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Have a question or concern related to Construction Contract Administration? Check out a list of frequently asked questions or ask your own!
Questions submitted are reviewed by the Construction Contract Administration Committee (CCAC) members and answered to the individual as soon as practical, usually within five business days. If you require a response more quickly, call the OAA to speak with a Practice Advisor.
Frequently asked questions (FAQ’s) are posted in this section some time later. FAQ’s have hypothetical answers, to hypothetical questions the theme of which is frequently asked. Readers should be aware that real situations have nuances and layers that cannot be dealt with in this context.
The OAA does not provide professional legal, insurance or accounting advice. Readers are advised to consult their own legal, accounting or insurance representatives to obtain suitable professional advice in those regards.
CCAC members are providing personal opinions and comments based on their own practice experience and the information presented in the question. Appropriate use of the information provided is the responsibility of the reader.
All SUBSTANTIAL PERFORMANCE PAYMENT CAD DRAWINGS BID MISC LIEN RAIC SIGNING CHANGE ORDER BACKDATE OCCUPANCY DISPUTE LENDER FORMS RFI MEETINGS HOLDBACK LICENSE CHOP COPYRIGHT TENDER CCDC CONSTRUCTION MANAGEMENT
You are certifying the amount of work done under the contract you are administering. Therefore it is the current contract amount that should be certified against.
With a stipulated sum contract, you certify against the current value of the contract, and adjust the contract value in response to signed change documents as the project progresses. With a construction management contract you certify against the current value of the contract, and adjust the contract value in response to new trade contracts and signed change documents.
Depending on the work done and how quickly the trade contracts are added, it is possible to meet the financial requirements for substantial performance several times during the course of the project, but the building won’t be ready for the purpose intended so substantial performance will not have been achieved until the project nears overall completion.
The short answer is: certificates should be dated to the date of the review by which the value of work completed was determined.
In order to issue a certificate for payment or to sign Form 6, the payment certifier must determine the value of work complete. A Certificate for Payment is based on a ‘value of work’ the same as the CLA.
It is most convenient if the Contractor’s request for a determination of Substantial Performance coincides with an application for payment, then the payment certifier can evaluate the value of work completed to date at the site once, and apply it to both requests. Unless prohibited by the terms and conditions of the contract, the Contractor may request a determination of Substantial Performance at any time, not just at the same time as an application for payment.
There are several dates associated with substantial performance: the date the Contractor claims it occurred, the date it actually occurred; the date it was certified; and the date of publication of the certificate. Using the correct date or qualifying which date is being referred to is important.
Unless the Work has stopped or progress reaches substantial performance on the date of the payment certifier’s review, there is no way for the payment certifier to know when substantial performance was achieved. All a payment certifier usually knows is that substantial performance was or was not achieved on the date of the review. It is the date determined by the payment certifier that should appear on Form 6.
The CLA gives the payment certifier 7 days after determining the date of substantial performance in which to issue the form 6 certificate, and gives the contractor a further 7 days to publish the certificate. The lien period runs from the date of publication of the certificate.
As argued above, a payment certifier usually can’t legitimately determine that substantial performance has occurred earlier than the date of review. There is a danger in back-dating a certificate, that the payment certifier may technically put themselves in violation of the 7 day limit.
The critical date with respect to the CLA is the date of publication as that is the date from which the lien expiration date is calculated.
The critical date with respect to the construction contract is the date substantial performance was determined by the payment certifier to have been achieved as that is the date the warranty periods normally start. Back-dating the certificate deprives the Owner of a portion of the warranty coverage.
Short Answer is – you are correct, you have not been contracted as the prime consultant or to provide the services of certification of payment the ‘payment certifier’ and thus should not sign an important form saying that you are. You are also correct that in the absence of a payment certifier the form 6 can be signed by the owner and the contractor and subsequently published.
Likely the lender is telling the owner that sign-off by an architect is a requirement for them to pay out the loan money to the owner to pay the contractor. Some financial institutions have in the past and some may do so now, engage an architect on their own as a third party verification. The lender would prefer that the borrow pays for that and also take the risk instead of them. By issuing your letter to the lender you are now taking on that risk from both the owner and the lender.
This situation often arises and, as the question notes, “part-way through construction”:
This points out one of the pitfalls of deviating from conventional contractual relationships. Often the rolls of the various parties are not properly defined.
