A New Age for Construction Contracts?

By Mikkel Arnston

Many may be familiar with CCDC (Canadian Construction Documents Committee) form contracts such as the CCDC 2 stipulated price contract. These contract forms represent a standardized base contract from which parties can add and supplement to effect their intentions. Recently, a new CCDC document has been released: the CCDC 30.

What is the Contract in CCDC 30?

There are CCDC contracts for different modes of project delivery. Stipulated price allows the parties to agree upon a price for the project as a whole. A unit price allows parties to agree upon a price per unit of relevant measure in the project, such as a price per metre of the subject matter. And there are other CCDC form contracts for various construction arrangements but the CCDC 30 represents a different approach.

The CCDC 30 is a form of contract for an integrated project delivery model (“IPD”). The IPD approach is a significant departure from the traditional approach to construction contracts. The traditional approach in this context is for a series of contracts stemming from the owner/municipality, and branching out. For instance the owner will have a contract with the person responsible for completing the construction (the general contractor), the general contractor may have sub-contracts for specific elements of the construction and so on down the line. The owner may also have a separate contract with a consultant. There are consultants for the design of projects. There are also consultants for the management of projects. The consultants may have sub-contracts with specialized consultants for specific tasks. In this traditional approach the Owner will have a contract with each of the General contractor and, sometimes, consultants. Each contract is separate. And, the owner typically does not have a direct contract with sub-contractors.

Why integrated project delivery?

IPD seeks such goals as collaboration, reduction of dispute, openness, transparency, and joint problem solving. It does this in a number of ways. In broad terms, the differences start with the contractual arrangement. Instead of a series of multiple contracts for each aspect of the project (construction, design, management), IPD combines these agreements into a multi-party contract with all of: the owner, general contractor, key consultants and key sub-contractors.

The money and ‘pool’ of profits

The money and profits are also approached differently in IPD. Instead of a stipulated price or a unit rate of price, IPD uses an initial assessment of the target cost of the project including an agreed upon ‘pool’ of profit. The concept is that all of the parties will work collaboratively to complete the project on time and on budget. If things do not go according to plan and the ‘pool’ is drained, the general contractor, consultants and sub-contractors do not receive profit, but the owner pays for the hard costs for the other parties to complete the project. With such an arrangement there is risk for all parties if the project is not completed on time and on budget so all parties are motivated to cooperate, share information and work towards solving problems as they arise.

Reducing disputes and litigation

Another aspect of IPD is the waiver of most claims as between the parties including most delay claims or change orders. This is meant to foster an environment where parties feel able to suggest solutions without the prospect of litigation and to motivate parties to contribute to the solution instead of preparing for a dispute or litigation.

Wrap up

Will IPD change construction contracting overnight? Not likely, but it is an important emerging development in the area to be aware of. IPD is a complex and nuanced form of contracting. It is a method of contracting that municipalities may be presented with or wish to consider. The above is only a handful of very broad comments about this complicated and involved contractual framework. It is highly recommended that if a municipality is considering an IPD approach to a project, they seek qualified legal advice on the drafting and negotiation of the framework and use of the CCDC 30 or other form of IDP contract.

If you have questions or would like advice, reach out to our Construction Law Team.

This post is meant to provide information only and is not intended to provide legal advice. Although every effort has been made to provide current and accurate information, changes to the law may cause the information in this post to be outdated.