Project delay in the CCDC context
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In March 2020, the COVID-19 pandemic forced Canadian provinces into states of emergency, which mandated the closure of non-essential businesses across the country. In Alberta, the construction sector was largely deemed an “essential service” while mandating job sites be subject to the public health and social distancing measures set forth by the provincial government. Such increased safety measures will, if they have not already, undoubtedly play a role in delays associated with the completion of some construction projects. In other provinces, where the construction sector was not deemed essential and most construction sites were closed for periods of time, the impact may be even more significant.
Even though the full impact of these safety measures on specific construction projects may not yet be fully known, all parties involved will need to consider the next steps to address the delay and increased costs associated with COVID-19’s impact. Examples of additional costs may include essential and non-essential equipment rentals, utilities, security monitoring, construction insurance, building permit extensions, and additional site expenses, such as wash/sanitation stations, re-mobilization and demobilization costs.
Every construction project will be impacted differently depending on the specific circumstances, as well as the provisions contained in the contract that the parties entered into. Generally, for parties that have entered into standard CCDC construction contracts, unaltered by supplementary conditions, the contractual rights and obligations are more streamlined. Despite the nuances used in the various CCDC contracts, the standard General Condition (GC) clauses addressing delay outside of the parties’ control remain consistent throughout. However, as parties often revise the standard clauses in CCDC contracts through supplementary conditions, it is important that the contract be reviewed carefully to confirm the applicable rights and obligations.
One of the most commonly used CCDC contracts is the CCDC2 contract — the stipulated price contract between an owner and the contractor. A new version of the CCDC2 contract was released by the Canadian Construction Documents Committee in December 2020. GC 6.5.3 of the CCDC2 contract addresses a situation in which delay is not caused by either party to the contract. In general, this provision allows for the completion time for the project to be extended for a period of time not less than the time lost as a result of the event causing the delay, unless the contractor agrees to a shorter extension. Moreover, GC 6.5.3 states that the contractor will not be entitled to payment for costs incurred by such delays. Indeed in Transit Glass & Aluminum Ltd. v Sakto Corp., 2008 CarswellOnt 1380 (OSCJ), the court commented that a delay to the job completion, in that case due to weather, would not entitle the contractor to additional payment. Therefore, unless otherwise amended by the parties, the CCDC2 contract allows the contractor’s schedule to be extended when the contractor is delayed by a cause beyond its control, but the contractor is responsible for any additional costs it incurs as a result of the delay.
While the management of delay claims resulting from the COVID-19 pandemic is still unfolding, many owners have been working collaboratively with contractors to address increased costs and delays to project completion. However, in order to increase the chances of the parties’ collaboration in such circumstances, it is essential for the contractor to keep detailed and accurate records of the various scopes impacted by the pandemic, and how those contributed to the overall delay or increased cost of the project. In addition, regular communication between the parties regarding concerns or challenges faced may assist the parties in finding ways to mitigate the impacts of the pandemic, where possible.
Additionally, GC 7.2.2 of the CCDC2 contract states that the contractor is entitled to terminate the contract, if the work on the project is suspended or delayed for a period of 20 working days or more under an order of a court or other public authority, as long as such order was not issued as a result of the actions of the contractor. Given the construction industry was determined to be an essential service in Alberta during COVID-19, and was generally not suspended like many other businesses, this provision may only apply in more limited circumstances. For instance, it may apply if a construction site was ordered to be shut down for more than 20 working days due to an outbreak of COVID-19 cases in the project workforce.
In order to enforce any of the potential remedies for delay under the CCDC2 contract, it is imperative that a contractor comply with the requirements set out in the contract, including the notice requirements. For example, under GC 6.5.3 of the CCDC2 contract, where the contractor seeks an extension of the completion date for the project, the contractor is required to provide notice in writing not later than 10 working days after the commencement of the delay.
Generally, in Alberta, contractual notice requirements are to be strictly complied with when making a delay claim. The Alberta Court of Appeal in ANC Developments Inc. v Dilcon Construction Ltd., 2000 ABCA 223, held that meeting minutes recording complaints made at site meetings did not constitute written notice of a delay claim as required by the contract. In addition, the Court of Appeal determined that Dilcon’s loss of productivity claim was barred due to written notice not being delivered within the required timeframe.
The unpredictability of COVID-19 makes it difficult to know how significant the impact could be on a project. However, as with any situation that causes delay to project completion, steps need to be taken as soon as possible in order to preserve contractual rights and remedies. Understanding the requirements of the contract, including the steps which must be taken in order to make such claims, is key to determining the best course of action.
Patricia (Trish) Morrison and Stela Hima Bailey practice Construction Law at Borden Ladner Gervais LLP.
Although care has been taken to ensure accuracy, this article should not be relied upon as legal advice.
This column first appeared in the February 2021 edition of On-Site. To read through the whole issue, click here.