I have seen the rare instances in which the utility transformer is in the building's basement. In those installations, the service conductors are certainly completely inside. In all other installations, the service conductors are necessarily outside for at least part of their length. So it is not clear to me what your engineer is challenging nor what issue you are trying to describe.
You can have the service disconnecting means on the outside wall, in which case the service conductors are completely outside. From that point into the building, you no longer have service conductors; you have a feeder.
You can have the service disconnecting means inside the building (see Infinity's comment), in which case the service conductors are partly outside and partly inside.