responses and determinations

The Engineer’s Responses and Determinations: What Should be Included?

Earlier this year I presented a CPD talk to RICS members in Dubai on the topic of Engineer’s Responses and Determinations. I usually like to kick things of with a poll and I asked the group the following questions:

How many people 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 people 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 people have experienced a situation where the Engineer’s response has caused the matter to escalate to a dispute? Over 50% of attendees confirmed that they had.

How many think that failures of the Engineer to carry out their contractual obligations on 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. 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) 

This 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. The Engineer can request further information if it is not possible to reach a conclusion from the information included in the claim. However, if they do so, the Engineer shall respond on the principles of the claim. If rejecting (or reducing the quantum), the response shall contain ‘detailed comments’.

FIDIC Sub-Clause 1.3 (Communications) 

This clause states that Approvals, certificates, consents and determinations shall not be unreasonably withheld or delayed’. This 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?

  • Establishes a revised Time for Completion (or not).
  • Prevents the deduction of delay penalties (or not).
  • Allows the Contractor to be paid for Costs legitimately incurred.
  • Allows the Contractor to be paid for work carried out which is the subject of a claim.
  • Reduces disputes.
  • This all promotes good will and cooperation.

Sub-Clause 3.5 (Determinations) 

This clause provides that the Engineer shall consult with each Party and  endeavour to reach agreement. If agreement is not achieved, the Engineer must make a fair determination in accordance with the Contract. This determination should take due regard of all relevant circumstances. In either case, the Engineer must give notice to both Parties with supporting particulars.

FIDIC Sub-Clause 3.1 (Engineer’s Duty and Authority)

This 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 an Engineer include in their 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.  They should also demonstrate 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 include the same criteria as a claim:

  • Examination of the cause.
  • Analysis 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.

Enjoyed this article? Learn more with Claims Class e-courses.