WHO SHOULD READ THIS
All engineers and engineering firms, and the owners, principals and contractors who engage engineers for their projects in the building and construction industry in New South Wales.
WHAT YOU NEED TO KNOW
From 1 July 2021, only registered professional engineers (or those under the direct supervision of a registered professional engineer) will be permitted to carry out professional engineering work in New South Wales in the following prescribed areas: structural, civil, mechanical, fire safety and electrical engineering (and any area prescribed by the regulations, which are yet to be published). Serious penalties and other consequences with respect to entitlement to payment will apply if this requirement is contravened.
WHAT YOU NEED TO DO
Engineers should carefully consider the new registration requirements (as well as the associated insurance requirements), and how those requirements will apply to them, in readiness for the new scheme's commencement on 1 July 2021.
Engineers play a vital role in the design and delivery of infrastructure and building projects across the nation. However, until recently, there was no mandatory requirement for engineers to be registered or adequately insured under any statutory schemes in New South Wales (NSW). The NSW Government has changed this by introducing the Design and Building Practitioners Act 2020 (NSW) (DBP Act) as part of the NSW Government's commitment to introduce a suite of new obligations on design and building practitioners in reponse to the Shergold and Weir Confidence Report on the building and construction industry.
The DBP Act partly commenced on 11 June 2020. Some parts of the DBP Act will commence on 1 July 2021 and others at a later date to be determined.
In summary, the DBP Act:
- introduces the imposition of a statutory duty of care on anyone who carries out construction work to exercise reasonable care to avoid economic loss caused by defects. The duty is owed to owners and successors in title and is now in force. Construction work has a broad definition under the DBP Act, meaning that the statutory duty will extend to a range of industry participants including designers, builders, supervisors and those involved in the manufacture and supply of building products for building work. The regulations, expected to be published later this year, may expand the types of work to which the statutory duty applies;
- will require a broad range of participants in the construction and engineering sectors, including designers, engineers and builders, to be registered under a newly created statutory registration scheme;
- will impose an obligation on such 'registered practitioners' to ensure that they are adequately insured;
- will introduce a scheme for the provision of 'compliance declarations' in relation to the preparation of (and variations to) 'regulated designs';
- will impose express obligations on directors of companies to report certain conduct in contravention of the DBP Act; and
- will introduce a broad suite of strict enforcement powers and penalties to ensure compliance with the various requirements of the DBP Act, which include:
- significant civil penalties;
- a prohibition on receiving payment for certain work done if registration requirements are not met (irrespective of any contractual entitlement to payment);
- investigation powers, including powers of entry, search, seizure and interrogation;
- the empowerment of authorised officers to issue 'stop work' orders.
In this Focus Alert, the first in a series to cover the various aspects of the DBP Act, particular consideration is given to the mandatory registration scheme (and associated insurance obligations) applying to professional engineers under the DBP Act.
We will publish further Focus Alerts over the coming weeks covering other important aspects of the DBP Act.
Mandatory registration scheme
From 1 July 2021, only registered professional engineers (or those working under the direct supervision of a registered professional engineer) will be permitted to carry out professional engineering work, which is defined as follows:
'....engineering work that requires, or is based on, the application of engineering principles and data to –
(a) a design, or
(b) a construction, production, operation or maintenance activity,
relating to engineering.'
Professional engineering work does not include engineering work that is 'only provided in accordance with a document that states the procedure or criteria for carrying out the work and the work does not require the application of advanced scientifically based calculations'. The regulations (which are expected to be published later this year) may also prescribe certain engineering work to be excluded from the definition of professional engineering work.
The prescribed disciplines of engineering for which registration is required are:
- structural engineering;
- civil engineering;
- mechanical engineering;
- fire safety; and
- electrical engineering.
The regulations may prescribe additional disciplines.
Applying for registration
To apply for registration, a person will need to make an application to the Department of Customer Service (Department). When determining whether an applicant should be registered, the Secretary of the Department may have regard to the following factors (among others):
- whether the applicant has the requisite qualifications, skills, knowledge and experience in relation to the class of registration they are applying for;
- whether the applicant has been suspended, cancelled or disqualified from holding an equivalent registration in another state or territory in Australia; or
- whether the applicant is an undischarged bankrupt.
Once the registration is granted, the registration period may apply for 1, 3 or 5 year(s).
Further, the regulations may impose conditions of registration such as the requirement to belong to a professional body.
Failure to comply with registration requirements
Engineers should be aware that if they carry out professional engineering work without an appropriate registration:
- they will not be entitled to payment or any other compensation for carrying out that work, regardless of any contract or other arrangement providing for payment. Further, if payment isreceived for undertaking that work, that money can be recovered as a debt in court; and
- they risk facing a penalty of up to $55,000 for an individual or in the case of a company, $165,000.
Professional engineers are the only practitioners under the DBP Act who are subject to these severe limitations with respect to their entitlement to payment.
Compulsory insurance requirements
As a precondition to a professional engineering registration, a person must be 'adequately insured' in respect of the professional engineering work that they are authorised to do.
For example, if a person is seeking to obtain registration as a 'civil engineer', it is incumbent on that person to ensure that:
- they are insured to perform engineering work related to civil engineering; and
- such insurance covers any liability the engineer may be subject to as a result of carrying out the relevant civil engineering work (including the provision of 'compliance declarations' with respect to that work, as required under the DBP Act).
Failure to comply with this provision can attract a maximum penalty of up to $11,000 for individuals or in the case of a company, $33,000.
The implications of this requirement to the insurance industry will be an issue to watch closely, particularly given the challenges that industry participants are already facing in the professional indemnity insurance market.
The regulations, expected to be published later this year, will shed more light on the registration and insurance requirements and processes introduced by the DBP Act. We will provide a further update when the regulations are made available.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.