Changes to registration for engineers scheme and fitness for purpose update
The new Practice Standard and Registration for engineers is part of the NSW Government’s ongoing suite of legislative reforms designed to produce better buildings in NSW, boost consumer confidence and improve standards in the construction industry.
Background
Sections 49 and 50 of the Design and Building Practitioners Act 2020 (DBP Act) provide for registration and codes of practice to be imposed on registered practitioners.
Compliance with the Practice Standard is a condition of registration for all Professional Engineers registered under the DBP Act when carrying out “professional engineering work”. It applies to all NSW registered professional engineers and sets the clear standards of work and behaviour by engineers carrying out professional engineering work under the DBP Act.
Initial draft – insurance obligations – “fitness for purpose” & site “supervision”
The initial consultation draft from mid-2023 contained a Fitness for Purpose (FFP) requirement “imposing a new obligation to ensure that designs for professional engineering work are ‘fit for purpose’” (FFP Obligation).
The FFP Obligation created significant concern in the construction industry and also the insurance industry for the following reasons:
- It imposed a higher duty of care on engineers than the usual common law “reasonable skill and care” duty.
- It imposed a higher duty of care than the “competent professional practice” standard of care in Section 5O of the Civil Liability Act (NSW) 2002.
- It was inconsistent with the Australian Consumer Law 2010 exemption from the FFP guarantee for architects and engineers.
- It was effectively uninsurable due to exclusions for FFP claims in almost all professional indemnity insurance policies in the market.
The draft practice standard also specified an unrealistic requirement on engineers for site visits and effectively created a new site supervision responsibility for consultants:
“… it is expected that Professional Engineers play a proactive role in all stages of the build process and will attend sites as necessary to see that work is being carried out in accordance with designs.”
This supervision requirement went beyond consulting engineering services and also created insurance concerns on the basis it was outside the traditional role of a consulting engineer.
Consultation Phase
The Government engaged in significant consultation with engineers, the construction and insurance industries more broadly and also peak member bodies such as Consult Australia and Engineers Australia and the Insurance Council.
Bellrock Practice Leader Simon Gray participated in the consultation meetings and presented at the insurance roundtables to discuss the significant insurance concerns with the draft.
The Consultation phase was very worthwhile with many concerns being addressed in the March 2024 Practice Standard.
2024 Practice Standard – March 2024 – commences 1 September 2024
Compliance with this Practice Standard is a condition of registration for all Professional Engineers registered under the DBP Act, which includes:
- Civil engineering
- Electrical engineering
- Fire safety engineering
- Geotechnical engineering
- Mechanical engineering
- Structural engineering.
This Practice Standard also details how the new Building Commission NSW will assess a Professional Engineer’s compliance with the Practice Standard.
A practitioner’s registration as a Professional Engineer (i.e. registration to carry out professional engineering work) is distinct from registration they may hold as a design practitioner, principal design practitioner or building practitioner under the DBP Act (i.e. registration to make design or building compliance declarations).
- A Professional Engineer must ensure they carry out professional engineering work in compliance with the ‘fit for purpose’ requirements. This obligation is enforceable by the Building Regulator as a condition of registration. The Building Regulator will have regard to the extent to which the professional engineer has a contract of engagement that incorporates a design brief.
- The professional engineer’s work complies with all applicable legislative requirements.
- The work carried out by the professional engineer accords with the provisions of the National Construction Code ("NCC").
- The work carried out by the professional engineer is within their competency.
- The professional engineer takes all reasonable steps to coordinate with other designers working on a project to deliver the project.
- The professional engineer takes all reasonable steps to provide guidance to the building practitioner, as appropriate, on how to implement the professional engineering work.
It is not one of the criteria, however, the Practice Standard notes – “to the extent that it is reasonably practicable, and they are engaged to do so, it is expected that Professional Engineers play a proactive role in all relevant stages of the build process and will attend sites as necessary to see that work is being carried out in accordance with the designs prepared by the Professional Engineer.”
The strict “supervision” requirement discussed above has been amended after consultation and is now more aligned with the role of a consultant engineer.
It is important that engineers make sufficient allowances in their fees and contracts for “necessary” site visits. In our experience, under-pricing leads to under-resourcing which in turn leads to insurance claims and unprofitable projects for engineers. The Practice Standard requirement provides a strong anchor for discussions about appropriate fees with clients.
Insurance Implications
The good news for engineers is that the FFP requirement has been “watered down” and is no longer a separate and express FFP requirement.
The FFP criteria now accord with the professional standards one would expect of an engineer and broadly match the common law and other duty of care requirements mentioned above.
The “adequate” insurance requirements under Section 75 of the DBP Regulations remain in force including an examination of “any limits, exceptions, exclusions, terms or conditions of the policy.”.
We recommend engineers review their insurance policies on an annual basis with particular regard to the following clauses:
- Broad building materials exclusions
- Broad cladding exclusions
- Superintendency exclusions
- Cost estimates exclusions
- Extended duty of care under the DBP Act exclusions
- Consequential loss exclusions
- Contractual liability e.g. indemnity, hold harmless, waiver of subrogation exclusions
- Waiver of the right to Proportionate Liability exclusions
Under the Practice Standard, “professional engineers are encouraged to obtain independent financial advice and/or insurance advice as required.”
Bellrock has a dedicated team of risk advisors who specialise in insurance for construction professionals. Our Team can provide recommendations in relation to adequate insurance and exclusions in professional indemnity insurance policies and seek extensions from insurers for the various exclusions noted above. Please contact us via the form below for assistance.