When the client/owner has a lender to loan funds for the construction, the lender wants to ensure that the collateral (the building) is being built ‘properly’, that there will be no code or zoning violations that would create problems if the lender had to take over and sell the building if there was a default on the loan. They want a responsible, professional to sign-off each month or each time a loan payment is made. The lender doesn't know if all is going properly or not. This is all understandable, but why should the owner’s (borrower’s) architect take on this ‘extra’ service and risk for a lender? Refer to Practice Tip PT.17
Wording such as the following may assist in making the architect’s position clearer to the client:
“The Construction Lien Act defines a payment certifier as “an architect, engineer, or any other person upon whose certificate payments are made under a contract or subcontract”. As [name of Practice] have not been retained to do site reviews for the purpose of preparing Certificates of Payment on the project, we cannot be regarded as the payment certifier, nor can we make a determination if the financial requirements for Substantial Performance have been achieved.
In accordance with the Construction Lien Act [CLA 32 (1) & (2)] ” If there is no payment certifier, the Owner and Contractor shall make the determination jointly and both sign the certificate." It also is clear that the Owner and Contractor can make the determination of Substantial Performance, and jointly sign the certificate.”
This issue is addressed in part in CCAC LTR Owner Consultant Not Certifier, which should be considered at the beginning of the project.
Such authorizations could be included in the client/architect contract or the construction contract. Standard contract language does not include varying authorities. CCDC 2 2008, GC 2.2.3 notes - “... The duties, responsibilities and limitations of authority of such project representatives [Consultant’s] shall be as set forth in writing to the Contractor.”... but this is commonly not done.
Failing something in writing in contracts or otherwise, it would be the architect’s firm that determines who can sign documents. The basic legal concept we are told (with many other considerations) is that the ‘receiver’ of a document is not responsible to determine if the person who signed it has the authority to do so – the company issuing the document is responsible for who signs.
Some architectural firms have a protocol that only partners or principles can sign documents with financial implications (e.g. contracts, change orders, certificates for payment). It would be up to the firm to establish rules and enforce them. Corporations may have authority for signing as part of their Articles of Incorporation or by-laws.
The architectural firm (Certificate of Practice Holder) is responsible for the actions and any failure to act on the part of their employees. The firm should be familiar with and act in accordance with the contents of OAA Regulatory Notice R.8, Personal Supervision and Direction Related to Contract Administration (General Review).
You are correct. There are two requirements to achieve Substantial Performance according to the Construction Lien Act of Ontario (some other provinces differ). 1/ is the 3:2:1 % calculation and 2/ is “ready for the use intended” – which is most often, but not always, occupancy. Simply because a space has been occupied does not mean that it automatically achieves Substantial Performance as defined by the CLA.
It should be noted that granting ‘occupancy’ is under the auspices of municipalities. Although a building or inspection department may ask for a sign-off letter from the architect (and engineers), it is the municipality not the architect who are authorized and responsible to grant occupancy for a building.
Once substantial performance has been determined to have been achieved at some point in time, it cannot subsequently be un-achieved at a later point regardless of the value of additional work or changes added to the scope.
As architects fulfilling the role of prime consultant, we are responsible for administering the construction contract as written and amended, not what the construction contract might become at some point in the future.
The value of a contract is the initial contract amount plus or minus the value of any signed change orders (COs), plus or minus the value of any undisputed change directives (CDs). The value of any change orders not signed by both the owner and contractor does not affect the contract value until they are signed by both parties.
It may even be argued that the extra work; even though requested by the owner and well executed, is a deficiency because it isn’t compliant with the contract. The next step would be to withhold monies on a certificate for payment to cover the cost of correcting the “deficient” work. This would penalize the contractor for trying to be helpful and cooperative, and reward the owner for bad behaviour. If you know that the owner requested all the additional work, then this would NOT be the approach to take.
If the owner doesn’t sign the COs authorizing the work approved verbally, then it is likely that the contractor and owner will eventually end up in dispute. If the architect has dealt fairly and impartially with the parties in interpreting and applying the requirements of the contract, then the architect should not be at risk. If the architect told the contractor to proceed with additional work in the absence of a CD or CO, then there is likely liability. Regardless, the architect will most likely be dragged into the dispute by one or both parties who will look to the architect’s insurer to contribute to a resolution. Make sure you have good phone logs, and email and paper trails to demonstrate your fairness and impartiality.
We regularly encounter situations in which substantial performance is achieved, only to have the owner add significant scope afterwards. This does not affect the fact that substantial performance was achieved earlier. If it did, it would throw the publication of substantial performance and the lien period expiration date into disarray.
