Hi if water is returning into the outer part of the flue which is made of steel it will damage the flue and corrode it. Yes it needs replacing as it could be deemed at risk and boiler switched off.

Sorry I cannot comment on another installers work
I did not inspect the installation so it’s unfair that I should give you a solution
Added to that Gasafe have given their view so I cannot add to their instruction
As an aside I don’t think it’s correct that My Builder is asking installers to pass comment on such serious issues as this

Rainwater is not particularly corrosive. What is far more likely to be the case is that when the flue was first installed, the flue sections were not pushed fully home into the o-rings or the o-rings were dislodged, ripped or some other issue to do with the plastic inner flue (which holds the corrosive condensate water). Plastic can handle the acidity, metal can't. If the exhaust fumes exiting the boiler through the inner flue mix with the fresh air coming in the metal outer flue then it can be dangerous and can put the CO reading off the scale and/or cut the boiler out. Also, over time the corrosive condensate water dripping from the inner flue leak will rot the outer flue through and then fumes can enter the property which is dangerous. I can't comment on the actual situation as I haven't seen it but it does sound legit that the flue needs to be replaced with all genuine Vaillant flue pipe and fittings and fitted to Vaillant's manufacturer's instructions. I would also recommend that any o-rings are greased when the installer pushes the new flue together. Also, every flue section or change in direction needs to be supported by a proper flue bracket. Badly supported flues coming apart can also cause the issue you are having. Hope this was of some use. Thanks.

From the information supplied without seeing the job i would agree with the engineer. I have had to change a few vaillant flus due to flu seals failinf after a couple of years