Owner’s Contract Provisions Are Still Problematic

Recently, the OGCA has needed to intervene with certain owners based on their continued use of problematic contract language.

One of the fundamental aspects of the OGCA has been our approach to protect our contractors against “questionable" contract language. I understand that this has been an issue for as long as owners have been around, but the OGCA is taking a concerted approach to changing problematic contract language.

So why bring this up now?

Simply put, because of changes within the municipal purchasing departments, wherein through retirements, attrition and/or layoffs from the pandemic, vital institutional knowledge that resided in their key personnel is disappearing. And the new group of procurement experts that are replacing those who have left, “know everything!” These same people are simply regurgitating older provisions with which the OGCA has already dealt, in one form or another, and reinserting them into existing tenders and contracts.

The frustrating aspect, as I noted, is that the OGCA has already educated the municipalities in question, and we, as an association, thought that the issues being raised were dealt with. Consequently, the OGCA was instrumental in introducing the new Construction Act to standardize processes so that the entire industry, as a whole, including owners, were on the same page. And yet, we have evidence of owners who believe they are entitled to ask for more than what the Construction Act is prescribing. These new developments are a recipe for disaster and the perfect catalyst for the OGCA to once again reaffirm what is and is not satisfactory in contract language.

Any time an owner is seeking to amend a Force Majeure clause in contract language to exclude pandemics, specifically COVID-19, know that this should never be contemplated or accepted by our members. The basis for the Force Majeure provisions are to encapsulate any event that was outside of the contractor’s control and that would, in turn, be compensable. The OGCA strongly believes that COVID-19 falls squarely under the auspices of this language and as such, contractors should be able to claim for costs associated with the pandemic, within reason.

Additionally, when we have municipal owners or private owners who include language in their contracts that ask for an additional 10% “contractual holdback” above and beyond the 10% allowable lien holdback, know that this should not be acceptable. The Construction Act was written in such a fashion as to be fair and equitable to all parties involved, and adding language that basically circumvents this process is not in the best interests of the contractor.

Furthermore, we have owners inserting language that is typical in a design-build scenario in all contracts and therein introducing new contract language that should be exclusively the domain of design-build.

Having this language accepted in other contract forms causes a “bleeding” of provisions that should not apply solely to contractors building as per the required drawings and specifications.

The issue with any contractor accepting said provisions is that they create past practice, and should the matter be adjudicated or brought up as a civil dispute, this may, in turn, create a precedent and work to the detriment of the industry as a whole. To ensure that we do not go down a rabbit hole based on questionable contract language, the OGCA has to be made aware of the offensive language to help.

In the occasions noted above, the OGCA has stepped in and brought the egregious language to the attention of the owners. And in all of the above occasions, the owners have seen that it is in their best interests to work with the OGCA towards a mutually acceptable conclusion. Whatever the impetus for the amended language, the OGCA recommends that contractors review their contracts fully, and should they come across questionable terms, bring this to the attention of the OGCA for our assistance.

Our voice is being heard and we are addressing the issues that we know about, but we need you, our members, to keep the OGCA “dialed in” to all of the questionable language being attempted by all owners.

Should you have any questions about contract language or require the assistance from the OGCA, please contact me directly at giovanni@ogca.ca or via phone at 905.671.3969.