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CCDC 2 (2020): 8 Key Changes to the Stipulated Price Contract

Published:

January 20, 2021

Author(s):

• Michael Richards, Partner
• John Kulik, KC, McInnes Cooper Alum

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In the first update to the CCDC 2 since 2008, in December 2020 the Canadian Construction Documents Committee (CCDC) published the CCDC 2 (2020). In that time, the Canadian construction industry has undergone significant changes with the introduction, or planned introduction (as in, for example, Nova Scotia’s Builders’ Lien Act) of prompt payment legislation across the country. The CCDC 2 (2020) incorporates various changes introduced by prompt payment legislation, including recognition of the role of adjudication in resolving payment disputes. It also creates a wholly new completion milestone, “Ready-for-Takeover”. Given the major changes the CCDC 2 (2020) introduces, it is important that parties intending to rely on this contract understand the impact it will have on their contractual obligations. Parties are also wise to update any of the standard supplementary conditions upon which they previously relied under the old CCDC 2 (2008), as these might no longer be appropriate. Fortunately, to provide parties additional time to review and understand this update, the CCDC advised it will continue to publish the CCDC 2 (2008) for another year.

Here are eight key changes in the CCDC 2 (2020) and an overview of how they impact the parties’ contractual obligations under these commonly used contracts.

1. Payment Terms and Release of Holdback

The CCDC 2 (2020) includes numerous changes to payment terms and the release of holdback, most of which help align these contracts with prompt payment schemes. To that end, the CCDC 2 (2020) now defines “Payment Legislation” as “legislation in effect at the Place of the Work which governs payment under construction contracts” (that is, prompt payment legislation). The specific changes to the payment terms and release of holdback under the new CCDC 2 (2020) include:

• The Contractor must now submit applications for payment to both the Owner and the Consultant, rather than just the Consultant (GC 5.2.1).
• In order to incorporate the concept of the “proper invoice” from prompt payment legislation, the Contractor’s application for payment must comply with Payment Legislation (GC 5.2.6).
• Similarly, and also to conform with prompt payment legislation, if the Owner intends to reject any part of an application for payment, it must provide the Contractor with a written notice of non-payment, with reasons (GC 5.3.1.1).
• On all applications for payment, the Contractor must provide evidence of compliance with worker’s compensation legislation (GC 5.2.7 and GC 10.4.1).
• After the first payment, the Contractor must now provide a CCDC 9A Statutory Declaration on the distribution of payment with all applications for payment (GC 5.2.7).
• Subject to the requirement of any Payment Legislation, the Owner must now pay the statutory holdback no later than 10 Working Days following the expiration of the lien period (GC 5.4.3).
• In conformance with existing prompt payment legislation, the Owner must pay the Contractor on the 28^th day after the receipt of the application for payment, or, in any event, in compliance with applicable Payment Legislation. However, the Owner must pay the final payment within five calendar days after the issuance of a final certificate for payment (GC 5.3.1.2; GC 5.5.4).

2. Ready-for-Takeover & Early Occupancy

Another significant change in the CCDC 2 (2020) is the introduction of a new completion milestone, “Ready-for-Takeover”.

Ready-for-Takeover Conditions. Under the new General Condition 12.1, this milestone is achieved when the Consultant confirms various conditions are satisfied, including:

• The Consultant has certified the Substantial Performance of the Work (as defined in the applicable lien legislation).
• Evidence of compliance with the requirement for occupancy or occupancy permit.
• Final cleaning and waste removal.
• Delivery to the Owner of operations and maintenance documents, as required by the Contract Documents.
• Delivery of as-built drawings completed to date.
• Completion of start-up testing.
• The ability to secure access to the Work has been provided to the Owner.
• The Contactor has scheduled demonstration and training, as required by the Contract Documents.

The Consultant’s certification of both Substantial Performance of the Work and evidence of compliance with the requirement for an occupancy permit are mandatory for achieving Ready-for-Takeover. However, if any of these remaining items are delayed because of conditions reasonably beyond the Contractor’s control, or by an agreement between the Owner and the Contractor, Ready-for-Takeover must not be delayed.

