Feb 4, 2021
Canadian Construction Contracts: Welcome To The New CCDC 2 (2020)
By Kayla Kwinter and Ryan Hauk
After twelve years with the CCDC 2 (2008) Stipulated Price Contract, the Canadian Construction Documents Committee (CCDC) has now released the new CCDC 2 (2020).
The revisions to the CCDC 2 (2008) do not significantly depart from its terms and mechanics. However, the revisions do provide important updates addressing the recent revisions to the construction legislation in many provinces, including the Ontario Construction Act. Most significantly, the CCDC 2 (2020) incorporates prompt payment and adjudication, and includes a number of key changes that will be critical to ensuring the timely completion of projects and uninterrupted flow of funds.
Below are some of the key changes found in the CCDC 2 (2020), and a brief discussion of how they may be relevant to you. We recommend that you contact your Torkin Manes lawyer to discuss any changes you may need to make to your supplementary conditions.
ADJUDICATION (Article 5.2, GC 7.2.3 and GC 8.2)
In October 2019, amendments to the Construction Act introduced mandatory adjudication for construction disputes. Under the Construction Act, the new adjudication provisions apply to all construction contracts.
Adjudication is now addressed in three sections of the CCDC 2 (2020):
- The interest rate specified for outstanding payments in Article 5.2 now specifically applies to payments due under an award in an adjudication;
- The termination provisions under GC 7.2.3 now specify that an owner is in default under the contract if it fails to pay the Contractor amounts due under an adjudication award; and
- A new GC 8.2 – ADJUDICATION has been added to the CCDC 2, stating that “nothing in the Contract shall be deemed to affect the rights of parties to resolve any dispute by adjudication”, clarifying that the adjudication process will be in addition to the previous and existing dispute resolution forms of mediation and arbitration.
In other words, the CCDC 2 (2020) now provides specific contractual mechanisms to enforce adjudication awards (which is consistent with the Construction Act), and parties may continue to use the traditional dispute resolution methods of negotiation, mediation and arbitration under the CCDC 2.
“READY-FOR-TAKEOVER” (GC 12.1)
The CCDC 2 (2020) introduces a new concept related to the completion of the project – “Ready-for-Takeover”. The Ready-for-Takeover concept is in addition to the existing concept of “Substantial Performance”.
Ready-for-Takeover is effectively a mechanism for ensuring the timely completion of the project once substantial performance has been achieved. Under the CCDC 2 (2008), the concept of “Contract Time” was tied to Substantial Performance of the Work. In the CCDC 2 (2020), the definition of “Contract Time” replaces the term “Substantial Performance of the Work” with the term "Ready-for-Takeover", with the result that the specified date for completion of the Contract now requires the project to be in a further state of completion than under the previous version of the CCDC 2.
The list of prerequisites for attaining Ready-for-Takeover are set out in GC 12.1.1 and include:
- Achieving Substantial Performance of the Work;
- Compliance with the requirements for occupancy under the occupancy permits;
- Final cleaning and waste removal;
- Delivery of as-builts and any necessary operation and maintenance documents;
- Completion of any necessary start-up testing, demonstration and training; and
- Provision to the Owner of the ability to secure access to the work.
GC 12.1.2 provides that Ready-for-Takeover may be achieved even if one or more of the above pre-requisites is delayed, provided that such delay is beyond the reasonable control of the Contractor, or upon the agreement of the Owner and the Contractor.
GC 12 provides a specific procedure for a Contractor to seek verification that Ready-for-Takeover has been achieved. When the Contractor believes that the Work is ready, it must submit its application for Ready-for-Takeover to both the Owner and the Consultant, together with its list of items to be completed or corrected. Within 10 days of receipt of the application, the Consultant must either confirm the date of Ready-for-Takeover, or advise that the Work is not Ready-for-Takeover and provide reasons why it is not. Immediately following confirmation of the date of Ready-for-Takeover, the Contractor and the Consultant must establish a reasonable date for finishing the Work.
In summary, the CCDC 2 (2020) now sets a specified date for completion of the contract that requires the project to be in a further state of completion than under the previous version of the CCDC 2 (i.e. “Ready-for-Takeover” by the Owner).
EARLY OCCUPANCY (GC 12)
A new GC 12.2 permits the Owner to take early occupancy of a part or of the entirety of the Work, prior to the Contractor attaining Ready-for-Takeover (as discussed above).
Two requirements are necessary before the Owner can take early occupancy: (i) prior approval from “authorities having jurisdiction” (for example, the municipality or City where the project resides); and (ii) the agreement of the Contractor, which cannot be unreasonably withheld. The terms do not define in what circumstances a Contractor could be justified in refusing to consent, but presumably the Contractor would be justified in doing so if it had concerns with safety at the project site or with its ability to promptly complete the project if early occupancy were taken.
Early occupancy does not relieve the Contractor of the requirement to complete the Work, however, the warranty period will commence and the Contractor will cease to be liable for the care of any area that has been occupied by the Owner.
PAYMENT APPLICATIONS AND PROGRESS PAYMENTS (GC 5.2 and 5.3)
Under the new CCDC 2 (2020), payment applications are still submitted on a monthly basis and evaluated based on a schedule of values. However, payment applications are now to be submitted to both the Owner and the Consultant simultaneously, and must include a number of deliverables that were often required by supplementary conditions, including evidence of compliance with workers' compensation legislation and a CCDC 9A Statutory Declaration as to the distribution of the amounts previously received.
