As many contractors will be aware, last year, the New Zealand Standards Review Committee undertook a review of NZS 3910:2013. The outcome of that review is NZS3910:2023, which includes a number of changes. By Brendan Cash (Partner), Madison Dobie (Senior Associate) and Ella Harkness (Summer Clerk) in Dentons’ Major Projects and Construction team.
One of the more significant changes is in clause 6, which governs the appointment, role and authority of an Engineer to the contract. The role of the Engineer has been separated into two roles, these being a Contract Administrator and an Independent Certifier.
This change is an attempt to address long standing concerns held by many in the industry about the inherent tension arising from the dual role of the Engineer under NZS3910:2013.
Role of the Engineer under 3910:2013
Under NZS3910:2013, the Engineer acts as the Principal’s representative or expert advisor. The Engineer also acts as the Principal’s agent when exercising certain functions, such as issuing payment claims and payment schedules.
However, despite this role as the Principal’s representative, the Engineer may also be required to act as a decision maker in resolving matters and disputes between the parties. In this role, the Engineer is required to act fairly and impartially to make decisions, value work and issue certificates.
There is a clear and obvious tension between these roles. Further, it can be less than clear when the Engineer is acting in either capacity. This tension and confusion has caused numerous issues, particularly for Contractors, for many years.
Change under 3910:2023
NZS3910:2023’s answer to this problem is the split role – the Contract Administrator and the Independent Certifier.
The Contract Administrator would fulfil the responsibilities previously held by the Engineer in their capacity as the Principal’s agent, representative and expert advisor. As per the new clause 6.2.1, they act for and on behalf of the Principal in giving instructions to the Contractor.
The role of the Independent Certifier would be to act fairly, impartially, and independently of either party in making decisions on all matters or disputes between the parties. Clause 6.2.2 restates the duties of the Independent Certifier and lists, without limitation, the various matters on which they can make Decisions. This includes valuing the work, deciding the contractor’s entitlements and valuing Variations, and considering and granting claims for extensions of time. This is not intended to overlook the role of the Contract Administrator. Rather, these provisions exist to enable the Independent Certifier to make decisions when an agreement cannot be reached between the Contract Administrator and the Contractor.
On the whole, this change is a positive one. It provides greater clarity as to what functions should be performed by the Contractor Administrator and what should be performed by the Independent Certifier. However, 6.1.6 may somewhat lessen the impact of the change. It provides that the Contractor Administrator and the Independent Certifier may be the same person.
This may be useful on smaller projects where it is not proportionate to have both a Contractor Administrator and an Independent Certifier. However, NZS3910:2023 is intended to provide the ‘market standard’ position. Parties may amend that position as appropriate for their particular projects but there is benefit in the starting point being clear that these roles are intended to be fulfilled by different people.
If the roles are fulfilled by the same person, the inherent tension between the roles remains at-play. That being said, NZS3910:2023 (in particular clause 6.2) provides clarity about which function is performed by which role will, at least, be useful when the roles are performed by the same person.
To facilitate the incorporation of the Contract Administrator and Independent Certifier, significant changes have been made across clause 6.
Clause 6.1 sets out the appointment of the Contract Administrator and Independent Certifier. Aside from the change in terminology, clauses 6.1.1, 6.1.2 and 6.1.3 are largely unchanged. To recap;
- Clause 6.1.1 states the Principal’s duty to ensure the Contract Administrator and Independent Certifier fulfil their obligations;
- Clause 6.1.2 requires the identification of the Contract Administrator and Independent Certifier in the Specific Conditions; and
- Clause 6.1.3 outlines the process to be followed if the Contract Administrator or Independent Certifier is no longer authorised or available to fulfil that role.
Some notable changes across clause 6 include the following:
- Clause 6.1.4 allows that in the event of the Contract Administrator or Independent Certifier being temporarily unavailable, the Principal may notify the Contractor of a person authorised to act in the interim.
- Clause 6.2.3 limits the circumstances in which the Independent Certifier can act as an authorised agent of the Principal. This includes when receiving payment claims, incorporating the Principal’s deduction in payment schedules when notified by the Principal, and issuing payment schedules.
- Clause 6.3 has been rewritten. There is no longer an Engineer’s Representative or assistant to the Engineer’s Representative. In their place, clause 6.3.3 permits the Principal to engage ‘Advisors’ to assist the Contract Administrator and Independent Certifier in carrying out their duties, including making submissions and recommendations, or providing other assistance or support. However, these advisors have no authority to issue Instructions or make Decisions, whereas the Engineers Representatives could under delegated authority. While 6.3 represents a change, under the existing NZS3910:2013, it was not uncommon for Engineers to appoint technical advisors despite it not being specifically called out in the Contract.
- Clause 6.3 also simplifies terms such as ‘directions’ or ‘instructions’ into the new term ‘Instruction’. Instructions shall only be given by the Contract Administrator. A useful addition under 6.3.2 is that the Contract Administrator should indicate whether the Instruction is a Variation or not. On the other hand, Decisions shall only be made by the Independent Certifier.
- The new 6.3.7 also specifies what the Independent Certifier may consider when making their Decisions. Each Decision must be in writing and include reasons. This requirement for reasons may assist Contractors to understand the basis for Decisions, which will assist in determining whether to proceed through clause 13 ‘Disputes’.
Separating the roles of the Engineer under the NZS 3910:2023 is, on the whole, a positive shift for Contractors. It will help mitigate some of the issues that arise where the Engineer is performing a dual role and will provide greater clarity for Contractors around instructions, valuations and decisions.
This will be particularly useful when disputes arise. Given these positive changes, Contractors should carefully consider the implications where the Principal proposes to appoint one person to fulfil these two roles and be mindful of the tensions that inevitably arise where that is the case.
This publication is not designed to provide legal or other advice and you should not take, or refrain from taking, action based on its content. Dentons does not accept any liability other than to its clients, and then only in relation to specific requests for advice. For specific advice, contact your legal advisor or the Major Projects and Construction Team at Dentons on (09) 379 4196.
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