Independent Certifier or just a certifier

I was looking through a set of tender documents for a small council job recently. Schedule 1 names the same person, from the same consultancy, as both the Contract Administrator and the Independent Certifier.

That is allowed under NZS 3910:2023. On a small job I can see why a principal would do it. But it got me thinking about whether the biggest change in the new standard is actually working the way it was meant to.

How it worked under NZS 3910:2013

Under the 2013 edition there was an Engineer to the Contract and, on many jobs, an Engineer’s Representative.

The Engineer had to be one natural person (6.1.4) and held what clause 6.2.1 called a dual role. The first part was expert adviser to and representative of the Principal, giving directions to the Contractor and acting as the Principal’s agent for payment claims and Payment Schedules. The second part was acting independently of either party to fairly and impartially make decisions, value the work and issue certificates.

The tension between those 2 parts was well known. Contractors would argue the Engineer was leaning towards the Principal and principals would sometimes lean on the Engineer they were paying. Most of us who have worked as Engineer or ER have felt that pull at some point.

The ER was optional. The Engineer could appoint one from time to time by notice to the Contractor (6.3.1). Where there was one, the ER usually ran the contract day to day. The ER could not review disputes, value Variations, provide Payment Schedules, grant extensions of time or issue completion certificates unless the Engineer expressly authorised it (6.3.3). If the Contractor was unhappy with an ER instruction or decision, it could refer it to the Engineer, who would confirm, reverse or vary it (6.3.4(b)).

So where there was an ER, there was a 2 person check. Where the Engineer did everything, there was not.

The gap was at the top. Once something reached the Engineer, disputes went to the Engineer’s own review under 13.2. A formal decision under 13.2.4 was final and binding unless it went to mediation, arbitration or adjudication. At that point the Contractor was asking the same person to look at their own call again.

What changed in NZS 3910:2023

The 2023 edition splits the Engineer into 2 roles.

The Contract Administrator acts for and on behalf of the Principal in giving Instructions (6.2.1). Only the CA gives Instructions, with a copy to the Principal and the IC (6.3.2).

The Independent Certifier acts fairly, impartially and independently of either contracting party in making the Decisions entrusted to it (6.2.2). That includes valuing the work, certifying Payment Schedules, deciding entitlement to and the value of Variations, granting extensions of time and issuing completion certificates. Only the IC makes Decisions and each one has to be in writing with reasons (6.3.7).

The Principal can also engage Advisers to support either role, but Advisers cannot give Instructions or make Decisions (6.3.6). There is no Engineer’s Representative in the 2023 general conditions, so unless the special conditions add one, the CA gives every Instruction and the IC makes every Decision personally.

The part that matters most is the review process in 6.4. Any party can ask the IC to review any matter, Instruction or Decision (6.4.1). The IC has 20 Working Days to confirm, correct or amend it (6.4.3). A party that is still unhappy can ask for a further review or a Final Decision (6.4.4 to 6.4.6). The parties can also agree to bring in an expert with the cost split 50/50 (6.4.8). A CA Instruction binds both parties until the CA or the IC reverses it under 6.4 (6.3.5).

That is the new check and balance. The IC sits in the middle and can correct the CA before a disagreement goes to formal dispute resolution.

But the standard still allows one person to hold both roles. Clause 6.1.2 says the CA and IC may be the same person. If they are, a replacement can also be one person (6.1.3).

Why the combined role defeats the purpose

If the CA instructs something and the Contractor disagrees, the Contractor asks the IC to review it under 6.4.1. If the CA and IC are the same person, the Contractor is asking that person to overrule their own Instruction. If they do not, the next step is a further review or a Final Decision. That is the same person again. The Contractor can go through 3 rounds of review and never get past the person who made the original call.

That is not a question of integrity. It is just human nature. Very few people will look at their own Instruction a few weeks later and say they got it wrong.

The same problem shows up in Variations. The CA instructs a Variation on the Principal’s behalf and the IC decides what it is worth. With one person in both roles, they are valuing a change they instructed for the Principal. It is worse again where the CA and IC is also the designer, because a design issue that causes a Variation is being judged by the person who designed it.

So in practice you are back to 2013 on a job where the Engineer did everything without an ER. Structurally nothing has changed. The difference is the label. Under 2013 everyone knew the Engineer wore 2 hats. Under 2023 the role is called Independent Certifier and the contract sets out a formal review process, so the Contractor is promised an independent check that a combined role cannot deliver.

Amending the independence out

Some principals go further. I have seen special conditions that replace 6.2.2 so the IC only has to act fairly and impartially, with the words about acting independently of either contracting party taken out. A new clause is then added allowing the IC to be an employee of the Principal.

The 2 changes go together. You cannot be independent of the Principal if they employ you, so the word has to go if that option is kept open.