Ready-for-Takeover Application. When the Contractor considers it has achieved Ready-for-Takeover, the Contractor must deliver to the Consultant and the Owner a written application for Ready-for-Takeover, containing a list of the remaining items to be completed or corrected. After submitting this application, the Consultant has 10 days to either

• Advise the Contractor if the Work is not Ready-for-Takeover, and provide written reasons.
• Confirm the date for Ready-for-Takeover to the Owner and the Contractor.

Early Occupancy. The CCDC 2 (2020) also allows the Owner to take early occupancy of part, or the entirety, of the Work before Ready-for-Takeover has been attained. However, the Owner can only take occupancy of the Work upon the Contractor’s agreement and with approval of the relevant authorities. Where the Owner takes occupancy of the Work before Ready-for-Takeover has been attained, the Contractor ceases to be liable for the care of the part of the Work occupied by the Owner, and the warranty period for that part of the Work starts from the date on which it is occupied. And where the Owner takes occupancy of the entirety of the Work before Ready-for-Takeover has been achieved, this does not relieve the Contractor from its responsibility to complete the Work in a timely manner.

3. Valuation of Change Directives

The CCDC 2 (2020) also revises the allowable costs in the valuation of Change Directives, and clarifies that these costs can only be charged if they contribute directly to the implementation of the Change Directive. The new GC 6.3 allows the Contractor to charge for any of these additional costs:

• The Contractor’s office personnel engaged in a technical capacity.
• In the absence of agreed rates, costs less salvage value of Construction Equipment, Temporary Work and tools, exclusive of hand tools under $1,000 owned by the Contractor.
• Rental costs of Construction Equipment, Temporary Work and tools, exclusive of hand tools under $1,000.
• Losses and expenses sustained by the Contractor for matters which are the subject of insurance under the policies prescribed in GC 11.1 – INSURANCE, when such losses and expenses are not recoverable because the amounts are in excess of collectable amounts or within the deductible amounts.
• Certain legal costs incurred by the Contractor in relation to the performance of the Work.
• Costs of auditing when requested by the Owner.
• Costs of Project specific information technology in accordance with the method determined by the parties.

However, with the deletion of GC 6.3.6.1(2) and (4) from the CCDC 2 (2008), the Contractor can no longer charge for wages of personnel engaged in the preparation or review of Shop Drawings, fabrication drawings, and coordination drawings, or for wages of personnel engaged in the process of changes in the Work.

4. Adjudication

Recognizing the significant role of adjudication under new prompt payment legislation, a new general condition, GC 8.2 – ADJUDICATION, has been added. This condition clarifies that nothing in the Contract affects the parties’ rights to resolve any dispute by adjudication pursuant to prompt payment legislation.

5. Delays

While GC 6.5.1 (Owner-caused delays) and GC 6.5.3 (delays outside the Contractor’s control) remain unchanged, GC 6.5.2 provides that if, due to a stop work order issued by a court or other public authority, the Contractor fails to achieve Ready-for-Takeover on the date agreed by the parties, then the Contract Time will be extended for such time as the Consultant may recommended, in consultation with the Contractor, and the Owner will reimburse the Contractor for costs incurred as a result of the delay.

6. Indemnification & Waiver

The timing for indemnification (GC 13.1) and for waiver of claims (GC 13.2) is now determined with reference to the date of Ready-for-Takeover. Furthermore, the Contractor and Owner’s indemnification obligation are now expressly limited to direct loss and damage, and exclude indemnification for indirect, consequential, punitive or exemplary damages (GC 13.1.2).

7. Cash Allowances

Under the new GC 4.1.4, cash allowances can be reallocated to cover unexpected shortfalls. Accordingly, where the actual cost of the Work under any particular cash allowance exceeds the allowance amount, the Consultant can direct that any unexpended amounts from other cash allowances be reallocated to cover that shortfall. In such case, there would be no additional amount added to the Contract Price. The Contractor will only be compensated for the excess cost where the actual cost of the Work under all cash allowances exceeds the total amount of all cash allowances.

8. Safety
With the deletion of the old GC 3.2.2., the Contractor is now responsible for overall health and safety on the Project, even where the Owner brings on other contractors or work is completed by the Owner’s own forces. However, under GC 9.4.2, both the Owner and the Contractor are now responsible for complying with all health and safety regulations and requirements.

Please contact your McInnes Cooper lawyer or any member of our Construction Law Team @ McInnes Cooper to discuss this topic or any other legal issue.

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