What Contractors and Owners Need to Know About Changes to the Industry-Standard Contract

The Canadian Construction Documents Committee’s (CCDC) industry standard prime contract between owners and the general contractors is a well-known document in the construction industry.

Known as the CCDC 2 Stipulated Price Contract, it is primarily used where the parties desire a single, predetermined fixed price, or lump sum, for a project. It is widely used in the industry and, for this reason, any changes to the document are hotly debated and closely followed.

So it was significant when in late 2019, the committee introduced the first update to the CCDC 2 since 2008. As of January 1, the CCDC 2 – 2008 is obsolete, and copyright seals for it will no longer be available from the CCDC.

Below are some of the key changes in the CCDC 2 that owners and contractors should keep in mind.

Payment terms

The new CCDC 2 has been designed to align with the prompt payment legislation that has been sweeping across Canada (legislation is pending in B.C.) Notable changes made to align the new CCDC 2 include:

• Where an owner rejects all or a portion of an application for payment, the owner must promptly provide written notice to the contractor of the reasons for the revision or rejection;
• applications for payment are to comply with the provisions of provincial payment legislation;
• payment by the owner is to be made within 28 calendar days of receipt of the application of payment and, in any event, in compliance with payment legislation; and
• final payment is to be made no later than five calendar days after the issuance of the final certificate of payment and in compliance with payment legislation.

Other changes to the payment terms appear to be designed to incorporate terms that were commonly found in supplementary conditions added to the previous version of the CCDC 2. For instance, applications for payment now require evidence of compliance with Workers Compensation legislation as well as a CCDC 9A declaration as to the distribution of amounts previously received from the owner.

Ready for takeover

One section of the revised contract introduces the concept of “ready for takeover” in addition to the traditional “substantial performance”. This concept is presumably designed to ensure that a project reaches total completion in a timely manner. To achieve this new contract milestone, the following conditions must be satisfied:

• Substantial performance has been certified;
• compliance with the requirements for occupancy have been satisfied;
• final cleaning and waste removal has been completed;
• copies of as builts have been delivered;
• startup and testing as well as any demonstrations and training as required by the contract have been completed; and
• the owner has been provided with the ability to secure access to the project.

Construction safety

In the old CCDC 2, the contractor was solely responsible for construction safety at the place of the work. In the new CCDC 2, the contractor remains responsible for health and safety but the Owner is now also responsible for construction safety as well as for ensuring that the consultant, other contractors, and its own forces comply with the contractor’s health and safety programs (GC 9.4).

Cash allowances

Following the trend of incorporating supplemental condition terms that are widely used, unexpended cash allowances can now be allocated to other cash allowances to cover shortfalls. The net amount of unexpended cash allowances, after adjustment for reallocation, is to be deducted from the contract price. Likewise, where the actual cost under all cash allowances exceeds the total amount of cash allowances, the additional amounts are to be added to the contract price (GC 4.1)

Miscellaneous

Other revisions include:

• A number of new costs that can be charged by the contractor with respect to change directives (6.3.7);
• the linking of insurance provisions to the new Ready to Takeover milestone rather than Substantial Performance (GC 11.1);
• indemnity claims are limited to direct loss and damage with an express exclusion for indirect, consequential, punitive, or exemplary damages (GC 13.1.2.3);
• the removal of contract security language previously found in Part 11; and
• with the agreement of the contractor, the owner can take early occupancy of a part or the entirety of the work (GC 12.2).

This article originally appeared in Business in Vancouver on January 21, 2022. It was co-written with Norm Streu, Executive Vice President of NCM development, Nexii Building Solutions. Christopher Hirst is Managing Partner at Alexander Holburn LLP.