 2.2.

[6] Powell-Smith / Stephenson, supra, note 2, pp. 12 et seq.