I see your quandary. A few comments -
Whatever you do, do it in writing. Document what happens. Produce those written documents with extreme care, potentially with advice from the city attorney.
Generally, public entities have little choice in reporting unethical behavior, potentially dangerous designs or drawings that are so wrong that their production is a prima facie indication that the engineer who signed and sealed the drawing(s) is not competent. This would apply to your firm's assignment. However, ...
The issue of unethical behavior is tough to prove.
If you can demonstrate that the design - as presented - requires special inspection in order to be accepted under the applicable building code(s), then you
might have him on both the competency and/or ethics issues. But you will have to use the design method assumed by the applicable code as well as any other generally accepted design methods to demonstrate the error. Most state boards won't do this - the complainant must provide it.
I think your first step is to contact the engineer and ask him to come by to discuss the matter. Ask him to explain the changes, and to provide hand calculations to you to back them up. If he "arches his back", you have little choice but to file a complaint. If he can demonstrate the basis for his changes - and they are reasonable - you have avoided an unnecessary conflict.
The third scenario is thornier: what if he "confesses his sins" and asks to be permitted to withdraw the drawings from consideration? I don't think you can ethically permit that, but you need to check with the city attorney (also on contract?) and someone with your state board.
Good luck, and let us know what happens -
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