ROLE OF THE ENGINEER UNDER FIDIC RED BOOK 2017

Among the many changes in the FIDIC 2017 Contract Set, FIDIC’s focus on clarifying the role of the Engineer, in many aspects (as analyzed below), may be considered the most important change, affecting successful application, management, and administration of a contract according to FIDIC standards.

As a whole, FIDIC’s changes are not aimed at reducing the role of the Engineer but, on the contrary, actually strengthen and clarify the issues that the Engineer is required to act upon (whether on behalf of the Employer or independent of the Parties).

However, because of the complexity in the structure of the terms, as well as the meaning of each issue it addresses, making correct interpretations and applications of the regulations related to the Engineer under FIDIC 2017, in general, and FIDIC Red Book 2017 in particular is not simple. Changes to the Engineer’s role include:

The number of clauses

The first change involves expanding and extending the regulations related to Engineer. Specifically, FIDIC Red Book 1999 only devotes 5 clauses pertaining to the Engineer, while FIDIC Red Book 2017 devotes 8 clauses. Changes in the names of clauses and their specific order are referenced in the table below[1].

No.	Contents	FIDIC 1999	FIDIC 2017
1	The Engineer		Clause 3.1
2	Engineer’s Duties and Authority	Clause 3.1	Clause 3.2
3	The Engineer’s Representative		Clause 3.3
4	Delegation by the Engineer	Clause 3.2	Clause 3.4
5	Instructions of the Engineer	Clause 3.3	Clause 3.5
6	Replacement of the Engineer	Clause 3.4	Clause 3.6
7	Determination	Clause 3.5	Clause 3.7
8	Meetings		Clause 3.8

Legal status of the Engineer

Currently, Employers tend to appoint the Engineer as a legal entity with the authority to speak on behalf of the consulting engineers – people who have the necessary professional competence and experience to perform designated responsibilities of the Engineer.

However, this DOES NOT exclude the possibility that the Engineer is appointed by the Employer as an individual in projects from time to time and under varying legal frameworks.

Therefore, in the official introduction, FIDIC only sets out the “if” assumption for convenience in practical applications when the Employer appoints an Engineer as a legal entity. Specifically, FIDIC Red Book 2017 stipulates:

“IF the Engineer is a legal entity, a natural person employed by the Engineer shall be appointed and empowered to act on behalf of the Engineer in the Contract[2].”

In addition to the requirements of qualifications and experience required to assume certain jobs, the Engineer notifies the Parties of the appointee (or substitution) to act on behalf of the Engineer. Such authority is effective only when the Parties have received written notice (of appointment or substitution)[3].

This provision is much clearer than the Engineer’s status as defined in FIDIC Red Book 1999 – whereby the Engineer is only described as a person appointed by the Employer to perform the duties set out in the Contract[4].

Engineer Representative

As an acknowledgment and reflection of the reality of Project implementation when the Engineer is appointed as a legal entity (or a collection of consulting engineers – with appropriate and equivalent skills and expertise), the appointment of a Representative for the Engineer – who is present regularly (full-time) at the Project is considered necessary.

Such provisions not only facilitate confirmation that the performance of the Contract is managed by a single-contacting point when instructions are issued, but also clearly defines who is and will be responsible for resolving claims (as well as other matters) in accordance with the Contract.

In terms of the authority of the representative, unlike the approach adopted by FIDIC Red Book 1999, FIDIC Red Book 2017 does not empower the Engineer Representative to make Decisions[5], and FIDIC Red Book 2017 also limits the Engineer Representative’s power to (i) replace the Engineer Representative,  and (ii) issues a notice to require the Contractor to remedy (or amend) in accordance with the requirements of the Contract, specifically in Clause 15.1 [Notice of Amendment][6].

From a legal perspective, the limitations on the authority of the Engineer Representative may be considered necessary and positive because the assignment of authority to the Engineer Representative in many instances may present dangerous legal implications. For example, when the Engineer’s Representative is entitled to issue a Notice of Amendment and the Contractor fails to comply with the Notice of Amendment, it may result in legal consequences of empowering the Employer to terminate the Contract. If that happens, the purposes and meaning of the contract entered into by the Parties may be lost, not to mention the possibility of contradicting the principle of devotion and goodwill in contract performance.

