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Do you have a question or concern related to the management of an architectural project? Check out a list of frequently asked questions or ask your own!

Questions submitted are reviewed by the Project Administration Resource Committee (PARC) members and answered to the individual as soon as practical, usually within five business days. PARC members are providing personal opinions and comments based on their own practice experience and the limited information provided in the questions. The reader is responsible for the appropriate use of the opinions expressed and the information provided herein. If you require a response more quickly, call the OAA and ask 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 general theme of which is asked frequently. Readers should be aware that real situations have additional facts and nuances 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.

 
 
SUPPLIER BID SOLE SOURCE

Q: We are a supplier/installer and want to bid on the supply of a product. The specification has linked this product to a particular installer. What is the process of requesting a substitution of not a product but an installer? Is it allowable to specify the installer? How can a sub-contractor/supplier (non-manufacturer) be specified into the tender?

A:

Short answer

There is no formal process for changing a specified supplier/installer/manufacturer where one has been pre-selected.

It is rare to find a sole source specified in a tender for a public body or institution as it is often prohibited or restricted, but private owners may do so at their discretion. By the time a project is out for tender, it is likely too late to have pre-selected suppliers/installers/manufacturers changed. This is best done before a project is tendered by approaching the owner or the consultants.

Further explanation

It is not uncommon in the private sector for owners to pre-qualify or to name specific sub-contractors, suppliers or installers that must be carried by every contractor bidding a job. The result may be that the owner does not receive the lowest price that they might otherwise have. Some private companies may be free to do this. The rules for most public sector projects would require a more open/competitive bid process.

There are a number of reasons why a particular manufacturer/sub-contractor/installer might be specified on a project.

1)      A client may have negotiated a price for a product based on a particular quantity per year aggregated over multiple projects. I have known this to be done for carpet tile and ceramic tile.

2)      A client may have negotiated a national service agreement so they only have to deal with one supplier/installer regardless of where the project is.

3)      By selecting a manufacturer, you may in some cases be limiting the selection of supplier/installer to factory trained or authorized sub-contractors or installers. Some products may be licensed to a particular supplier/installer.

4)      Some very small projects may receive better pricing or material availability if the supplier/installer is guaranteed to get other projects as well.

5)      Some projects may require companies providing services to be pre-screened for security purposes and only previously screened companies may be allowed to bid.

6)      Major landlords may require the use of specific sub-contractors/installers so that all of the work/products of a similar nature are done by the same company throughout a building. This makes pointing a finger at someone if there is a defect or failure much easier and it reduces the effort required of the Landlord to train the trades in, and monitor their compliance with building standards.

7)      Portions of a building may still be under warrantee, and to avoid voiding the warrantee, it may be necessary to have any additional work affecting the product under warrantee done by the original company.

8)      Some companies may decide that preference should be given to suppliers/installers that are related corporately.

The requirement for a bidder to carry one of a list of preferred sub-contractors/installers or use a sole prescribed sub-contractor/installer should be set out explicitly in the instructions to bidders and in the specifications. 

While it is possible to create a set of requirements that effectively limit the qualified suppliers/installers to a single company, there should be no reason for not being explicit about sole sourcing a service.

Any other sub-contractors/installers wanting to get on the list or to be prescribed should ask the bidders to see if they can get approval from the bid calling authority to be added for the project being bid, or should approach the owner/landlord and the appropriate consultant about being added for future projects. 

It should be realized that obtaining approval is extra work for the bidder and there may be little incentive for them to put in the effort required unless there is a competitive advantage for them or they have a really good working relationship with the person/company making the request.  

 

 

 
PAYMENT PROGRESS PROGRESS PAYMENTS INVOICE SCHEDULE OF VALUES BREAKDOWN SUB-CONTRACTOR

Q: Re: Processing of Progress Payments. In recent years we’ve been asked more often to submit the trade invoice as back-up to our monthly Progress Draw. Is this mandatory when working under a CCDC-2 contract on a tendered project? The trade invoices required are usually the electrical & mechanical trades, and we are told the reason is to verify the percentage complete. I’m not sure how this practice verifies anything of legal substance. Shouldn’t the consultant be capable of determining, within reason, the value of work complete in any given month? My concern is that this practice will spread, requiring us to submit invoices for all the architectural finishing trades also therefore making a tendered stipulated sum contract completely open book. Please advise.

