Following a CPD talk to RICS members in Dubai on the topic of Engineer’s Responses and Disputes, attendees were polled by show of hands on the following questions:

How many attendees have experienced a situation where the Engineer does not respond to a claim within the contractual time-frame?

Almost everyone confirmed that they had.

How many attendees have experienced a situation where the Engineer’s response has done little to resolve the claim?

Again, almost everyone confirmed that they had.

How many attendees have experienced a situation where the Engineer’s response has caused the matter to be escalated to a dispute?

Over 50% of attendees confirmed that they had experienced this situation.

How many attendees think that failures of the Engineer to carry out their contractual obligations with respect to claims is helpful to projects?

No one thought that this helped projects.

This is clear feedback from RICS members that the Engineers often do not perform their obligations and that this has a detrimental effect on projects.

So, what should Engineers be doing to help projects when responding to claims?

Well, as usual, the contract provides the answers, so let’s have a look at what the FIDIC Red Book has to say on the subject.

FIDIC Sub-Clause 20.1 (Contractor’s Claims) requires the Engineer to respond within 42 days of receipt of the claim. The response may be acceptance in full, rejection, or, presumably, acceptance but with reduced quantum. If the claim does not contain sufficient information for the Engineer to reach a conclusion, the Engineer may request further particulars. If requesting further particulars, however, the Engineer is obliged to respond to the principles of the claim. If rejecting (or reducing the quantum), the response shall contain ‘detailed comments’.

FIDIC Sub-Clause 1.3 (Communications) states that ‘Approvals, certificates, consents and determinations shall not be unreasonably withheld or delayed.’ This obligation reinforces the provisions of Sub-Clause 20.1 (Contractor’s Claims) to respond within 42 days.

Why does FIDIC place such importance on the response time?

  • A response establishes a revised Time for Completion (or not).
  • A response prevents the deduction of delay penalties (or not).
  • A response allows the Contractor to be paid for Costs legitimately incurred.
  • A response allows the Contractor to be paid for work carried out which is the subject of a claim.
  • A response reduces disputes.
  • This all promotes goodwill and cooperation.

Sub-Clause 3.5 (Determinations) provides that the Engineer shall consult with each Party and that the Engineer shall endeavour to reach an agreement. If agreement is not achieved, the Engineer is obliged to make a fair determination in accordance with the Contract, taking due regard of all relevant circumstances. In either case, the Engineer is obliged to give notice to both Parties with supporting particulars.

FIDIC Sub-Clause 3.1 (Engineer’s Duty and Authority) states that ‘whenever carrying out duties … specified in … the Contract, the Engineer shall be deemed to act for the Employer’. Does this mean that the Engineer is obliged to defend the Employer’s position by not making ‘a fair determination in accordance with the Contract, taking due regard of all relevant circumstances’? I think not, and neither did the RICS attendees.

So, what should be included in an Engineer’s Response or Determination in order to comply with the Contract?

Sub-Clause 20.1 (Contractor’s Claims) directs the Engineer to: . . . respond with approval, or with disapproval and detailed comments. He may also request any necessary further particulars, but shall nevertheless give his response on the principles of the claim . . .’. Under Sub-Cause 3.5 (Determinations), the Engineer is obliged to ‘make a fair determination in accordance with the Contract, taking due regard of all relevant circumstances’.

The Engineer, therefore, has an implicit obligation to demonstrate to both the Employer and the Contractor that the response or determination is fair and reasonable and in accordance with the Contract and that if either party chooses to raise the matter to a dispute, they will ultimately fail. The Engineer’s response must therefore be a comprehensive document which sets out the findings clearly and includes the same criteria as a claim:

  • Examination of the cause.
  • Examination of the effect and linkage to the cause.
  • Examination of the final effect on the Time for Completion with explanations.
  • Calculations of the additional payment with explanations.
  • Examination of the contractual entitlement.
  • Substantiation of all the above.

The above information helped the attendees to better understand the Engineer’s obligations and provided useful and practical advice as to how these may be performed so as to comply with the contract. Hopefully, it will help our readers, as well.

This blog was written by ICCP Executive Officer and Fellow, Andy Hewitt

If you would like to learn more about claims, check out our training partner, Claims Class.

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