Clarification of Instructions by Engineer

Practical application of the clauses in FIDIC Red Book 1999 has shown that there are two issues that cause the majority of challenges for the parties, namely (i) would an instruction issued by the Engineer or Engineer’s Representative constitute a Variation in accordance with the contract, and if so, (ii) which procedure should the Contractor follow. The consequences of these issues, when not approached with caution and concern, may lead to settlement by a jurisdiction – something neither party desires when entering into a contract.

If FIDIC Red Book 1999 merely stated that: “… If an instruction constitutes a Variation, Clause 13 [Variations and Adjustments] shall apply.”[7] However, FIDIC Red Book 2017 provides additional provisions which affords the Contractor the right to inform the Engineer that[8]:

• Said instruction constitutes a Variation (or is related to work that is part of an existing Variation)[9] or
• Failure to comply with applicable law will either affect the safety of the Construction or is technically unfeasible.

If the Engineer does not respond (in the form of confirmation, replacement, or adjustment) within 7-days after receiving the Notice, the Engineer is deemed to have revoked the instruction. In contrast, the Contractor shall comply with the Engineer’s response[10].

The Engineer’s Determination

In addition to requiring the Engineer to give fair determinations[11], FIDIC Red Book 2017 approaches the Engineer’s determination from an entirely new perspective. Accordingly, the Engineer:

• Acts objectively without being considered as acting in the interests of (and on behalf of) the Employer[12];
• Complies with the strictly defined sequence, procedure, and schedule; and
• Via such compliance, produces results that are binding on the Parties to the Contract.

With respect to the requirement to act neutrally, it is possible that – to a certain extent – the parties to a FIDIC contract have not seen much meaning in practice because in any aspect, the Engineer is appointed by the Employer, and in most cases, the Employer is the one who pays the Engineer. However, from a legal perspective, this is a rule that leads to important legal consequences, especially considering that the Engineer is one of the initial and most effective dispute resolution methods in any construction contract.

With respect to the second requirement, the complex nature of the procedures specified in FIDIC Red Book 2017 for Engineers could be simplified into the following process:

• respect the agreement of the Parties: the Engineers must do their very best to encourage and consult with the Parties (both in terms of time and manner) for the Parties to reach a consensus; ->
• make decisions: when the Parties fail to reach a consensus; ->
• acknowledge the binding effect of the agreements made by the Parties or of the decision issued by the Engineer; and ->
• notice of non-compliance with the Engineer’s decision.

To ease up on the application of Clause 3.7 [Determination], FIDIC has provided a diagram for clarification (with more detail) the aforementioned order and procedures[13]. However, the application of Clause 3.7 [Determination] still encounters certain challenges as the Engineer is not yet familiar with FIDIC Red Book 2017, in comparison to decision-making under FIDIC Red Book 1999.

Therefore, to facilitate the best possible understanding and application of mechanisms for determination-making and issues resolutions under FIDIC Red Book 2017, reference to the detailed flowchart presented in Appendix II [Flowchart of Events under Clause 3.7 [Determination], FIDIC Red Book 2017] is advised.

Another aspect that should be noted is the clear separation of the nature of the Engineer’s determination. Accordingly, in the first version, the Engineer’s determination does not clearly distinguish between (i) the issues agreed upon by the Parties, in which the Engineer only has to record and send notice; and (ii) matters requiring determination by the Engineer. As a result, the Engineer often depends heavily on their own actual understanding and application, taking into account the given circumstance and period, to give the (only) final outcome that is the Determination[14].

In addition, FIDIC Red Book 2017 requires the Engineer to make their decision within 42 days (or another period proposed by the Engineer and agreed upon by the Parties)[15]. However, the question of the starting point of the duration, whether it applies to all kinds of issues to be resolved or whether it needs to be clearly distinguished are the new points that FIDIC Red Book 2017 has addressed. To be more specific:

• In case of a matter to be agreed upon or determined (not a Claim), the starting point of duration is the same as stated in the Contract[16];
• In case of Claims (without regard to cost and/or time), the starting point of duration must be the date of receipt of the notice of claim by the Engineer[17];
• In case of Claims related to costs and/or time, it is the date on which the Engineer:
• Receives details of the claim along with supporting particulars[18]; or
• Receives details of the Claim or Final Claim (when the issue of the Claim remains ongoing)[19].

