The NSW Government is proposing to introduce a new Practice Standard for Professional Engineers, and released a draft for consultation in July.
The Standard forms part of the NSW Building Commission’s commitment to restore confidence in the quality of residential construction in the state and includes mandatory obligations for professional engineers registered under the Design and Building Practitioners Act 2020 (NSW).
A key feature of the proposed standard is a requirement that designs must be “fit for purpose”.
“While Consult Australia supports the policy intention of the NSW Government to increase consumer confidence, the introduction of a statutory fitness for purpose obligation will not deliver this. Instead, we run the real risk of engineers across New South Wales being uninsurable,” says Consult Australia Chief Executive Officer, Jonathan Cartledge.
Australian engineers are already struggling to access affordable professional indemnity (PI) insurance. PI insurance premiums have risen rapidly in over the last seven years, according to the Australian Prudential and Regulation Authority. PI gross written premiums have grown by 75% since 2015, with average premiums rising by 27%. It is a situation that Engineers Australia notes “is not sustainable”.
A fit for purpose obligation contradicts the exemption for engineers and architects under Australian Consumer Law. This exemption exists because engineers, architects and designers cannot guarantee the final build. While they deliver designs and specifications in accordance with a client’s wishes, the implementation of those designs and specifications is dependent on third parties.
“We believe insurers are likely to respond to this new fitness for purpose obligation by increasing their premiums to unaffordable levels. This will have significant implications for the construction industry and the timely delivery and value for money of NSW’s infrastructure pipeline,” Jonathan notes.
The proposed standard would apply to engineers working on the design of Class 2, 3 and 9c buildings – including multi-unit residential, townhouses, boarding houses, hostels and other short-term accommodation – and is likely to expand over time.
Consult Australia is currently engaging with the NSW Government to advocate on members’ behalf, and has raised concerns with the Australian Small Business and Family Enterprise Ombudsman, the NSW Small Business Commissioner, the Insurance Council of Australia and other advocacy groups.
“Our members support the policy intention of the NSW Government to increase consumer confidence in the building industry and are 100% committed to delivering high quality engineering outcomes.
“But our message to the NSW Government is loud and clear. The proposal will worsen the insurance emergency and may mean many smaller firms are unable to afford the insurance required to operate in New South Wales,” Jonathan concludes.