A:

For CCDC-2 (without any supplementary conditions), it is not mandatory to provide all the sub-contractor’s invoices with monthly progress draw applications. The contractor is, however, required to provide evidence/back-up that would justify the monthly draw request. Note that, where a schedule of values is agreed upon prior to the first application for payment as required by CCDC-2, that schedule of values' listing of work items should provide a good breakdown to the consultants of all parts of the project, enabling them to evaluate the amount of work completed to date. Note that the purpose of the schedule of values is to assist the architect in evaluating the application for payment and is to be prepared to the architect’s approval.

Sub-contractor invoices may be useful, for example, where products (such as hollow metal doors) are delivered to site and invoiced well before the labour to install them is expended or where products of very different costs and quantities are included in a single line item on the schedule of values. 

In some instances, consultants request the mechanical and/or electrical sub-contractor invoices as an additional aid in determining the monthly percentage complete values. This should not be something feared by the contractor. It should facilitate and even speed up the progress draw review process. Often it is done because the work items in the schedule of values are not broken down sufficiently to assist adequately in evaluating the application for payment. Any discrepancies between the sub-contractor invoices and the contractor’s application for payment should be explained in the material submitted.

With regards to this leading to further requests for other sub-contractors' invoices, that is an unlikely scenario under CCDC-2 contracts, since they are usually not as complex as the electrical and mechanical scopes of work. Of course, with other forms of contract, and in particular with PPP projects, the requirements may be entirely different.

Further Consideration: 

As stated above, while it is not mandatory to provide all sub-contractors' invoices with monthly progress draw applications, adequate breakdown of the work in the Schedule of Values must be provided in order to facilitate accurate, fair, and timely review. Doing so is as much to the benefit of the contractor or sub-contractor as it is to the architect and their sub‑consultants.

The level of detail required to provide a ‘good breakdown’ varies with the complexity of the project, most notably cost and size, but also technical complexity of the construction and contractor requirements. For example, phasing of work and overall schedule: is all work sequential, and the concrete and steel sub-contractors complete before the partition framing is underway, or are numerous sub-contractors working in different areas at various stages of completion in different areas of the project? Will there be long intervals between delivery, installation, and/or finishing or will it happen in rapid succession?  These factors result in more or less information needed to clearly and easily demonstrate and assess the progress of work, which is to the mutual benefit of all parties.

Examples of the above challenge often include drywall and door & hardware contracts. If the partitions are all framed at once, and gypsum board installed & finished at once only afterwards, in a small building, a couple of line items may suffice- e.g. framing; board/finish; perhaps repeated per floor provided the sub-contractor is not expecting to be paid for delivery of materials. 

On the other hand, in a multi-million dollar high-rise project where deliveries of materials account for a significant expenditure, and framing, installation, and finishing activities are happening in concert at different levels of completeness in completely different wings or blocks of a building, it may be advisable to include multiple line items, per floor and per area– e.g. supply of framing materials; framing; supply of board materials; boarding; taping/finishing; repeated per floor and building area as necessary. 

Having the above agreed upon prior to the first application for payment will help immensely to expedite the review process and ensure fewer questions/concerns from both parties (as to how an item is justified to have been progressed to__% complete, or may need to be reduced from __% complete).

While the provision of a sub-contractor invoice is not necessary to achieve this; it is incumbent on the contractor to prepare a Schedule of Values that is acceptable to the architect and manage the correlation between the Schedule of Values and their sub-contractor’s invoices. Providing sub-contractor invoices that do not correspond clearly and accurately to the Schedule of Values is of benefit to no one.  

It may in certain circumstances be more straightforward and preferable not only for the architect or consultant but for the contractor to simply base the Schedule of Values on a sub-contractor invoice that is provided for particularly complex or unique scope of work, as is typically the case with the electrical and mechanical scopes of work.

That said, contractor-sub-contractor invoices are not under the purview of the consultant and in review of progress payments the consultant does not specifically concur with or approve any part of such invoices; it is therefore cautioned that provision and review of actual sub-contractor invoices may imply a higher degree of scrutiny than intended (i.e. only being used for general review and understanding of the division of scope between sub-contractors), which could lead to unnecessary questions of minutia in future progress draws.

Preliminary meetings to review the Schedule of Values including proposed breakdowns, at the beginning of the project prior to the 1st progress draw, at the award of a phased portion of a project (as the Schedule of Values is expanded to incorporate newly tendered and awarded work), and/ or as work progresses to review the monthly progress draws, is highly recommended. It is often the most expedient way to understand one another’s requirements, questions or standpoint, and resolve any differences of opinion.

