Stipulated Price Contract

In February 2008, the Canadian Construction Documents Committee issued the new CCDC-2 Stipulated Price Contract, replacing the 1994 edition.

The CCDC-2 is the standard construction contract commonly used across Canada between a building owner and the prime contractor when the work is done for a fixed price or lump sum. The CCDC-2 document is updated periodically by CCDC to address specific concerns in the construction industry and to reflect trends (e. g., dispute resolution) that have arisen since the previous edition. This article summarizes some significant changes in the 2008 CCDC-2 that have an impact on engineers in their role as consultants.

First, key changes to CCDC-2 that do not directly impact engineers but of which they should be aware in their role as consultants include:

• Progress payments (GC 5.3.1). The owner must now make payment to the contractor within 20 days after the consultant’s receipt of the contractor’s application for payment, rather than 5 days after the date of the consultant’s certificate for payment.

• Delays (GC 6.5.3). “[A]bnormally adverse weather conditions” are now grounds for an extension of contract time.

• Protection of work and property (GC 9.1.2). The contractor must determine, prior to commencing any work, the location of all underground utilities and structures indicated in the contract documents or those that are “reasonably apparent.”

• Mould (GC 9.5). The contractor must report any presence of mould at the place of the work and take steps to avoid sickness, injury or damage to people and property. The owner must retain an expert if it does not agree with the contractor regarding the existence, significance or cause of the mould or steps to be taken. The responsible party must indemnify the other and pay for any loss, costs or delay.

• Insurance (GC 11.1). Minimum requirements for insurance coverage are now specified in the new companion document CCDC 41 -CCDC Insurance Requirements. It can be more easily amended over time than CCDC-2 as the insurance industry amends policy coverage. Engineers should note that although the owner and consultant are insured under that coverage, the insurance does not cover the consultant’s negligence. Accordingly, engineers should ensure they have their own coverage for negligence.

Some changes directly affect the engineer’s role as a consultant.

Direct impact on engineers

Administration of the construction contract. Previously, the consultant provided administration of the contract in the manner set out in the contract documents until the final certificate of payment was issued, and, with the owner’s agreement, until the correction of any defects was completed.

Now, in GC 2.2.1 of the new CCDC-2 contract, there are no timing restrictions indicating the end of the consultant’s services. Instead, administration of the contract by the consultant is linked to the time it takes the contractor to perform its obligations under the contract.

Also, now in GC 2.2.4, the consultant must inform the owner of the date when the contractor’s application for payment was received.

Shop drawings. In the new GC 3.10.9, the consultant must indicate, in writing, the acceptance or rejection of any deviations in the shop drawings. Also, in GC 3.10.10, the contractor is now explicitly responsible for errors or omissions in the shop drawings, even if the consultant accepts a deviation. Finally, in GC 3.10.12, the consultant is required to review shop drawings with “reasonable promptness so as to cause no delay in the performance of the Work.”

Payment. In GC 5.3.1, the consultant must still issue a certificate for payment to the owner within 10 calendar days after the receipt of an application for payment from the contractor in the amount applied for, or in some other amount as determined by the consultant. However, the consultant must now also provide a copy of that certificate to the contractor.

In GC 5.4.2, the period for the consultant to review and verify Substantial Performance of the Work and reply to the contractor is now 20 calendar days after the contractor has submitted the application and a list of items to be completed or corrected. Previously, the 1994 CCDC-2 permitted the consultant 10 days to verify the validity of the contractor’s application and a further 7 days to notify the contractor whether the work was substantially performed. Engineers should compare this new 20 day period for verification against requirements in builders’ lien legislation (for exam- ple, s. 7(3) of the British Columbia Builders Lien Act allows only 10 days to certify completion).

Previously under GC 5.7.2, upon receipt of an application for final payment, the consultant had 10 days to review the work to verify the validity of the application, and the consultant had an additional 7 days after the review to notify the contractor that the application was valid, or give reasons why it was not. As with GC 5.4.2, the consultant now has 10 calendar days to review the work and advise the contractor in writing of the validity of the application.

Changes in the work

In GC 6.5.3 of the new CCDC-2, the contractor may now be entitled to costs where an extension of the contract time is granted for a delay caused by the actions of the consultant or anyone employed by either the consultant or the owner. The new GC 6.6 requires any party intending to make a claim for a change in the contract price to: give timely notice to the consultant; take all measures to mitigate loss or expense; keep all necessary records; and, submit a claim to the consultant within a reasonable time. The consultant must then deliver findings in writing within 30 days from receiving the claim (unless the parties agree otherwise).

Protection of work and property

In the new GC 9.2.6, the consultant is no longer required to provide an initial finding on disputes relating to the steps taken by the contractor to deal with toxic or hazardous substances. If the owner and contractor do not agree on the existence or significance of the hazardous substance, or if the substance was brought to the place of the work by the contractor or anyone for whom the contractor is responsible, then the owner is required to retain and pay for an independent qualified expert to make a determination.

In GC 9.3 there is now a requirement for the consultant to investigate the impact of any fossils, articles of antiquity, structures and other remains of scientific or historic interest discovered at the place of the work. If the discovery affects the contractor’s time or costs to perform the work, the consultant must, with the owner’s approval, issue instructions for a change in the work. Any artifacts discovered belong to the owner. However, the contractor must take precautions to prevent their removal or damage.

Indemnification

In the previous GC 12, the contractor indemnified both the owner and consultant. Now, the 2008 CCDC-2 requires only that the contractor and the owner indemnify each other. The consultant is no longer indemnified.

Engineers should determine whether they can address this risk by supplementary conditions or their own insurance or indemnity provisions in the Client-Engineer agreement (or a combination).

The limitation of liability in CCDC-2 2008 on the reciprocal indemnities of the owner and contractor is the greater of the contract price or $2 million, but in no event is to exceed $20 million. The indemnity for third party claims is unlimited for direct loss for personal injury or damage to property.

Even with the 2008 improvements to the standard CCDC-2 contract, it is likely that the parties to the contract will continue to require Supplementary Conditions that address their individual requirements and that reflect the specifics of the project.

Owen Pa
wson, B. Arch., LL. B is a partner with Miller Thomson, LLP in Vancouver. E-mail opawson@millerthomson.com