Standard of Care

What is unusual about the following: “We are not c apable of delivering the quality and value specific to the project requirements. We lack the skill, judgment and experience of comparable firms in our field”?

Everything — because those are words you will never find in any contractor’s pre-qualification statement that crosses your desk. Unless of course, the contractor has something of a death wish.

According to the Ontario General Contractors Association “Guide To Pre-Qualification of Contractors,” a properly run prequalification process will eliminate, “… candidates who do not demonstrate that they have the necessary financial capability, technical expertise, managerial ability, project success and relevant experience for the project at hand.”

That’s the pre-qualification goal; but does it work? Not surprisingly, during the prequalification, the contractors sell their wares. They sell the depth of their skill and judgment and the fact that it matches or surpasses their competition.

But for owners and their consulting engineers, what matters is not what the contractor claims in the prequalification document; it vanishes on the wind. What matters is what’s written into the contract. If there is no standard of care clause in the head contract, there is nothing to hold the contractor to the claimed level of skill, care and judgment that got them admitted to the bid process in the first place. And, nothing to “push down” to the trades which will do most of the work.

So, the message is that owners and their consultants should take pains to include a standard of care clause in the supplementary conditions for CCDC-2 — or any of the other CCDC suite of documents. Such a provision might read as follows:

“In performing its services and obligations under the Contract, the Contractor shall exercise a standard of care, skill and diligence that would normally be provided by an experienced and prudent contractor supplying similar services for similar projects. The Contractor acknowledges and agrees that, throughout the Contract, the Contractor’s obligations, duties and responsibilities shall be interpreted in accordance with this standard. The Contractor shall exercise the same standard of due care and diligence in respect of any Products, personnel or procedures which it may recommend to the Owner.”

So, what does this fine language mean? It means that the successful bidder — its trades too — will carry out its obligations under this particular contract to a standard of skill, care and judgment that is at least equal to the skill, care and judgment demonstrated by comparable contractors doing similar work. In legalese, it establishes an industry based, objective standard of performance for that contractor on that project. A benchmark.

Some contractors in Ontario have questioned the need for a standard of care clause in the contract. So, in the face of contractor reservations, do we insist on it? Well, yes. Prequalification is all about sales — putting your best self promotional foot forward — not about actual delivery. That’s for later. By contrast, the head contract is all about delivery, project delivery.

The standard of care expected of a contractor needs to be an “express” (not implied/unwritten) term of the contract because the owner can’t rely on the puffery of prequalification. Owner reliance on prequalification claims are blocked by the contract. Article A-2, Agreements and Amendments, paragraph 2.1 of CCDC2-2008 reads: “The Contract supersedes all prior negotiations, representations or agreements, either written or oral, relating in any manner to the Work, including the bidding documents that are not expressly listed in Article A-3 of the Agreement — Contract Documents.”

Some ask if the same standard of care clause finds a home in an open tender. Of course it does. In an open tender, pre-qualification actually takes place after tenders have closed. The owner’s evaluation of the bidder’s skill, care and judgment becomes one of the factors, in addition to price (and bid compliance), that determines who is awarded the contract.

Others argue that a standard of care clause is unnecessary in the construction contract because it will be read into the contract anyway, as an implied or unwritten term. Well, maybe it will be and maybe it won’t. If things are not going well on the project for the contractor, that contractor is not going to accept that such a standard of care is an unwritten term in the contract — especially if it hasn’t lived up to it.

But isn’t the traditional phrase, “…. in a good and workmanlike manner….” enough? No, it’s not. You won’t find it in CCDC2-2008. Even if you did, the old standard is too narrow and the bar is a touch low. It’s narrow in that it relates to the competent execution of the work, which may not extend to the overall task of managing and coordinating the project. It’s too low a bar because one contractor’s good and workmanlike manner may be poorer than another’s. The standard of care clause given above is broader, referring to the whole enterprise and comparing performance to identifiable examples. And it is objective, based on comparable firms doing comparable work.

Are there any contractors out there who advertise on their website that “We do not have the skill, judgment and experience of our competitors in the field”? I didn’t think so.

So, why add a standard of care clause to the head contract? Because you will do a better job of meeting your standard of care if you do a better job of making the contractors meet theirs.

Bill Pigott is a partner in the Toronto office of Miller Thomson, LLP.