Legal Comment

Friend or foe? The engineer’s representative

By Stuart Robertson (partner) in Dentons Kensington Swan’s Major Projects and Construction team 

While much attention has recently been directed at the role of the Engineer and an apparent lack of independence, one of the issues recently being debated is the increasing role of the Engineer’s Representative (ER). This is supported anecdotally with the ever-decreasing visibility of the Engineer and their replacement by a much more active ER.  

So who is the ER? They are ‘a natural person appointed under 6.3.1’ (1.2 and 6.3.1). This continues the theme as with the engineer, that he or she is a natural person and not a company or firm of consultants. They are an identifiable person with whom the parties can establish a solid working relationship, trust and respect.

The Engineer appoints the ER. But there may only be one at any one time (6.3.1). The ER’s appointment must be by written notice from the Engineer to the Contractor.

Whereas the Contractor cannot easily (if at all) have the Engineer removed, clause 6.3.2 provides a mechanism for the removal of the ER. The Contractor must record in a written notice its objection to the ER, ‘on reasonable grounds’. These must be stated in the notice. Once lodged, it appears the Engineer must (the clause says ‘shall’) appoint a replacement ER. In reality the Engineer may take it upon themselves to make a decision on the notice of objection, with one result being the ER is not replaced. It would then be up to the Contractor to challenge that decision under the clause 13 dispute process.

The most common grounds we see for challenging the ER’s appointment is where the ER is an employee of the Principal. This is because the Engineer’s obligations under clause 6 apply to the ER. That includes the obligation under clause 6.1.1 to act reasonably and in good faith, and under clause 6.2.1(b) to independently, fairly and impartially make decisions entrusted to him or her under the Contract. Naturally, this may be a difficult task for the ER if he or she is an employee of the Principal. 

As noted above, increasingly it is only ever the ER that is seen on site. There is also a trend for the contract to contain special conditions that allow solely the ER to grant or decline Variations, EOTs and time related costs. Often ERs are issuing provisional and replacement payment schedules. In an extreme example, an ER was found to be reviewing matters in dispute under clause 13.2.1.

Before contractors rush to instruct their lawyers, clause 6.3.3 needs to be carefully considered. The starting point is to review the clause 6.3.1 notice of appointment (or 6.3.2 if the ER is a replacement). In addition to appointing the ER, the notice should set out any powers the Engineer is delegating. This is because 6.3.3 states:

The Engineer’s Representative may exercise any of the powers of the Engineer under the Contract except:

(a) The reviewing of matters in dispute;

(b) The valuing of Variations, the provision of Payment Schedules, the issuing of a Practical Completion Certificate or a Final Completion Certificate, the granting of extensions of time, and any changing of the Drawings or Specifications, unless expressly authorised by the Engineer by written notice to the Contractor; and

(c) Any other powers excluded by the Engineer by written notice to the Contractor.   

What does this all mean? The Engineer can exclude the ER from exercising some or all of their powers, by written notice to the Contractor (this is rarely seen in practice). The Engineer can authorise the ER to exercise any or all of the subclause (b) powers. Again, this must be by written notice to the Contractor.

But what the Engineer cannot delegate is the power to review matters in dispute. This covers a review under 13.2.1 and a formal decision under 13.2.4.

As the ER’s powers are by delegation from the Engineer, the ER must comply with the same obligations under clause 6.2. A failure of the ER to carry out his/her duties properly gives rise to a deemed Variation under clause 6.2.4.

If you find the ER is essentially acting as the Engineer on a project, start by checking for the clause 6.3 notice from the Engineer appointing the ER. If you cannot locate one, consider asking the Engineer to provide a copy. If you are unhappy with a decision of the ER, contractors also have the right to have any instruction or decision of the ER reviewed by the Engineer, under clause 6.3.4(b). This is a precursor to the clause 13 dispute process. 

As long as the ER is appointed correctly, given delegated powers by written notice to the Contractor, they can effectively stand in the Engineer’s shoes for the majority of the tasks usually performed by the Engineer. In that situation an ER is more valuable as a friend than as a foe.

• Dentons Kensington Swan offers 15 minutes of free advice on construction issues to CCNZ members. 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 Kensington Swan does not accept any liability other than to its clients, and then only in relation to specific requests for advice.

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