Contracts for engineering design normally include the obligation that the services will be performed with the reasonable skill, care and diligence that would be applied by a normally skilled member of the profession in similar circumstances. The profession makes considerable use of codes of practice, or “standards”, which codify current design practice. The prevailing view of the design profession is that such standards represent the “state of the art” that they are expected to apply. But does compliance with the current applicable standard mean that the designer has discharged his/her contractual duty of care? Might something more be required? Does the designer need to anticipate how the design standards may evolve? This paper addresses these questions in the light of a recent case, in which the judge’s findings on the applicable standard of care in relation to the use of current design standards may be surprising to many designers.

A previous paper outlined the significant changes in work health and safety (WHS) legislation in Australia since 2011. That paper discussed in general terms that one of the significant developments In the new harmonised Work Health and Safety Act (the Act) and the Work Health and Safety Regulations (Regulations) is the formalisation of higher WHS obligations on organisations that design, manufacture, import or supply products. This paper looks in more detail at the specific new WHS obligations that have now been imposed on a design organisation.

Since 2011, work health and safety (WHS) legislation in Australia has undergone significant change through harmonisation across most Australian jurisdictions. The new legislation places a significantly higher burden of responsibility and compliance on organisations working in the construction industry than previously. The impact of the new legislation on an organisation needs to be carefully reviewed to ensure that personnel at all levels understand their duties and obligations, and that processes and procedures are updated and implemented to reflect the new regime. One of the significant developments is the formalisation of higher WHS obligations on organisations that design, manufacture, import or supply products. The focus of this paper is on the changed requirements arising from the new legislation. It should be noted however, that the following comments are not applicable in Victoria or Western Australia at present, as they have not yet implemented the harmonised WHS legislation.

This paper addresses the following issues:

·     In a construction project, the design is the foundation that determines not only the construction costs, but also the entire life cycle costs including operation, maintenance and refurbishment.

·     Design costs are typically no more than 1% of the life cycle costs.

·     Design contracts involve different considerations to other construction contracts and subcontracts.

·     Employers should ensure that the contractual arrangements for procuring the design are the most appropriate for achieving their objectives, the most important of which is to obtain a design of the required quality.

This paper endeavours to identify the major design risks in a construction project, generally under the headings of scope, time, cost and quality.  The fundamental importance of design in achieving a project that satisfies the manifold requirements of aesthetics, functionality, constructability, operability, maintainability and economic performance over its life cycle are emphasized.

The 1:10:100 “rule” brings into sharp focus the impact that design decisions made at the earliest stage of a project have on the ultimate outcome over its life.  The corollary to this “rule” is that the most effective investment in ensuring project success is that made to obtain the most appropriate design.  A “better” design, even if it costs more to produce, can reap substantial financial returns over a long period of time in the form of lower operating or maintenance costs, or a reduced requirement for upgrading or refurbishment.

The employer can manage its design risks by appropriate selection of the right designer, agreeing to reasonable and equitable terms in the design contract which protect the employer’s interests without an unreasonable or unrealistic shifting of risks to the designer, and by agreeing to reasonable remuneration and time to perform an agreed scope of work to the required quality.  In addition to auditing of the designer’s compliance with the requirements of the contract, in appropriate cases it may be appropriate to engage an independent “proof engineer” to ensure the quality of the design.    The employer’s best risk management will be to have an unrelenting focus on the quality of the design, and provide an appropriate contractual setting in which this has the best opportunity of being achieved.

The designer can best manage its design risks by appropriate due diligence on the employer, by not agreeing to contractual terms which place unmanageable and uninsurable risks on it, by ensuring that it will be adequately remunerated for a clear and unambiguously defined scope of work it is required to execute, and by executing that scope of work in accordance with the contractual requirements.  Managing risks during execution of the design requires that adequate attention be given to resources, not only those at the “coalface” but also those required for supervision, coordination and checking.  Quality certified design organizations generally have sophisticated procedures intended to achieve designs to the appropriate quality, delivered on time with an acceptable financial outcome.  A designer ignores those procedures at its risk!

Traditionally, the engineer ‘wore many hats’ in connection with a construction project—as promoter, designer, project manager, contract administrator, certifier, adjudicator and sometimes even arbitrator. A number of those functions were fulfilled as ‘the engineer’ under a construction contract, in which the engineer, although engaged by the employer, was expected to act independently of both contract parties in his/her administration of the contract. It is apparent that that role is largely defunct under many modern construction contracts.

The changing role of the engineer is illustrated by reference to case law and modern construction contracts. Examples are given of major problems which have arisen from an inappropriate contractual role for the Engineer resulting from inadequate definition, execution and coordination of the various engineering functions. It is suggested that, notwithstanding the changed role of the engineer, the definition and proper execution of these functions are as important to the successful outcome of projects as ever.

This paper discusses the three elements that form part of every construction project and every construction contract: time, cost and quality. There is an inherent tension in satisfying expectations of all three elements in equal measure. The history of many major projects shows that management of project costs within expectations can be difficult. Failure, as a difference between expected and observed performance, applies to any of the elements of time cost or quality, and is likely to lead to a dispute. The importance of aligning expectations with what the contract can deliver is discussed as an important aspect of dispute avoidance.