Engineering Contracts

There are the standard  forms of engineering contracts. The principles are broadly similar to those in respect of construction contracts. Engineers Ireland publish a standard civil engineering project contract.

Engineering contracts are used in relation to projects such as roads, bridges and sewage systems. Most building and construction contracts have significant engineering elements. Construction of a building, apartment block or a building for industrial or commercial use, has  many engineering elements.

Civil engineers will commonly design more complex buildings or unusual buildings from the perspective of structural stability. Mechanical engineers may design the various systems in building.

The essential requirements and nature of civil and building contracts are broadly similar. The fact that separate formats are used is largely based on the fact that the architectural profession has produced the standard form construction contracts whereas the engineering professions have produced contracts more focused on engineering aspects.

Civil engineering contracts have tended to be more complex than construction contracts. Differing issues can arise in engineering in relation to pricing. Civil engineering works tend to have a greater underground element. It is more  difficult to anticipate the effect of ground conditions.

In the case of road contracts, there may be difficulties in estimating the extent to which excavated material can be reused in the works. If it cannot be reused, difficult issues of disposal and waste and substitute materials arise, which significantly affect cost.

The suitability for reuse will depend on the nature of materials available on the relevant site. Informaton may be available to a limited extent through site investigation reports at tender stage, but there is likely to be significant elements of uncertainty.

Design and build type arrangements are more appropriate to design and construction arrangements. The employer typically a public service contractor in relation to infrastructural works, will be less concerned with the fine detail of completion.

The calculation of quantities is usually more difficult in engineering contracts than construction contracts due to inherent uncertainties arisng from the nature of the works. In most civil engineering projects, the employer prepares a bill of quantities which forms part of the documents. Accordingly, the contract price is adjusted if the quantities differ from that contemplated.

Contractors may be given information at tender stage regarding ground condition, by way of site investigation reports based on boreholes. The standard standard engineering contracts provides for compensation in the event the ground conditions are worse than could have been reasonably foreseen by an experienced contractor. This covers the risk that  additional work may arise from matters such as an artificial or natural obstruction, which are beyond contemplation and outside the scope of what was coontempalted at tender stage..

Measuring and Bills

Measuring rules that apply in civil engineering are similar to those applying in building. The standard engineering form contemplates the use of the civil engineering standard methods of measurement proved the Institution of Civil Engineers and Federation of Civil Engineering Contractors. They are to apply, unless otherwise contemplated.As works progress, the rates in the bills apply against actual quantities.

A bill of quantities may be prepared by the employer in a lump sum contract for the purpose of the tender. In this case, it may not be a contract document. It will be schedule of rates and accordingly, relevant to the valuation of variations only. There will be no measurement of the actual quantities in the course of the work. If quantities are less than anticipated or greater than anticipated, the risk falls with the employer or contractor as the case may be.

Delays and Extensions

The Standard engineering form of contract contemplates that some for events may lead to  an extension of time. It provides that an extension of time may be granted in the event of works being delayed by any variation ordered under certain provisions of the contract or where the quantities exceeding those anticipated by the bill of quantities or any other cause of delay referred to in the conditions or exceptional adverse weather conditions or other special circumstances of any kind whatsoever, which  occur which are such as to fairly to entitle the contractor to an extension of time.

Contracts contemplate delays caused by specific failures on the part of the employer including in the  provision of drawings, failure to issue instructions, adverse physical conditions, engineer’s instructions, variations, failure to give timely possession. These are separately covered. The general clause does not appear to capture other employer’s breaches.

Under the standard engineering contract, time may become at large and accordingly, the liquidated damages clause may cease to apply where the employer is in default in causing delay. This may have a practical consequence that little or no damages are recoverable as it may be difficult to prove actual loss. The public works contracts now used by the public sector do not use this format.

Price Variation

The standard engineering form of contract deals with price variations. It deals separately with increases in labour, materials and plant. Increases due to inflation in these elements from the designated date being 10 days prior to the latest date for receipt of tenders are provided for. Increases allowed for labour costs to be tied to the level of registration of registered employment agreements.

Engineering contracts are  frequently delayed in commencement.The clause concerned is almost invariably amended in public sector and many other contracts and is made not to apply.

Civil engineering contracts provide for physical ground conditions and artificial obstructions that are not reasonably foreseeable. The contractor is to be entitled to an extension of time and compensation if it is delayed or involved an extra expense by reason of encountering physical conditions or artificial obstructions, which could not reasonably have been foreseen by an experienced contractor.

Compensation is limited to the cost in relation to the delay and disruption and cost plus profit in relation to carrying out additional works and  construction plant required. The clause commonly gives rise to disputes and arbitration. It may be contended whether particular conditions could have been anticipated. Significant additional cost may arise. The  question as to who bears it is usually of great significance.

