The New CCDC 2 – Stipulated Price Contract – The Grace Period is Almost Over (Part I: Key Differences)
On December 14th, 2019, the Canadian Construction Documents Committee (the “CCDC”) released its new CCDC 2 – 2020 Stipulated Price Contract. This replaced the earlier 2008 version of the contract.
As with previous new releases, CCDC essentially provided a one year adoption grace period in which copyright seals for the previous version of the contract continued to be sold. However, as of January 1st, 2022, the 2008 stipulated price contract will no longer be available.
This article is intended to serve as a reminder that, very soon, contracting parties desiring to enter into a CCDC 2 contract will need to switch to the new 2020 version of the contract. As such, we have summarized some of the key differences between the two versions.
The new CCDC 2 introduces an entirely new completion milestone: ready-for-takeover. This concept is important to Part 12 – Owner Takeover and will occur following substantial completion.
The prerequisites for attaining Ready-for-Takeover, outlined under the new GC 12.1, are as follows:
- The consultant has certified or verified substantial performance of the work (as defined in applicable lien legislation);
- Evidence of compliance with the requirements for occupancy or occupancy permit;
- Completion of final cleaning and waste removal;
- Delivery of operations and maintenance documents to the owner, as required by the contract documents;
- Delivery of completed as-built drawings;
- Completion of start-up testing;
- Secure access to the place of the work has been provided to the owner; and
- Demonstration and training, as required by the contract documents, has been scheduled by the contractor.
The achievement of the first two prerequisites, that is certification of substantial performance and issuance of an occupancy permit, are mandatory for attaining ready-for-takeover. However, if the remaining prerequisites are delayed for some reason beyond the contractor’s control, or by agreement with the owner, then ready-for-take is not to be delayed.
Once the contractor believes ready-for-takeover has been achieved, it must deliver a written application for ready-for-takeover to both the owner and the consultant. The application must contain a list of items required to be completed or corrected. The consultant then has 10 days to either confirm the date of ready-for-takeover or advise that the work is not ready and provide written reasons explaining why.
Early Occupancy by the Owner
The new stipulated price contract also sets out the ability for the owner to take early occupancy of part or all of the work, prior to ready-for-takeover. Importantly, early occupancy may only occur if the contractor agrees (though consent may not be unreasonably withheld) and with the prior approval of the relevant authorities.
Any part of the space that the owner takes early possession of will be deemed to have achieved ready-for-takeover as of the occupation date. As such, the responsibility for care of that area will transfer to the owner and applicable warranty periods will commence.
Payment Terms and Legislation
In October of 2020, the Alberta government announced changes to the Builders’ Lien Act (to be renamed the Prompt Payment and Construction Lien Act) contained in Bill 37. These changes have not come into effect as of the publishing of this article but, once enacted, will have significant consequences for payments and dispute resolution in the construction industry. A summary of the proposed changes can be found here. These changes follow similar legislation being passed in other provinces, including Ontario.
The new CCDC 2 addresses these changes by making reference to applicable payment legislation and specifying that nothing contained in the contract limits the parties’ rights to use the legislated adjudication process.
The significant changes to payment terms in the CCDC 2 are as follows:
- applications for payment must be submitted to both the owner and consultant simultaneously;
- the application must comply with applicable legislation meaning it will need to be a “proper invoice” (once the new legislation is in effect);
- the contractor must provide evidence of compliance with worker’s compensation legislation with every application;
- after the first payment, all other applications must include a CCDC 9A statutory declaration;
- any rejection by the owner of a payment (or party of payment) must include a written notice of non-payment with reasons;
- subject to applicable payment legislation, the owner must now pay the statutory holdback no later than 10 working days following the expiration of the lien period; and
- subject to the applicable payment legislation, the owner must pay the contractor on the 28th day after the receipt of the application for payment. This does not, however, apply to the final payment which must still be made within five calendar days of the issuance of a final certificate for payment.
The new CCDC 2 also removed any references to non-statutory holdbacks and early holdback releases for subcontractors.
The new CCDC 2 makes two important changes in terms of responsibility for construction safety. First, old GC 3.2.2 was removed, now meaning that the contractor will remain responsible for health and safety at the place of work even where other contractors are involved. Second, the new contract now requires that the owner comply with health and safety regulations where previously that obligation was placed only on the contractor.
Reimbursable Cost for Change Directive
The updated contract also adds new items that can be charged by the contractor in the valuation of a change directive, and modifies or removes others. The new or modified items that can be charged (contained in GC 6.3.7) are the actual costs of the following:
- the compensation (including wages and benefits) of office personnel engaged in a technical capacity;
- 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;
- subcontract amounts of subcontractors with pricing mechanisms approved by the owner;
- deposits lost provided that they are not caused by negligent acts or omissions of the contractor;
- losses and expenses sustained by the contractor for matters which are the subject of insurance under the policies prescribed in GC 11.1, when such losses and expenses are not recoverable because the amounts are in excess of collectible amounts or within the deductible amounts;
- legal costs, in relation to the performance of the work, provided they are not relating to a dispute between the owner and the contractor, the result of the negligent acts or omissions of the contractor, or the result of a breach of the contract by the contractor;
- cost of auditing when requested by the owner; and
- cost of project specific information technology in accordance with the method determined by the parties.
The contractor can no longer charge for the compensation of personnel engaged in processing changes to the work or the review of shop drawings, fabrication drawings and coordination drawings.
There are also a number of changes to insurance requirements, both contained in the CCDC 2 itself and through changes made in the new CCDC 41 - 2020. In the stipulated price contract itself, the period of insurance coverage has been adjusted so it is now linked to the ready-for-takeover milestone instead of substantial performance. CCDC 41 increases the required insurance coverages for various forms of insurance and introduces a new type of required contractor insurance: pollution liability insurance.
Indemnification and Waiver of Claim
Previously, indemnification claims were required to be brought within 6 years of the substantial completion date (or such shorter date as prescribed by a limitations statute). Now, the 6-year period begins to run as of the ready-for-takeover date instead. The time periods relating to waivers of claims (contained in GC 13.2) are also now tied to ready-for-takeover.
Indemnity claims between parties are also strictly limited to direct losses and damage and expressly exclude liability for indirect, consequential, punitive or exemplary damages. There is no limitation placed on indemnification respecting third party claims.
The following changes are also worth mentioning:
- CCDC introduced a new Division 01 – General Requirements and certain of the previous CCDC 2 – 2008 provisions have been migrated there (including certain definitions);
- The scope and purpose of the contractor’s review of the contract documents has been limited in GC 1.1 such that the contractor is generally not responsible for errors, omissions or inconsistencies contained in the documents but must report to the consultant any errors they discover;
- GC 4.1.4 now allows for reallocation of cash allowances, meaning unexpended amounts from one cash allowance can be used to cover a shortfall in another; and
- GC 11.2 regarding contract security has been entirely removed.
This post is part one of a two part series entitled "The New CCDC 2 – Stipulated Price Contract". Our next post will address supplementary conditions.
 The Government of Alberta currently expects to finalize regulations by February 2022 and bring the legislation into force by July 2022: https://www.alberta.ca/introducing-prompt-payment-for-construction-industry.aspx.