The Nominal PE and the Unregistered Subcontractor
An offshore engineering firm, Vega International, signs a RM120 million design-and-build bridge contract in Sabah with a Malaysian developer. Vega is not registered with BEM as an Engineering Consultancy Practice. It appoints Ir. Tan, a Malaysian PE, as 'Technical Director' and uses his name and seal on all drawings. In reality, the bridge design is performed by Vega's engineers in Singapore; Ir. Tan visits the site twice and signs the drawings without reviewing the calculations. The main contractor is CIDB-registered Grade G7, but it subcontracted 70% of the structural steelwork to a local company that is not CIDB-registered. The site supervisor is not registered with CIDB. A routine BEM inspection asks for the ECP registration and design records.
1. Identify the registration breaches under the Engineers Act 1967 and CIDB Act 1994. What are the consequences for Vega, Ir. Tan, the contractor and the subcontractor?
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Vega's arrangement is a classic nominal-PE breach. Under the Engineers Act 1967 and the Registration of Engineers Regulations 1990, an engineering consultancy practice must be registered with BEM. An unregistered foreign firm cannot provide engineering consultancy services in Malaysia through a Malaysian PE's name and seal. Ir. Tan is not a rubber stamp: signing drawings without reviewing the calculations is misrepresentation and a failure of professional competence. He may also be negligent if the design is defective. The CIDB Act 1994 requires contractors carrying out construction work to be registered, and construction personnel such as site supervisors to be registered. The Grade G7 contractor cannot cure its own registration by passing 70% of the structural steelwork to an unregistered subcontractor; that subcontractor is itself carrying out construction work. The site supervisor's lack of registration is a further breach. Consequences can include fines, stop-work orders, refusal of permits, deregistration, blacklisting and professional disciplinary action against Ir. Tan.
2. What should Ir. Tan have done before accepting the appointment and signing the drawings? What should he do now?
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Before accepting, Ir. Tan should have checked: whether Vega was registered as an ECP or would form a registered Malaysian ECP; whether his role was a genuine technical directorship with authority and resources; whether he would personally review and approve the design; who would be the qualified person in charge; whether professional indemnity insurance covered the offshore work; and whether the contract required a Malaysian PE's seal. He should have refused to lend his seal. Now he should stop signing immediately, notify BEM, cooperate with the inspection, and require a full independent review of the design by a competent registered engineer. He should document his concerns and, if Vega refuses to regularise, resign from the appointment and report the matter. He should not backdate reviews.
3. Advise the developer on the risks and remedial steps.
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The developer should not rely on the inspection outcome. It should: (1) verify Vega's ECP registration and Ir. Tan's actual role; (2) appoint an independent registered ECP to review the bridge design and construction; (3) check the CIDB registration of the main contractor and all subcontractors, and the site supervisor; (4) withhold further payments until the breaches are cured; (5) notify BEM and CIDB; and (6) review the contract for termination or step-in rights. The contract with an unregistered ECP may be unenforceable or expose the developer to regulatory action; at minimum it creates delay and cost risk. If the design has not been properly reviewed, the bridge's safety is uncertain. The developer should also consider whether the bank disbursement should be deferred until the design and registration issues are resolved. Regularisation is better than concealment, but it must include a real technical review, not just a new name on the drawings.