In Canada, the Canadian Construction Document Committee (“CCDC”), comprised of stake holders in the construction industry, publishes a suite of construction contracts. The CCDC suite of contracts are the most used standard form contracts in the industry in Canada and the CCDC 2 Stipulated Price Contract is the most frequently used of these contracts.
In December 2020 CCDC published an update to the CCDC 2 Stipulated Price Contract.
The majority of the updates to the CCDC 2 were made to match prompt payment legislation that has been either introduced (or that is planned) in several Canadian provinces (including Ontario and Alberta) and to incorporate changes that were commonly made by parties to CCDC 2 contracts by way of supplementary conditions. Although the CCDC will continue to publish the CCDC 2 – 2008 Stipulated Price Contract for one year, it is important for Owners and Contractors to be aware of the changes that have been made.
In this article, we set out a summary of the significant changes made to the CCDC 2 – 2020 Stipulated Price Contract.
Summary of Changes to the CCDC 2 - 2020 Stipulated Price Contract
- Ready-for-Takeover: The CCDC 2 – 2020 Stipulated Price Contract introduces the concept of “Ready-for-Takeover” as a milestone for completion of the work. Previously, completion of the work was set as achievement of “substantial performance” pursuant to the applicable lien legislation.
“Read-for-Takeover” will be achieved when various conditions are confirmed by the consultant to have been met, including:
- achieving “substantial performance” pursuant to the applicable lien legislation;
- issuance of an occupancy permit;
- completion of final cleaning and waste removal;
- delivery of required operations and maintenance documents to the Owner; and
- completion and submission or delivery of as-built drawings.
The achievement of “Ready-for-Takeover” is also linked to specific obligations, including delivery dates for the work, warranty periods, insurance periods, indemnification obligations and waiver of claims deadlines.
Owners and Contractors should also be aware that the CCDC 2- 2020 Stipulated Price Contract now also permits the Owner to take early occupancy of all or part of the work before “Ready-for-Takeover” is achieved for the project as a whole. Such early occupancy will pass responsibility for that part of the work to the Owner and will also start the early running of applicable warranty periods. Owners and Contractors will likely want to clarify how early occupancy will impact ongoing work.
Payment Terms and Release of Holdback:
As noted above, the CCDC 2 – 2020 Stipulated Price Contract has modified payment terms to reflect prompt payment legislation that has been introduced (or is being contemplated) in many Canadian provinces. Changes made to reflect these changes to the prompt payment legislation include the following:
- holdbacks may be released annually for multi-year projects; and
- evidence of compliance with workers’ compensation legislation and a declaration by the Contractor as to the distribution of amounts previously received by the Owner by use of a CCDC 9A is now required for each payment application.
Both Owners and Contractors should consider if the payment terms set out in the CCDC 2 – 2020 Stipulated Price Contract are sufficient to meet compliance with all applicable laws and regulations in their applicable jurisdiction.
Change Directives:
The CCDC 2 – 2020 Stipulated Price Contract includes updates to the costs to be considered in connection with valuation of a change directive. Now, costs for a change directive may only be charged if they contribute directly to the implementation of the change directive. These costs include:
- wages of office personnel engaged in a technical capacity;
- costs (less salvage value) of temporary work equipment, tools and hand tools under $1,000 owned by the Contractor;
- losses and expenses by the Contractor for matters which are the subject of insurance under the policies required by GC 11.1 [INSURANCE] but that are not recoverable because they are in excess of collectible amounts or within deductible amounts;
- legal costs in relation to the performance of the Work, provided that the same are not relating to a dispute between the Owner and the Contractor, the negligent acts or omissions of the Contractor, or, the breach of contract by the Contractor; and
- costs of auditing if requested by the Owner.
A Contractor is no longer able to claim for certain items in a change directive, including:
- wages of personnel engaged in review of shop drawings, fabrication drawings and coordination drawings; and
- wages of personnel engaged in processing changes of the Work.
Owners and Subcontractors should consider how the changes to costing for change directives will be implemented and what impact the same may have on the contract pricing.