As such, prior to deciding on any matter pursuant to Clause 3.7 [Determinations], the Engineer, acting in accordance with FIDIC Red Book 2017, must answer at least four questions, namely (i) What is the issue behind the Claim of the party; (ii) What kind of problem is it; (iii) Whether the party making the claim has complied with the procedures set forth; and (iv) what are the applicable time limits.

Finally, in order to avoid potential disputes that may emerge when the Engineer fails to act in a timely manner, FIDIC Red Book 2017 now specifies that if the Engineer fails to act within the prescribed time limit, the legal consequence are that (i) the Engineer shall be deemed to have rejected the Claim[20]; and (ii) as for the matter to be agreed or determined, the matter shall be deemed to be a Dispute that requires decision by the Dispute Avoidance/Adjudication Board[21][21]. This principle of “silence as refusal” stands in stark contrast to the principle applicable to the Parties[22] whereby if either Party fails to send a Notice of Objection within 28 days of receiving the Engineer’s decision, the decision will be deemed approved and final (binding on the Parties).

Organization of meetings

As mentioned in Section I [Number of Clauses] above, the role of the Engineer is further emphasized and expanded upon, thereby providing a more accurate reflection of the issues taking place in the actual implementation of the Project. Specifically, FIDIC Red Book 2017 has added provisions for the organization of meetings – thus helping the Parties to find solutions to potential disputes as well as serving as a good and viable opportunity for the Parties to be updated on the progress and the situation of the Project – which helps to prevent problems that may emerge. In addition, during each meeting, meeting minutes are recorded by the Engineer and distributed to each Party afterward[23].

Final Thoughts

From a legal perspective, the changes in the role of the Engineer in FIDIC Red Book 2017 clearly demonstrate the spirit of FIDIC to (i) clarify, as much as possible, the problems that the Engineer may encounter over the course of performing their work; (ii) further enhances the role of the Engineer, and thereby limiting or immediately dealing with matters that might cause disputes between the Parties; (iii) provokes the Engineer to improve their personal capabilities and proactively take action during the performance of the Contract – adhering to the role as a neutral third party.

On the other hand, these detailed regulations, such as the specificity of the order and procedures, would inevitably complicate matters, which may cause the Engineer to be confused, thereby not being able to make correct or appropriate applications to deal with issues at hand.

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[1] The delineation of the Clauses under this section is only for relative comparative significance because FIDIC Red Book 1999 also contains a number of provisions corresponding to FIDIC Red Book 2017, but those provisions are not clear, allocated in many different sections, and lack the focus to express its general meaning.

[2] See Clause 3.1 [Engineer], Paragraph 3, FIDIC Red Book 2017.

[3] See Clause 3.1 [Engineer], FIDIC Red Book 2017.

[4] See Clause 3.1 [Engineer’s Duties and Authority], FIDIC Red Book 1999.

[5] See Clause 3.4 [Delegation by the Engineer], FIDIC Red Book 2017, Clause 3.2 [Delegation by the Engineer], FIDIC Red Book 1999.

[6] See Clause 3.3 [Engineer Representative], Clause 3.4 [Trustee by Engineer], FIDIC Red Book 2017.

[7] See Clause 3.3 [Instructions of the Engineer], FIDIC Red Book 1999.

[8] See Clause 3.5 [Engineer’s Instructions], FIDIC Red Book 2017.

[9] Please note that the Variation procedure has been further clarified and solidified by FIDIC Red Book 2017, thereby making it easier for the Parties to agree on the variations.

[10] See Clause 3.5 [Engineer’s Instructions], FIDIC Red Book 2017.

[11] See Clause 3.7 [Agreement or Determination], FIDIC Red Book 2017; Clause 3.5 [Determination], FIDIC Red Book 1999.

[12] See Clause 3.7 [Agreement or Determination], FIDIC Red Book 2017.

[13] See the Instructions for Drafting Particular Conditions, attached Forms (as described in Appendix I).

[14] See Clause 3.5 [Determination], FIDIC Red Book 1999.

[15] See Clause 3.7 [Agreement or Determination], FIDIC Red Book 2017.

[16] See Clause 3.7.3(a).

[17] See Clause 3.7.3(b).

[18] See Clause 3.7.3(c)(i).

[19] See Clause 3.7.3(c)(ii).

[20] See Clause 3.7.3(i).

[21] See Clause 3.7.3(ii).

[22] See Clause 3.7.5.

[23] See Clause 3.8 [Meetings], FIDIC Red Book 2017.