Blogs

16 Sep 2020

Successfully working with an independent certifier

by Nikita Cellini, Trainee Solicitor - Toronto, Canada

Independent Certifiers are increasingly being used in contracts in Canada and Australia. Differing in many respects from contract administrators such as the FIDIC Engineer, the Superintendent under the AS4000[1] or NEC Project Manager, working with an IC requires a subtly different approach. This article draws on Systech Law’s experience to provide an overview of the role of the Independent Certifier and how to successfully work with them.

What is an Independent Certifier?

The Independent Certifier’s (IC) duties have evolved over time to include a variety of “Certification Services”. While the IC’s precise role and duties will depend on the particular contract in question, examples of Certification Services may include:

  • Developing and implementing a certification quality plan that identifies the processes and outcomes of the Certification Services.
  • Site inspection and monitoring of work.
  • Witnessing testing and commissioning procedures.
  • Reporting on observations, findings and potential risks to certification arising from regular inspections.
  • Issuing a Substantial Completion Certificate or Final Completion Certificate.

Independent Certifiers are commonly involved in Public Private Partnerships[2]. Consequently, several IC agreements have entered the public domain and are available online. An IC is empowered by an agreement between the IC, the Contractor, and the Owner / Employer. The Project Agreement (PA) between the Employer and Contractor, in turn, provides the framework for the IC’s authority.

Independence

As may be expected, there is an overarching requirement for the IC to act independently in fulfilling its duties, and the PA will also generally limit the Parties from entering into any other agreement related to the project with the IC.

In contrast to traditional contract administrators, an IC is appointed and paid by both Parties to the PA. Although usually required to act independently when performing certain functions, traditional contract administrators are appointed and paid for by the Owner / Employer and act generally as an agent. This has often been critiqued by Contractors, as there are obvious implications for the independence of such administrators.

An IC therefore provides a greater guarantee of independence between the Parties both contractually and in a broader commercial sense, insofar as the IC’s appointments rely on a positive reputation on both sides of the Employer / Contractor relationship. However, Employers will still generally have the greater bargaining power in terms of the appointment.

Certification

The IC has the authority to make binding decisions in the determination of certain Certifications including Milestone Payment Completion Certificate; Interim Substantial Completion Certification, Substantial Completion Certificate and Final Completion Certificate. It is the responsibility of the Parties to raise any discrepancies or errors in the certificate prior to their issuance.

Issues regarding certification processes are well-known by contractors. Although some of these risks may be mitigated when using an IC, in comparison to traditional contract administrators, the Contractor must still ensure it is thorough in its approach to certification. Although all contract administrators are liable in respect of their work, the greater transparency that comes with being engaged by both Parties requires the IC to be stringent in its certifications while also demonstrating fairness between the Parties.

Dispute Resolution

The IC is responsible for assisting in the resolution of disputes that cannot be resolved by the Parties, with an associated cost for each dispute addressed by the IC.

As with certification, the IC’s role between the Parties should avoid some of the common issues encountered when traditional contract administrators, that act generally as an agent of the Employer, are required to act with independence in the disputes process.

However, working with an IC in disputed matters also requires a more collaborative approach than Contractors may be used to, and an understanding that the IC’s imperative should be to prevent the dispute escalating rather than attempting to resolve it strictly in line with the law. Therefore, in complex disputes, the IC’s determinations may not result in a comfortable compromise if the Parties are unsure of key factual or legal points. Preparedness, at least at a high level, is therefore key.

Building a successful relationship

Working with an IC raises unique and interesting challenges. To develop a successful relationship with an IC requires trust in the IC’s capacity to provide Certification Services independently and effectively. However, the IC’s ability to do that requires a Contractor to take the IC into its confidence and work collaboratively.

In achieving this collaboration, preparedness and effective interfacing with the IC are vital project outcomes, with important implications for cashflow and project relationships. Given that the engagement of the IC is by three party agreement, this relationship can be managed differently in contrast to traditional contract administrators, with greater possibilities for ‘managing up’ to induce performance or cooperation from the IC.

To gain the most from the engagement of an IC, Parties must understand and attune to the IC’s priorities, but there are clear opportunities for Contractors in the areas identified in this article. This may, on the face of it, give the impression that Employers potentially disadvantage themselves by using an IC. However, such a view is short-sighted; the Contractor’s gain is not the Employer’s loss in this instance. Indeed, this kind of adversarial thinking is exactly what the IC system aims to challenge. Employers should find that the greater balance brought about by an IC reduces friction in key areas, which directly beneficial for projects.

Systech

Systech has had positive experiences building successful relationships with Independent Certifiers, and our teams look forward to exploring how we can assist your project.


[1] Australian Standard General Conditions of Contract

[2] For example, Alternative Financing Procedure Contracts in the province of Ontario.

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