The standard engineerng contracts require the employer to obtain planning and other consents including environmental consents and consents relating to archaeological issues and antiquities that arise.

Where after the designated date, the cost of performance of the contract is increased or decreased as a result of legislative enactments or statutory instruments, the exercise of powers by public bodies, then the amount of such increase or decrease shall be borne by or accrued for the benefit of the employer and the contract price shall be varied accordingly. The relevant date is 10 days after the latest date for receipt of tenders.

The standard engineering contract allows for termination by one party if the other party is in default. It sets out the grounds on which the employer may terminate by reason of the contractor’s default.

Where variations are instructed under the contract by the engineer, the contractor may claim additional amounts referable to them. This also applies

  • where the contractor has been delayed or disrupted by reason of default on the part of the employer
  • by  his engineer in the administration of the contract
  • where the site or ground conditions are different to those anticipated
  • because the tender information is incomplete.

The engineer is obliged to act fairly as between contractor and employer. He may not act in the interests of one party over another. This is a case, notwithstanding that he is  initially retained by the contractor and may have prepared the relevant data on foot of which the tender was prepared.

The standard engineering conditions of contract require the engineer to decide the amount due to the contractor. To some extent, the engineer may constitute an appeals tribunal in relation to his own decisions.

Except as otherwise provided, if a dispute of any kind arises between the employer and the contractor, in connection with or arising out of the contract, including any dispute as to any decision, opinion, instructions, certificate or valuation of the engineer, it is to be determined by the engineer who shall state its decision in writing and give notice of the same to the employer and the contractor within specified time limits, generally up to three months.


Engineer’s Instructions and Variations

Under the standard engineering contract conditioos, the contractor must comply with the engineer’s instructions in any matter connected with the contract. Any instruction off the engineer which is a subject of a subsequent claim shall be either an instruction in writing or an oral instruction confirmed in writing. If within 21 days, the contractorshall confirm in writing to the engineer, any oral instruction, it is to be deemed to be issued in writing.

The engineer may order any variation to any part of the works that may in his opinion be necessary for the completion of the works. He has  power to order any variation that is desirable for the satisfactory completion and functioning of the works. They may include additions, omissions, substitutions, alterations, changes in quality, form, character, kind, position, dimension, level or line and changes in the specified sequence, method or timing of construction.

No such variation may be made by the contractor without an order by the engineer. No order in writing shall be required for the increase or decrease in the quantity of any work, where such increases or decreases is not a result of an order given under the clause but results from quantities exceeding or being less than those stated in the bill of quantities.

Claim for Additional Payment and Time

If the contractor intends to claim any additional payment, he shall give notice in writing of his intention to the engineers as soon as reasonably possible, after commencement of the events giving rise to the claim. On the happening of such events, the contractor shall keep such contemporary records as may be reasonably necessary to support  any claim he may subsequently wish to make.

The contractor may be entitled on general principles to payment for variations even where notice is not being given. If the employer is aware of an instruction being given and aware that the instruction confers some additional benefit, the employer may be obliged to make payment on the basis of restitution. If the instruction is given by the employer rather than the engineer, and the contractor, although not obliged to do so, acts on foot of it, there is likely to be a collateral agreement in relation to the variation.

Civil engineering projects are particularly prone to delay. The contractor may claim that the employer has caused delay which has in turn caused further cost and delay. A  variation order by the engineer may extent time, and if the work is on the critical path, an extension of time is allowed.

Claims for the delay and disruption, may in effect be claims based on inefficiency and loss of productivity in consequence of the relevant events. The contractor will typically be seeking to make the employer responsible.

The contractor will seek the direct cost of the disruption and additional expenses including portion of overheads and profits based on the absence of contribution from the project towards overhead costs.

Where an extension of time or delay is caused by two effective causes one of which entitles the contractor to an extension, the contractor is entitled to an extension. A concurrent claim may arise where it is not possible to determine which the predominant cause of the delay. Some courts have taken the view that there should be an extension of time without compensation.

Contractor’s Compensation

Under the standard engineering form of contract, the contractor is entitled to compensation in relation to specified events including delay to completion caused

  • by engineer failing to issue drawings in time;
  • by reason of encountering adverse physical conditions or artificial obstructions which may not reasonably have been anticipated when the contract was entered;
  • by reason of engineer’s instructions,
  • by reason of delay on the part of engineer in giving his consent to the proposed method of work;
  • by reason of facilitating other direct contractors to the employer carrying out the works;
  • by reason of suspension of the work by the employer;
  • by reason of failure to give possession;
  • by reason of certain defaults on the part of nominated subcontractors.

A contractor is entitled to compensation for delay on completion of works due to breach of contract by the employer. These are delays which create an entitlement to an extension of time. A delay must be on that critical path to completion so as to justify an extension of time.


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