Payment applications are now also required to comply with the applicable “Payment Legislation”. The new CCDC 2 (2020) contains a new defined term “Payment Legislation”, which is defined as “the legislation in effect at the Place of Work, which governs payment under construction contracts”. In Ontario, this means that for projects subject to the Construction Act, payment applications must be in the form of a “proper invoice”, with the result that the prompt payment and adjudication provisions are triggered.
Progress Payments under the CCDC 2 (2020) are now required to be made 28 days following the Owner’s receipt of the payment application (as required under the Construction Act) and “in compliance with Payment Legislation”. This latter requirement presumably imports the requirement to send Notices of Non-Payment in compliance with the Construction Act, notwithstanding that these requirements are not specifically referred to in the CCDC form. Parties relying on the CCDC 2 (2020) may wish to specifically address these requirements in their supplementary conditions to avoid any confusion.
Under the CCDC 2 (2020), if the Consultant certifies an amount other than that listed in the payment application, or rejects the payment application entirely, it is now the Owner, rather than the Consultant, that is required to notify the Contractor. This is again, presumably to ensure that proper notices are sent in accordance with the Construction Act.
PAYMENT OF STATUTORY HOLDBACK (GC 5.4)
Under the old GC 5.5, statutory holdback, once certified for payment, was due on the first calendar day following the expiry of the holdback period as set out in the lien legislation applicable to the Place of the Work. Under the new GC 5.4, the Owner is now required to pay the statutory holdback to the Contractor no later than 10 working days following the expiration of the lien period. However, the 10 day period is stated as being subject to the requirements of the applicable Payment Legislation. Under the Construction Act, holdback is payable upon the expiry of the lien period. Accordingly, holdback for projects subject to the Construction Act must be paid after the lien period expires (and not 10 days later).
Partial or annual release of holdback is not addressed in the CCDC 2 (2020), although it is now permitted under the Construction Act. If parties wish to provide for the annual or phased release of holdback, they must do so by way of supplementary conditions.
CONSTRUCTION SAFETY (GC 9.4)
Under the CCDC 2 (2008), the Contractor was to be solely responsible for construction safety at the place of the Work, including compliance with the rules and initiating safety precautions and programs.
Under the CCDC 2 (2020), the contractor is still responsible for health and safety, however, the Owner (including its personnel) is now also responsible for complying with all health and safety precautions and programs, as well as the rules, regulations and practices required by the applicable health and safety legislation.
DELAYS (GC 6.5)
Under the new CCDC 2 (2020), GC 6.5.2 has been revised to preclude claims for extensions for delays caused by stop work orders issued by a court or public authority, unless the delay results in the failure of the Contractor to obtain Ready-for-Takeover by the date stipulated in the Contract. The Contractor is still otherwise entitled to an extension of the Contract Time and reimbursement of reasonable costs as it was under the old GC 6.5.
In other words, in order to claim relief under GC 6.5.2, a Contractor must now also prove that the delay caused by a stop work extended the Ready-for-Takeover date.
There are also a number of general changes and clean up items summarized below:
- Facsimiles (Article A-6): A “Notice in Writing” is no longer permitted to be sent by facsimile.
- Document review (former GC 3.4): The obligation on the Contractor to review documents has been simplified to state that the Contractor is not responsible for errors, omissions or inconsistences in the Contract Documents. The former GC 3.4 (Document Review) has been deleted, and the new provisions are contained in GC 1.1.3 and 1.1.4. The CCDC 2 (2020) no longer imposes a positive obligation on the Contractor to review the contract documents and report to the Consultant on any error, inconsistency or omission. GC 1.1.3 provides that the Contractor’s review of the Contract Documents is only for the purpose of facilitating co-ordination and execution of the Work.
- Shop Drawings (GC 3.8): A number of provisions have been removed to simplify this section, but the substance of the section is largely unchanged.
- Documents at the Site (former GC 3.9): The requirement for the Contractor to keep Contract Documents, submittals, reports, and records of meetings at the site has been removed.
- Cash Allowances (GC 4.1): Unexpended cash allowance items can now be re-allocated to other cash allowances to cover shortfalls. Accordingly, additional amounts will only be added to the Contract Price when the actual cost of the Work under all cash allowances exceeds the total amount of all cash allowances. Likewise, only the net amount of any unexpended cash allowances, after providing for any reallocations, will be deducted from the Contract Price.
- Costs of Performing a Change Directive (GC 6.3.7): The CCDC 2 (2020) now specifies the kinds of costs that can be claimed in connection with a Change Directive.
- Contract Security (Old GC 11.2): The requirement for the contractor to provide contract security in the Contract Documents has been deleted.
- Indemnification Claims (GC 13.1) and Waiver of Claims (GC 13.2): These provisions are now tied to the date of Ready-for-Takeover instead of the date of Substantial Performance of the Work. Additionally, indemnification is now limited to direct claims, expressly excluding any liability for indirect, consequential, punitive or exemplary damages. The CCDC 2 (2020) also clarifies that there is no limit on third party claims of any kind.
If you have questions about the updated CCDC 2, please contact Torkin Manes lawyers Kayla Kwinter or Ryan Hauk.