The Role of the Engineer in a New FIDIC Contract

Multilateral Development Banks (MDB) such as the World Bank, Asian Development Bank, EBRD, AfDB have been providing the financial support through loans and grants to many developing countries to promote their economy, infrastructure and social quality. Providing large infrastructure projects such as a highway, railway, harbor, power plant is one of MDB’ primary goals for the low-income countries and for the projects, a standard form for construction works made by International Federation of Consulting Engineers (FIDIC) has been used for the project.

In 2017, FIDIC released a new version of the standard contract form. FIDIC has been trying to make its contract forms balanced between an employer, normally a government and a contractor, a construction contractor.

It is notorious that most construction projects do not end by the projected time. Delayed projects cause problems of increased time and cost and they amount to an Employer’s loss such as loss of highway toll fee, purchase of expensive electricity. The loss also occurs to the Contractors because of increased indirect cost to maintain the project longer than they calculated first for the bidding price.

To make it worse, many risk factors exist in the unsound projects, especially in the developing countries. For example, a beneficiary government with no staff skilled at construction contracts, prevalent corruption, authority’s complicated procedure for a permit, too low bidding price, unexpected adverse weather, unforeseeable underground condition, Engineer’s poor coordination between the government and the constructor and so on. Based on its long experience and reliable opinions of its experts, FIDIC offers good and balanced general conditions of the contract for both Employer and Contractor to specify each party’s right and responsibility.

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But a good contact form does not always guarantee successful completion of a project. In order to prevent known risks of the projects, FIDIC specifies a coordinator, the Engineer in its standard contract form. FIDIC changed the very first definition of the Engineer and its role in the contract form to fix possible contradictions and reflect the reality in the construction contracts. In the past, the Engineer used to be a neutral person between two parties, to coordinate the project and confirm the work completed for monthly payments. However, under the structure of a contract that the Engineer was paid by the Employer, inevitably the Engineers generally failed to be impartial between two parties. Therefore, in 1999, FIDIC changed the Engineer’s role as an employee of Employer, but has been keeping a few provisions to ask the Engineer to be fair to determine performing his major jobs — in fact, now no contractor seems to rely on the Engineer’s neutral position. Though the Engineer is not even a party in the contract, FIDIC spares quite a part of the contract to provisions related to the Engineer and actually allows a significant power in the contract to control the Contractor.

To be successful in a project applying the newly released FIDIC’s form, an analysis of the explicit and implied risks regarding the Engineer’s right and responsibility is essential. The risk analysis is beneficial not only to the Contractor but also to the Employer because neither Contractor nor Employer wants to lose its money in a project because of the Engineer’s unauthorized act or unreasonably impair management of the contract. Furthermore, to take a progressive step forward coping with the known risks in the projects — the Engineer’s partial attitude in the project, the Bank’s active interference is important because successful completion of the projects in a smooth and harmonized way is the Bank’s interest. The Bank’s interference is even more meaningful if a project is in an underdeveloped country and corruption is foreseen.