 
HOLDBACK RELEASE TAKE OVER PROCEDURES

Q: After a project is substantially performed, and basic holdback is released, the project continues and a 10% holdback on any payments made subsequent to substantial performance must be retained until work is deemed complete as defined in the Construction Lien Act (approx. less than $1,000). The general contractor is requesting release of holdback with each application for payment based on the fact that the work was requested by the owner and is additional scope. It is my understanding that if the additional work becomes a part of the contract, then the Construction Lien Act requires that finishing holdback is retained until after deemed completion. Please advise.

A:
Refer to OAA/OGCA Document 100 – Take Over Procedures. The following excerpt confirms your assumption regarding finishing holdback that is required to be withheld until the contract is deemed complete under the Construction Lien Act (CLA). The holdback is not eligible to be claimed by the Contractor on an application for payment until the contract is deemed complete under the CLA.

6.1 (a) When the Contractor is satisfied that the Contract is completed as defined in subsection (3) of Section 2 of the C.L.A., and after making an inspection, the Contractor shall forward the inspection report and make a written request to the Consultant and/or Payment Certifier for a review and assessment of the work. The Consultant and/or Payment Certifier shall, in turn, notify the Owner of the Contractor’s request. The Contractor's request shall include a statement as to the amount of monies for the holdback for finishing work due for release and payment upon expiry of the 45-day period from the date the Contract is completed. This review and assessment by the Consultant and/or Payment Certifier shall be carried out within 10 calendar days of the Contractor’s request and shall constitute the review and assessment which is a precondition to the issuance of the statement of completion and issuance of the certificate for payment for the work performed to the date of the completion.

Further Commentary

The provisions of the CLA apply to any payment made under a contract regardless of whether any item of work was in the original scope or was added at any time during the contract.  Where additional work is documented as a change to the contract (e.g. by Change Order or Change Directive), the additional work becomes part of the contract and is subject to all the provisions of the CLA.

If a portion of the additional scope is undertaken before substantial performance, the holdback on the completed portion of the additional scope accrues as part of the basic holdback and is released after substantial performance.  The holdback on the remaining portion accrues as part of the finishing holdback and is released after deemed completion.

Where scope is added after substantial performance, the holdback on the additional scope accrues as part of the finishing holdback, and is released after the project is deemed complete. If the addition of scope after substantial performance has been achieved results in the financial requirement under the CLA being no longer met, it doesn’t invalidate the previously determined substantial performance of the contract.  Another certificate of substantial performance is not required when the project again meets the financial requirement nor is another publication of the certificate.

 

 
CCDC SUBSTANTIAL PERFORMANCE TIMELY GC 6.6 GC 5.7 OVERTIME

Q: A contractor has submitted additional pricing for overtime work that was done prior to the issuance of substantial performance. It has been more than six months since this work was performed, so the question is, “Is there a time limit for submitting change orders of this nature?”

A:
SIMPLE ANSWER
In a CCDC-2 contract, there is no specific time limit for submitting a claim for a contract change. General Condition GC 6.6 Claims For A Change In Contract Price states that “Timely Notice in Writing” shall be given by the claiming party. In this particular case, if the “Client Supplementary Conditions” do not make specific reference to what “timely notice” constitutes, then there is no explicit time requirement, unless otherwise stated in other sections of the contract.
 
It is stated in the question that the overtime work took place before substantial performance and that more than six months have passed. There is no statement that the contract is deemed complete. Assuming that “timely notice” is not defined in the contract, some would consider that six months is not considered reasonable or timely notice. Obviously the contractor would argue otherwise.
 
EXPANDED ANSWER
Usually, in CCDC-2 type contracts, General Condition GC 6.6 Claims For A Change In Contract Price is adjusted by providing finite time limits as to when a contractor is entitled to submit a claim. In some projects, it is also common to have a clause that will require the contractor to provide a “Final Release of Claims”, prior to providing final payment. This would be usually stated in an amended portion of General Condition GC 5.7 Final Payment, where an actual sample form may even be provided as part of the appendix to the General Conditions.
 
If there was ever any acknowledgement in writing by the owner or the consultant that overtime by a certain trade or general contractor was going to be considered, prior to the overtime work taking place, then the owner/consultant should review the claim and provide comments as to its validity or substantiation. If such communication took place in the form of verbal discussions, it will be more difficult to have the parties agree that overtime discussions did indeed take place.
 
In some instances, there might be a “good will” gesture by the owner, in entertaining a claim outside of the specific terms of the contract, for timely submission. When this is the case, the owner must be cautious to not set a precedent, especially if it occurs during the early stages of the work. 
 
To note that determining what constitutes reasonable “timely notice” will likely differ from one project to another, depending upon project size, complexity, prior working relationships or other factors.”

 
ACCEPTANCE COMPLIANT BID AWARD LETTER

Q: I am currently asked to recommend acceptance of the low bidder to a provincial Ministry. Is there particular wording that should be in this letter?

A:

The Project Administration Resource Committee (PARC) – (formerly the Construction Contract Administration Committee) would be concerned about who determined whether the bids were substantially compliant or not (Contract A/Contract B issues). The architect should not in any circumstances be making that determination. The client’s legal advisors should be. Nothing in any letter should imply that the architect made such a determination, rather the letter should state who else did make the determination.

For a public body, PARC would expect that among the substantially compliant bidders, the contract would be awarded to the low bidder based on the rules/regulations governing bidding by the public body. This being the case, any letter would not be a recommendation, but an observation of fact. There is no reason why the architect would be involved in that determination either. 

Since a letter recommending acceptance of a bid is not something that an Architect should be doing, PARC does not have a template for it. Ultimately it is the responsibility of the client to decide who to award a contract to. We do have a template for advising the successful/unsuccessful bidder of the client’s decision, but not a recommendation to the client about who to award the contract to.

Because of the potential liability issues involved, PARC recommends that architects consult with Pro-Demnity Insurance or their insurance advisor before proceeding.

 
SUPPLIER BID SOLE SOURCE

Q: We are a supplier/installer and want to bid on the supply of a product. The specification has linked this product to a particular installer. What is the process of requesting a substitution of not a product but an installer? Is it allowable to specify the installer? How can a sub-contractor/supplier (non-manufacturer) be specified into the tender?

A:Short Answer

There is no formal process for changing a specified supplier/installer/manufacturer where one has been pre-selected.

It is rare to find a sole source specified in a tender for a public body or institution as it is often prohibited or restricted, but private owners may do so at their discretion. By the time a project is out for tender, it is likely too late to have pre-selected suppliers/installers/manufacturers changed. This is best done before a project is tendered by approaching the owner or the consultants.

Further explanation

It is not uncommon in the private sector for owners to pre-qualify or to name specific sub-contractors, suppliers or installers that must be carried by every contractor bidding a job. The result may be that the owner does not receive the lowest price that they might otherwise have. Some private companies may be free to do this. The rules for most public sector projects would require a more open/competitive bid process.

There are a number of reasons why a particular manufacturer/sub-contractor/installer might be specified on a project.

  1. A client may have negotiated a price for a product based on a particular quantity per year aggregated over multiple projects. I have known this to be done for carpet tile and ceramic tile.
  2. A client may have negotiated a national service agreement so they only have to deal with one supplier/installer regardless of where the project is.
  3. By selecting a manufacturer, you may in some cases be limiting the selection of supplier/installer to factory trained or authorized sub-contractors or installers. Some products may be licensed to a particular supplier/installer.
  4. Some very small projects may receive better pricing or material availability if the supplier/installer is guaranteed to get other projects as well.
  5. Some projects may require companies providing services to be pre-screened for security purposes and only previously screened companies may be allowed to bid.
  6. Major landlords may require the use of specific sub-contractors/installers so that all of the work/products of a similar nature are done by the same company throughout a building. This makes pointing a finger at someone if there is a defect or failure much easier and it reduces the effort required of the Landlord to train the trades in, and monitor their compliance with building standards.
  7. Portions of a building may still be under warrantee, and to avoid voiding the warrantee, it may be necessary to have any additional work affecting the product under warrantee done by the original company.
  8. Some companies may decide that preference should be given to suppliers/installers that are related corporately.


The requirement for a bidder to carry one of a list of preferred sub-contractors/installers or use a sole prescribed sub-contractor/installer should be set out explicitly in the instructions to bidders and in the specifications.

While it is possible to create a set of requirements that effectively limit the qualified suppliers/installers to a single company, there should be no reason for not being explicit about sole sourcing a service.

Any other sub-contractors/installers wanting to get on the list or to be prescribed should ask the bidders to see if they can get approval from the bid calling authority to be added for the project being bid, or should approach the owner/landlord and the appropriate consultant about being added for future projects.

It should be realized that obtaining approval is extra work for the bidder and there may be little incentive for them to put in the effort required unless there is a competitive advantage for them or they have a really good working relationship with the person/company making the request.
 
CONSTRUCTION MANAGEMENT PAYMENT

Q: For a construction management project, what contract amount should be used for certification when there are un-awarded trade contracts: budget amount, projected amount, General Conditions amount and add the trade amounts as they are awarded by Change Order?

A:

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.

 
SUBSTANTIAL PERFORMANCE LIEN BACKDATE

Q: Is it acceptable practice to backdate the Certificate of Substantial Performance (CLA Form 6) to the date of the applicable Certificate for Payment? The Construction Lien Act uses the term value of work and not work certified as completed? Is it acceptable to use the value of work as a bench mark when a Certificate for Payment is not issued at the exact date of Substantial Performance? (e.g. contractor did not submit an invoice, with the request for Substantial Performance).

A:

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.
 

 
SUBSTANTIAL PERFORMANCE LENDER LIEN

Q: Part-way through the construction the client (a developer/builder) requested that we commence providing payment certifications as he had a new lender. We were doing reviews for architectural work but are not the prime consultant and have no knowledge of the details or values of construction contracts. Twice we provided an opinion letter as to the approximate percentage completion of the project but would not do a Certificate for Payment. Now the project is complete we are asked to prepare and sign the Form 6 Substantial Performance certificate. We indicated that without any knowledge of their contracts and as we do not consider ourselves the 'Certifier' for the project, that the owner and the contractor can sign the Form 6 - to commence the Lien period and advertisement etc. They feel that we should be signing the Form 6. We do not wish to become responsible for delays, but do not feel that given the circumstances that we should sign as the Certifier in this case.

A:

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.

Other Considerations:

This situation often arises and, as the question notes, “part-way through construction”:

  • where the client is a developer/owner/builder,
  • where the architect and other consultants are each engaged directly by the client with none designated as a prime or responsible for coordination of all the consultants
  • or when the client gets a lender part way through the project.

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:

    “To 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. 

 
SIGNING

Q: Can you please tell me who is allowed to sign Change Orders, Contingency Allowance Change Orders, Certificates for Payment, etc. in an architectural firm? Can it only be an Architect/Engineer or are others allowed if they have owner’s permission?

A:

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).

 
SUBSTANTIAL PERFORMANCE OCCUPANCY

Q: The contractor applied for substantial performance and I declined because the total certified value of work is less than 97% that the Construction Lien Act prescribes. The contractor contests that since the space is occupied they qualify for substantial performance. Is the 97%, 3:2:1 calculation rule of the CLA valid in all circumstances?

A:

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.

 
SUBSTANTIAL PERFORMANCE CHANGE ORDER

Q: The Contractor has requested Substantial Performance. He wants the release of holdback to pay his subs. However, there are many outstanding Change Orders (+ $190K) that the client has advised verbally that they will pay (most are due to client requests) but have not approved the CO’s by signing and returning. After multiple requests, I still have not received the signed COs from the Client. We are well within the required % of completion at the current Contract Amount. I could issue Substantial Performance Certificate on the current Contract Amount but the outstanding COs would then be lost in limbo - and likely it would end in court. The majority of the extra work has been completed by the contractor in an effort to meet the Completion Date without delay. This puts the contractor in peril, I presume, but what about our office? As Payments are Certified based on work completed – if I approve the amount based on work completed to date we will be OVER the current contract amount (is that breach of contract?) If the COs do come in, the contract amount will increase by $190K –and we will still be within 5%.

A:Standard contracts require a signed CD or CO, not  just a verbal instruction, to authorize changes to a contract. If the contractor has in good faith done work which is not in the scope of the contract, based on verbal assurances from the owner, then the contractor is at risk. The value of the extra work is outside the scope of the contract (until the COs are signed) and should not be considered as part of the value of the work done to date nor as part of the value of the contract. The architect should not be at risk provided he/she has acted in accordance with the terms of the contract in a fair and impartial manner. If on the other hand, the architect were to certify payment for work not in the scope of the contract, that would attract liability, potentially for the value of the work improperly certified.

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.

Other Considerations:

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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DISPUTE

Q: In issues where the contractor differs in opinion from the consultant as to the interpretation of an aspect of the work under the contract document, and where the consultant has the authority to and has made clear their findings and interpretation, can the contractor continue to dispute the issue and call for dispute resolution measures? 

A:The answer depends on whether the contract is plain vanilla CCDC2 or if there are pertinent supplementary conditions. The comments below assume a plain vanilla CCDC2 and that the contract documents were not in error or lacking in coordination. 

This response should be read with a copy of the CCDC2 document at hand. From a quick look at CCDC2 conditions: 

GC 2.2
The Consultant’s interpretations are not binding.
2.2.12 gives the Consultant the authority to reject work which does not conform to the requirements of the Contract Documents. 

The Consultant could use this to withhold payment where the Contractor proceeds with work contrary to the Consultant’s interpretation. The danger is that the Work could come to a screeching halt. 

GC 7.1
7.1.2 may give the Owner the right to terminate the contract if the Contractor can be shown to be neglecting to prosecute the Work properly or failing to comply with the contract to a substantial degree. 

This is something that the Owner’s lawyers would have to evaluate based on the specifics of the situation. 

If the Owner would even consider starting to move in the direction of terminating the contractor then a call to the bonding company from the Owner’s lawyer may cause them to bring pressure to bear on the Contractor to change his confrontational approach. The Owner would have to be prepared for the costs and delay involved in proceeding with another contractor. 

GC 8.1
8.1.1 indicates that the option of requesting dispute resolution is open to the contractor on any and every issue.   

8.1.3 allows the Consultant to give instructions to the Contractor that are necessary for the proper performance of the Work where a dispute is not resolved promptly. 

The Consultant should only issue a Supplementary Instruction (i.e. no-cost change) in response to questions of interpretation unless they feel that there is a definite change to the contract. The wording of the instruction should state that the instruction is issued in accordance with GC 8.1.3 in order to put the Contractor in a position of having to “act immediately according to the instructions”. Failure of the Contractor to do so would be a breach of the contract. To issue a Change Directive just to get the Contractor moving loses the battle because it presupposes that there is a change to time or value. 

GC 8.2
The Contractor is likely to be in breach of 8.2.3  

CCDC2 relies on CCDC40-2005 for the resolution of disputes.                

Costs of the Mediation
12.1 Shared Costs - Unless the parties have agreed otherwise, the fees and reasonable expenses of the Project Mediator and any reasonable expenses associated with the conduct of the mediation shall be shared equally by the parties. 

Costs
19.2 Costs to Successful Party - Except for the costs of legal fees and legal expenses of the successful party, the costs of the arbitration shall be borne by the unsuccessful party unless the arbitrator considers it appropriate in the circumstances to apportion them between the parties.19.3 Legal Costs - The arbitrator (a) may decide which party shall bear the costs of legal fees and legal expenses of the successful party, if they were claimed during the arbitration,(b) may apportion those costs if the arbitrator considers it just and reasonable to do so, and (c) in either event, shall specify the amounts of those costs or the manner of determining those costs. 

Based on the above excerpts from CCDC40, if the Contractor’s disputes are clearly bogus, pushing for arbitration as soon as possible would put him in the position of having to pay the costs out of his own pocket. That may cause a change in his behaviour. The Owner would still have to split the costs of the mediation which preceded the arbitration, but if the Contractor lost at arbitration and had to pay the Owner’s costs, it should be a deterrent to proceeding with other bogus disputes.  

All that aside the Owner should be advised to review the situation with their lawyer and maybe have the lawyer send a letter putting the Contractor on notice that it appears that the Contractor is not acting in good faith and that the client would seek to recover any delays or damages caused by the Contractor’s actions. 

If the Owner gives in to the bullying, it will just get worse. There is a cost to taking a stand, but there is also an escalating cost to giving in. 

Above all, the Consultant needs to remain impartial and not to favour the Owner because of the Contractor’s posturing. This does not mean the Consultant cannot require the Contractor to follow the letter of the contract with respect to all submissions and applications. The working relationship has already deteriorated, so little further damage can be done. The Contractors not acting in good faith should learn that there are consequences to their actions. The Consultants have to make sure they remain impartial in their dealings with the Owner and Contractor and comply with all the timelines and notices required by the contract. 

The Consultant should approach the Owner about extra fees to deal with the situation, especially if the Consultant was not involved in any prequalification process, did not recommend the Contractor be on the bidders list, or the Contractor was included at the explicit request of the Owner.
 
SUBSTANTIAL PERFORMANCE

Q: Can an architect issue a Certificate of Substantial Performance jointly with a Payment Certifier? Where the architect would certify that part a)

A:

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.”

 
FORMS

Q: Where do I get standard forms like General Review Reports, Certificate for Payment or Certificate for Substantial Performance?

A:
Standard forms used by architects are authored, published and maintained by several different organizations primarily the Architectural Canada  (RAIC), the Canadian Construction Documents Committee (CCDC)  and the OAA. Refer to OAA Practice Support Standard Forms.
 
 
MISC

Q: Does the architect supervise the work of the builder and other contractors?

A:
No. Supervise means to direct - as in tell workers what and how to do the work. Contractors build – architects watch (review). Contractors supervise workers on site; architects do that for their work in their offices. The standard construction contract CCDC 2 - 2008  GC 3.1.1 states “The Contractor shall have total control of the Work and shall effectively direct and supervise the Work so as to ensure conformity with the Contract Documents".
 
 
MISC

Q: I found that work is not up to the standard that we expected – but the owner says he is Okay with it; what should I do?

A:
At minimum document the facts. If it is important you may need to affirm your position. The specifications are where quality standards get defined. The owner may not understand the details and may simply be trying to avoid a conflict or confrontation, particularly on residential renovations projects where the owner is in close contact with the workers.  It may be that the contractor or trade workers agree with you and would prefer to rectify poor workmanship, than to leave it. More communication may be the way to deal with this issue. If necessary you may need to write to the owner, that it is against your judgement but that you are prepared to accept the standard of the work completed but that you are on record as not being satisfied with the standard.
 
 
RFI

Q: How do we stop all the minor RFI’s and doesn’t the contractor just do these to set up a delay claim?

A:

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.   

 
MEETINGS

Q: Who runs the construction meetings and issues minutes - the architect or the contractor?

A:

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.

 
PAYMENT

Q: Can a certificate of payment be issued without a statutory declaration (subsequent to the first certificate)?

A:

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 5.5.1.2). 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:    

  • The un-amended CCDC contracts make no provision for not issuing a certificate because a Stat Dec was not submitted except after substantial performance. We will issue a Certificate for Payment without a Statutory Declaration or with a Stat Dec that has not been properly filled in, or has not had the CCDC seal applied to it (after having tried to obtain one from the Contractor), but based on the requirements of the Supplementary Conditions of the contract, we note the omission/deficiency/copyright issues in our covering letter to the Owner. 
  • We were advised by the of the CCDC that their Stat Dec was not intended to, nor should it be used if the contractor has not yet received payment based on the first Certificate for Payment.
  • 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.”
  • In our case, we would send a cover letter along with our Certificate for Payment to the client, advising of the particulars of the Certificate and identifying if no Stat Dec was included (and indicating the contractor’s explanation as to why it was not provided).  We would also copy this to the contractor so as to ensure transparency between the contracting parties (client and contractor).
 

Q: Can I issue a Certificate for Payment that reduces the value from the last month for a particular trade?

A:Yes. Providing of course there is a reasonable reason to do so.  A Certificate for Payment is a statement by the architect regarding the percentage of the total project that has been attained. The schedule of values done by the contractor is used as reference by the reviewing consultants. There may be an occasion that the trade, contractor and consultant have each misjudged the value of a particular line item of work, or it could be found that some work was later found to incorporate incorrect material. Although a general contractor or a trade may object, standard construction contracts do not prohibit this.
 
PAYMENT

Q: I received a form from my client’s bank – it looks like a Certificate for Payment but has some other clauses in it that seem like maybe I shouldn’t be signing it – like - I certify the value to complete the work is ….  and - All work done to date meets all applicable laws, codes, by-laws. Should I sign this?

A:

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.

 
PAYMENT

Q: We have a project in which the contractor has obtained a building permit and has proceeded with the work based on a letter of intent from the client. The client has not yet generated the paperwork required before they can sign a contract (CCDC2 in this case). It has been more than a month, and the contractor has submitted an application for payment.
 
Since there is no formal contract, it would appear that there is nothing for us to administer and no requirement to certify anything. The client will not pay unless there is a certificate for payment. If there is no payment, work will stop and both the client and the contractor will be upset and blame the consultant for being too legalistic.
 
Is there anything that we can do to qualify a certificate for payment that won’t attract undue liability, but will allow the work to continue?

A:Answer provided by John Hackett, ProDemnity Insurance at the request of the CCAC

An enforceable contract has existed from the moment the owner / client issued its letter of intent which will have accepted the contractor’s bid (or negotiated amended bid). The contractor has clearly accepted the letter of intent as “acceptance” by the owner and is proceeding with the work.
 
The owner’s / client’s obligation to pay for work carried out by the contractor has existed from the moment the letter of intent was issued. If payment cannot be made without a “signed” contract, the owner should not have issued a letter of intent. The contract created with the letter of intent can be enforced by either party whether or not a “formal” signed version is ever signed.
 
Presuming the administration of the contract is the responsibility of the architect, the application for payment triggers the requirement that the architect process same including issuance of a certificate for payment.
 
The architect states that the form of contract to be used is CCDC-2. The architect also needs to know and act in accord with the content of any Supplementary Conditions that were provided to the contractor at the time of bidding since those form part of the contract.
 
One assumes that the architect has the necessary information from client and contractor required to carry out its role as administrator. That would include any schedule of values / contract breakdown upon which it will base its certification.
 
If it does not have all of the necessary information and / or there is discomfort with the schedule of values as submitted by the contractor, the architect can so state in a covering letter…perhaps noting that the schedule needs review etc. and that subsequent certificates may need adjustment to reflect any changes agreed to.
 
The architect is bound to fulfill its role as administrator, without favoritism to either party, regardless of the status of any paper work in the client’s organization.
 
If the contractor is not paid in accord with the contract that is the basis of the letter of intent, the contractor may act in accord with the contract provisions or law, including stopping work, filing a lien etc. Those are the recognized tools at its disposal when it is not paid for the work it has been contracted to do.
 
An initial invoice / certificate often includes compensation for the required bonds and insurance, and the architect would be wise to assure itself that any required bonds, insurance policies etc. have been delivered by the contractor to the owner, either directly or via the architect (depending on what is required by CCDC-2 and any Supplementary Conditions).
 
Architects are always liable for their professional advice and services. An architect’s professional liability insurance covers damages arising from “errors, omissions or negligent acts” in the performance of those services. If an architect is alleged to have made an error in a certificate, the insurance is there to provide a backstop.
 
CAD DRAWINGS

Q: We specify that shop dwgs for special railings and stairs are stamped by an Ontario  P Eng. The Contractor says that they will have the shop drawings stamped after our final review of the shop drawings. Is that right ?

A:
The provision for sealing drawings in the Engineers Act is different than for Architects. It uses the words – “final” drawing and “checked by” so that miscellaneous shops prepare the shop drawings and then send to an Engineer they may use on a regular basis to check and stamp the drawing. They would normally pay for each such review check so the trade is trying to avoid extra costs.   

This may or may not be acceptable depending on the circumstances. One way to alleviate the concern is to specify more particularly that each submission shall bear the seal of the Engineer. 
 
Reference: The Engineers Act - R.R.O. 1990, Reg. 941, s. 53; O. Reg. 13/03, s. 16. 
 
HOLDBACK

Q: Am I within my rights to demand a statutory declaration from my
contractor to prove that he has paid all the sub trades and suppliers
in full?
 My contractor suggests that he will charge me a fee of $200 for this
 service and only once payment of the entire project is paid in full.

A:The answer to the question depends entirely on the specifics of the construction contract. The plain vanilla CCDC 2 (Canadian Construction Documents Committee, stipulated price contract - a standard construction contract used across Canada) only requires that the contractor provide a statutory declaration for release of the basic 10% holdback, mandatory under the Construction Lien Act, following Substantial Performance.

Some contracts include the requirement to submit a statutory declaration with every application for payment other than the first. This is done to protect both the owner and to a lesser extent, the consultant.
If the contract does not contain wording which requires statutory declarations with any other applications for payment, then the contractor should be entitled to recover their costs if asked to provide them.
 
CAD DRAWINGS RAIC CHOP LICENSE

Q: Where do I get the copyright letter about releasing CAD drawings?

A:The RAIC Canadian Handbook of Practice (CHOP) has an Appendix A - Digital Copyright and Architects,  following Chapter 2.3.7 that contains excellent information on the issues pertaining to copyright. There is a sample license agreement and disclaimers related to the release of electronic drawings. You are advised to edit the License Agreement to suit your situation and receive the signed form back before releasing drawings to anyone.  Refer also to the RAIC Practice Builder – The Exchange and Transfer of Electronic Documents – 2010. (no cost for RAIC members)
 
CAD DRAWINGS RAIC COPYRIGHT

Q: The client said that I have to give my CAD files to the contractor or else there will be an extra charge. The Client says he has paid us, he should own what he has paid for, so what is the problem?

A:

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:

  • The need to ensure protection of their intellectual property and copyright;
  • the need to ensure that there is no additional liability or increased risk to the architect when distributing electronic documents; and
  • the provision of digital or electronic documents is not effortless and there is a need for appropriate compensation for providing electronic files.
 
BID CCDC TENDER

Q: Is there a difference between tender and bid? I thought tender was when we send the drawings out and the bid is what contractors send back - is that correct?

A:The terms tender and bid are so often used interchangeably that the Canadian Construction Documents Committee (CCDC) and other design and construction associations including the OAA have generally agreed within their own organizations to only use the single term “bid”, in an attempt to have more consistency and eliminate the potential argument or question that there is a difference between the two terms within a single document such as a construction contract.