Cash Allowances:
The CCDC 2 – 2020 Stipulated Price Contract permits the reallocation of unexpended cash allowances to cover any shortfalls that may occur in connection with a budget item, meaning that an increase in the Contract Price will only occur when the cost of an increase exceeds the total amount of all cash allowances provided for in the Contract. The total of any unexpended cash allowances will similarly be deducted from the Contract Price.
Owners and Contractors should consider how this will work in practice and whether additional terms and clarifications in the supplementary conditions are required.
Delays:
The CCDC 2 – 2020 Stipulated Price Contract has amended the provisions regarding delays set out at GC 6.5 [DELAYS]. Now, if there is a delay in the performance of the Work due to a stop work order issued by a court or other public authority, an extension of time will only be permitted where the Contractor cannot achieve “Ready-for-Takeover” by the agreed on date.
Consequential Damages:
The indemnification provisions in the CCDC 2 – 2020 Stipulated Price Contract at GC 13.1 [INDEMNIFICATION] have been revised to expressly exclude any liability for “indirect”, “consequential”, “punitive” or “exemplary” damages. These terms are not defined.
Both Owners and Contractors should be aware that there is no standard definition of “indirect” or “consequential” damages in Canadian law. Accordingly, consideration should be made as to whether or not additional language in supplementary conditions is required to clarify what damages will be deemed to be “indirect” or “consequential” and if that allocation of risk is acceptable to each party in the specific Project circumstances.
Safety:
Unlike the previous version, the CCDC 2 – 2020 Stipulated Price Contract requires both Owner and Contractor to comply with applicable health and safety legislation, but does not specifically assign the “Prime Contractor” or “Constructor” responsible for health and safety at the Project site. Where the “Prime Contractor” or “Constructor” role is not assigned, it is assumed to be the Owner’s responsibility.
Both Owners and Contractors will likely want to specifically assign the role of “Prime Contractor” or “Constructor” so that there is no ambiguity with respect to health and safety obligations.
Document Review:
The CCDC – 2 2020 Stipulated Price Contract now requires the Contractor to report any error, inconsistency or omission in the Contract Documents that it discovers, or that is made known to it. This is a change from the previous iteration of the stipulated price contract which required the Contractor to review the Contract Documents and promptly report any error, inconsistency or omission. It has also been clarified that the purpose of review is only for the purpose of facilitating coordination of the Work.
Adjudication:
The CCDC 2 – 2020 Stipulated Price Contract has introduced GC8.2 [ADJUDICATION]. This new general condition clarifies that nothing in the standard form contract (including the dispute resolution provisions) affects the Owner or Contractor’s rights to resolve disputes by adjudication pursuant to any applicable legislation.
Insurance:
In addition to the updates made to the CCDC 2 – 2020 Stipulated Price Contract, the CCDC has also made changes to CCDC 41 – CCDC Insurance Requirements (these insurance requirements are incorporated by reference into the CCDC 2 – 2020 Stipulated Price Contract). Among other things, the changes to the CCDC 41 – CCDC Insurance Requirements have:
- increased limits for certain required insurance policies; and
- included an obligation of a Contractor to obtain pollution liability insurance.
Owners and Contractors should review the CCDC 41 – CCDC Insurance Requirements carefully in order to consider if additional or other insurance requirements should be incorporated for their project.
General Deletions:
Owners and Contractors should also be aware of deletions made in the CCDC 2 – 2020 Stipulated Price Contract. Significant deletions include:
- deletion of the requirement that the use of the Work be in accordance with applicable laws and not encumber the Site;
- deletion of the requirement to keep Contract Documents, submittals, reports and records of meetings at the Site (note, however that as-built drawings are an item required for “Ready-for-Takeover” status to be met); and
- deletion of the requirement for the Contractor to provide contract security.
Going Forward
Owners and Contractors that commonly use the CCDC 2 Stipulated Price Contract often develop and use their own set of supplementary conditions. It is important that any supplementary conditions used for the CCDC 2 should be reviewed and updated to conform with the updated contract standard form.