As stated, unsigned COs are not part of the contract. Further, the architect is not responsible for the owner’s nor the contractor’s actions or lack thereof. We are not required to babysit either party, although our timely input may help resolve/prevent issues, and avoid formal disputes. Such timely input could ultimately save us a lot of time and expense.
If the contractor has properly (according to the terms of the contract) requested a determination of substantial performance, and based on the architect’s review and calculations, has achieved substantial performance at a given point in time, a certificate of substantial performance should be issued within the timeframe established in the contract.
If the owner subsequently signs all the COs after you determine that the contract is substantially performed, even if the certificate hasn’t yet been issued, then work was legitimately determined to have been substantially performed, and a certificate for payment should still be issued. The key is in determining the project’s completion status and suitability for use at a specific point in time, regardless of what may or may not happen later.
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No. The CLA is clear that either the Payment Certifier or the owner and contractor jointly shall issue the certificate of Substantial Performance.
Although the CCDC may not reference the Stat Decs, the financing agreement with the Client may require it. It may be prudent to either request information re such agreements before issuing the second certificate or stating something like… “ No statutory declaration has been submitted with this invoice. The client should ensure whether such documentation is required by its lender before making payment.”
Answering questions from contractors is part of the architect’s role when doing construction contract administration. On occasion some contractors, find it easier to send in an RFI than to hunt in the documents further. Although lack of response to a contractors questions could be used as part of a claim, most contractors and trades simply want to build a good product the same way you want to have designed one. The process for sending in RFI’s has become extremely easy with e-mail, architects can become just as organized in responding to them. The RFI process needs proper management by both contractors and consultants in order for it to be an effective tool to assist construction.
CHOP, Volume 2, Chapter 2.3.10, Appendix A - Requests for Information has excellent information on managing the RFI process.
See CHOP Volume two, Chapter 2.3.11 where it states:
“Either the architect or the general contractor prepares the minutes, depending on the architect’s choice and the general requirements of the specifications.”
On most larger projects, the contractor runs and prepares minutes of construction site meetings. It is best to specify at the bidding stage the detailed arrangements and requirements of the contractor for site meetings. On occasions the architect minutes the site meetings. The goal is to have decisions and other matters recorded and properly distributed to the appropriate individuals for information and action.
The answer is that it depends on what the project manual specifications require in the construction contract between the owner and the contractor.
Standard construction contracts, such as CCDC 2 (ref. GC 5.2 and 5.3), do not require a ‘Statutory Declaration’ as part of the regular monthly progress payments, but rather only require a Stat Dec be submitted along with the application for payment of the 10% lien holdback following Substantial Performance (ref. CCDC 2, GC 22.214.171.124). The contractor declares in the statutory declaration (CCDC 9A) that they have distributed monies received from the owner to pay others doing work on the project. This protects the owner in the event of a lien claim from a 3rd party sub-contractor or supplier because they were not paid by the general contractor. To 'solemnly declare' is a serious thing in legal terms; as the CCDC 9A form states, "The making of a false or fraudulent declaration is a contravention of the Criminal Code of Canada, and could carry, upon conviction, penalties including fines or imprisonment."
If the contract requires Stat Decs every month, it is not something that a construction contract administrator should take lightly or waive. The same serious consideration should be given to requirements that may be specified for WSIB clearance forms every month.
Other comments from CCAC members, based on personal experiences:
No - Although these forms may look reasonable or at least might if you changed a couple of words they are extending your liability beyond what is reasonable and to parties with whom you do not have any duty to. Lenders, surety and bonding companies will look to their document to rely upon in the event there are any problems such as contractor default or bankruptcy.
The standard forms which architects use have suitable wording such as - based on my periodic visits, to the best of my professional opinion. They do not state that you certify that construction meets all laws, or that you can attest to how much it will cost to complete, for example if another contractor had to be brought in.
Refer to Practice Tip PT.17.
This is a frequent issue and a question with many nuances. Copyright and ownership of the architects drawings belongs to and remains with the architect unless given away via contract or a written license release. The client has a right to use the drawings for the purpose intended (e.g. the client’s contractor uses as reference to build). The contractor should not expect to be given CAD drawings (dwg. files) unless it is stated in the written specs or bid documents and thus the contractor should have no claim for an extra.
The RAIC Practice Builder – The Exchange and Transfer of Electronic Documents – 2010, notes: “As leaders in the design and construction industry it is important that Architects cooperate with clients and contractors in a manner that promotes efficiency, innovation and a reduction in the amount of paper consumed. Architects have the following concerns regarding the distribution of electronic files: