Owner's Engineer - A Viable Solution For Capital Projects

By Jack Brock and Nick Arvin, Harris Group Inc.

The rising use of Owner's Engineers for major projects has been driven by two acute business trends. First, staffing in owner companies' engineering departments has been steadily reduced, and, in some cases, the engineering department has been completely eliminated. These reductions have been forced by budget constraints that have required cuts in staffing, while the owner still has to develop and execute necessary projects. As a result, engineering departments have fewer on-staff engineers and must turn to outside engineering firms to fill staffing shortages during times of increased activity.

The second trend motivating the use of Owner's Engineers is the increased use of third party or off-balance sheet financing for projects, which has led to extensive use of Engineering, Procurement and Construction (EPC) contracts. Under this approach, the engineering department can outsource the entire project, but in so doing they relinquish to the contractor much of their ability to influence project design and quality. Attempts to change the design and procurement of materials on the project after the contract is in place often results in change orders, which add to the cost of the project. The net result is that the owner has lost much of his in-house engineering expertise while, at the same time, shifting control of the design and execution of his project to the EPC. The owner may try to exercise control using their available staff, but in many cases those resources will be overwhelmed by the requirements of defining and monitoring a large project. So, many companies choose to retain an engineering firm to act on behalf of the owner. This outside firm becomes the Owner's Engineer for the project.