I understand why a council would do it. Many have used in-house engineers as Engineer to the Contract for years. If they use an employee it is more honest to drop the word than to keep a promise the appointment cannot meet. It is also often a standard clause carried across every contract, whether or not it gets used.

But I think it is the wrong call. The role is called Independent Certifier. Independence is the whole point of the 2023 split. Take it out and you have a certifier who only has to be fair.

It also gives the Contractor less than the old standard did. Under 2013, clause 6.2.1(b) required the Engineer to make decisions “independently of either contracting party”. With that amendment, the 2023 IC only has to act fairly and impartially. On paper, the Contractor had a stronger promise under 2013 than it gets under this version of 2023.

Each of these changes can be defended on its own. Put together, they can leave one person as CA and IC, with no independence requirement and possibly a Principal employee in the role. At that point most of what the 2023 split was meant to fix has gone.

The Contractor has no say

The CA and IC are named in the Specific Conditions at tender. The Contractor can price it or qualify its tender, but it has no say in who is appointed. The only input it gets is making representations when someone is replaced (6.1.3(c)).

Then there is who pays. The IC is engaged and paid by the Principal and often relies on that Principal for its next job. Even someone doing their best is going to feel a pull one way. That is not a criticism of anyone doing the role. It is just how the arrangement is set up.

Is it fair

On a small job the cost argument is fair. A 3 month job with a modest contract sum will struggle to justify 2 separate appointments with 2 sets of fees, site visits and meetings. Most of the time the IC role on a job like that is quiet. Monthly Payment Schedules, a couple of Variations and a Practical Completion Certificate.

But the saving only holds while everyone agrees. For the Contractor, the quick and cheap way to resolve a disagreement is gone and the only real option becomes formal dispute resolution. Contractors know this at tender time, so they price the risk in or qualify.

For the client it is not the saving it looks like either. A decision made by a combined CA and IC is easier to challenge because the independence is open to question. One dispute that goes to adjudication can easily cost more than a separate IC would have cost for the whole job.

So I do not think it is fair to either party once something goes wrong. It works well right up until the first real disagreement.

Does 3910:2023 suit small jobs

The standard reads well in principle. But if principals need special conditions to change how the IC works, or default to the combined role to save money, then the contract is not working as intended for a lot of the people using it.

There is already a standard form for jobs where the Principal administers the contract itself. NZS 3915:2005 is written for contracts where no Engineer is appointed. It is 20 years old and was not updated alongside 3910:2023, so it will likely need special conditions of its own to bring it up to date. But it is honest about how the job is being run.

If a principal wants to use its own staff or cannot justify an independent certifier, I would rather see the job let under NZS 3915 than under a 3910:2023 contract with the independence amended out.

What I would like to see

On larger or higher risk jobs, I think the IC should be appointed jointly by the Principal and the Contractor. Both agree the person, both sign the engagement, the cost is shared and neither can remove the IC on their own.

This is not a new idea. NZS 3910:2023 already does it for the agreed expert under 6.4.8. Dispute boards on international FIDIC contracts are appointed by both parties with the cost shared.

It does have downsides. It adds cost and time at the start of a job, either the Principal or the Contractor can stall the appointment and it complicates the IC’s role as the Principal’s agent for Payment Schedules under 6.2.3. So I see it as an option for the jobs where a dispute would be expensive, not a fix for everything.

Some middle ground for now

Until something changes, there are ways to keep the cost down without losing the independent check:

• Keep 6.2.2 as written and do not amend the independence out.
• Appoint different people from the same firm as CA and IC. It is not fully independent but it is a lot better than one person reviewing their own Instructions.
• Engage a separate IC on call. They are paid only when a Payment Schedule, Decision or review is needed, which on a small job is not many hours.
• If an in-house IC is needed, pick someone outside the delivery team with no involvement in the design or budget.
• If one person is CA and IC, use a special condition to name a separate person for any 6.4 review of their own Instructions and Decisions.
• Decide on risk, not just contract value. A small job with poor ground information, old services, a tight programme or difficult stakeholders is more likely to end up in a disagreement than a larger straightforward one.

If one person does hold both roles, be disciplined about it. Head every letter as either Contract Administrator or Independent Certifier. Keep Instructions and Decisions in separate registers. Give proper reasons with every IC Decision, as 6.3.7 requires, so they stand up if they are tested later.

My view

Combining the roles is a legitimate option and on the right job it is sensible. It should be a deliberate decision based on risk, not a default to save a fee line. The Independent Certifier only earns its keep when there is a disagreement. That is exactly when it needs to be genuinely independent.

BlueWave provides CA, IC and independent review support on NZS 3910 contracts across the Bay of Plenty. If you are setting up a 3910:2023 contract and weighing this up, happy to have a chat.