The Procurement Issue

VOLUME 9 • ISSUE 5

SEPTEMBER // OCTOBER 2020

THE OFFICIAL PUBLICATION OF THE G RAND VALLEY CONSTRUCTION ASSOCIATION

GVCA

BUYERS GUIDE 2020

THE

PROCUREMENT ISSUE

With stories on how procurement is changing due to the COVID pandemic, and how contractors and owners are responding.

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THE OFFICIAL PUBLICATION OF THE GRAND VALLEY CONSTRUCTION ASSOCIATION

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VOLUME 9 • ISSUE 5 SEPTEMBER - OCTOBER 2020

THE

PROCUREMENT ISSUE

PUBLISHER Martha George EDITOR James Raiswell

CONTRIBUTORS

Kimberly Aitken Paul Knowles Rocco Sebastiano Jagriti Singh Elliot A. Smith Jesse Watts

PHOTOGRAPHY Lisa Lackenbauer

CONTRIBUTOR

LAYOUT & DESIGN Janet Day

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FEATURES

DEPARTMENTS

ADVERTISING SALES Lana Lang-Nagle lana@gvca.org

519-622-4822 x128 SUBSCRIPTION INQUIRIES & LETTERS

TO THE EDITOR

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©2020 Grand Valley Construction Association. ll rights reserved. The contents of this publication A may not be reproduced by any means, in whole or in part without prior written consent of the publisher

14 THE PITFALLS OF EMAIL BID SUBMISSIONS

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WELCOME

Messages from the Chair and the President

17 PURCHASING IN A PANDEMIC

5

CRYSTAL BALL REPORT

18 COVID-19: THE TOP 5 THINGS TO LOOK FOR IN CONSTRUCTION CONTRACTS

Waterloo Eye Institute and Recreation Centre, Wellesley Township

20 RCCAO REPORT: SUPPORT NEEDED FOR MUNICIPAL INFRASTRUCTURE INVESTMENTS 22 COVID-19: A GREEN OPPORTUNITY? 24 SHOWDOWN ON COMMUNITY BENEFITS? 26 6 KEY TAKEAWAYS FOR MUNICIPAL INFRASTRUCTURE

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SIGHTINGS

Were you spotted?

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SAFETY

Work-life balance 10 FINANCIAL Operating through COVID-19 and beyond

13 LEGAL Suppliers have an achilles heel, but deposits could protect them

27 GVCA JOURNAL BUYERS GUIDE

2020 30 GVCA EVENTS &

EDUCATION CALENDAR 30 ADVERTISERS’ INDEX GVCA Journal // VOLUME 9 • ISSUE 5 // SEPT- OCT 2020

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WELCOME TO JOURNAL A MESSAGE FROM THE CHAIR

RISK AND UNCERTAINTY What’s the difference between risk and uncertainty? Some people confuse the terms or think of them as the same.

They’re not.

A risk is something the probabilities of which are known or can be calculated, judged and weighed in on, whereas we don’t know the probability of an uncertainty as there are too many things in play beyond our control. In the bidding world, the difference between the two is very important. It’s easy enough to gamble on an identified risk because you can quantify its likelihood. You can’t do that anywhere nearly as effectively with uncertainty.

As a buyer of construction services, your

A MESSAGE FROM THE PRESIDENT

ability to draw a bright line between project risk and project uncertainty can be a tremendous asset for bidders. It helps them decide between bidding a project and pricing for inherent risks, and not bidding at all, or even worse for you the buyer, adding contingencies on top of contingencies resulting in potential budgetary issues with your project. Without a clear difference between the two, bidders will interpret information in their own way—and possibly to your detriment.

Mike Reid, GSC

My advice: purge ambiguity and provide pertinent information. Your ultimate goal is to get the fairest price for the services. Separating those factors you know (risk) with those you don’t (uncertainty) will help get you there. Forcing too much into the contract with your contractor and trades will not work out well for you. Providing clarity and sharing risk or providing important information in your bid documents will move bidders’ uncertainty over to an understandable and acceptable level of risk for them. In turn, you will have better project success.

KNOWNS, UNKNOWNS AND UNKNOWN UNKNOWNS When it comes to knowledge, we can break down the things we know into three categories. The first is what we know: known facts. The second is what we know we don’t know: known unknowns. And because we know the limits of that knowledge, we can research those unknowns to find the answers we need.

Where we run into trouble is with the third category of knowledge: unknown unknowns.

In other words, those things or ideas that we don’t know we don’t know.

Martha George, GSC

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GVCA Journal // VOLUME 9 • ISSUE 5 // SEPT- OCT 2020

Let me explain. We all have known at some level that a pandemic was possible or even likely. That was a known. The known unknown was what form that pandemic would take, and how long it would last. The unknown unknown that’s facing us now is what’s next.

What will be the next major event that slaps us in our faces and disrupts our businesses?

We like known knowledge. We can even deal with known unknowns. But unknown unknowns are hard to manage. They haul us out of our comfort zones with little warning or control.

My point in all this: control those things you can, and worry less about those you cannot. Unknown unknowns are everpresent and impossible to predict. Stay calm. Stay focused. Stay humble, and stay safe.

CRYSTAL BALL REPORT

Crystal

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PRE-BID REPORT

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GVCA’s Crystal Ball Report is a unique and insightful member service. Updated daily by GVCA staff, the report tracks planned projects during the pre-bidding phases, following them from concept to design to prequalification, construction and completion.

Waterloo Eye Institute University of Waterloo The School of Optometry & Vision Science Building at the University of Waterloo was built in 1974. This project proposes to conduct a facility assessment, and develop concepts and cost estimates for a significant interior building modernization that includes a large renovation, and the addition of two stories of new space.

The project includes such exterior improvements as re-cladding, re-glazing, and redesign/expansion of public access to the clinic. Interior renovations and new construction include new finishes, elevator, mechanical and electrical distribution, and an assessment of the school’s current and future space use strategies including re-envisioning of clinic/patient care rooms, offices, and lounge/kitchen areas.

Recreation Centre | Wellesley Township Wellesley Township plans to build a recreation centre at 1401 Queens’ Bush Road.

The centre will include a single pad arena with elevated indoor running track, a gymnasium/community centre with banquet kitchen facilities, community rooms/ offices, two soccer fields, an outdoor walking trail, a playground and a skate park.

The township is preparing a master plan for a new community park located at the corner of Hutchison Road and Queen’s Bush Road. The township has retained the consulting team of FJ Galloway Associates Inc. plus GSP Group Inc. to coordinate the process and create a schematic design that is aligned with the diverse recreational interests of residents of the township on the 40-acre site.

For more information or to have your project profiled, contact GVCA’s pre-bid reporter Rob Agley at rob@gvca.org

GVCA Journal // VOLUME 9 • ISSUE 5 // SEPT- OCT 2020

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SIGHTINGS

WERE YOU SPOTTED? We regretfully could not host our three annual golf tournaments this year due to COVID-19. Our GVCA tournament in June, our LinC (Leaders in Construction) tournament in July, and our WinC (Women in Construction) tournament in August all had to be cancelled for everyone’s health and safety.

So for this edition of Sightings, we thought you’d like to take a look back at last year, and all the fun we have to look forward to again in 2021.

We look FORE-ward to seeing you on the links then!

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GVCA Journal // VOLUME 9 • ISSUE 5 // SEPT- OCT 2020

Construction Insurance and Surety Specialists Local Knowledge and Expert Advice Industry Specific Programs Tailored Insurance and Surety Solutions

cowanconstruction.ca

GVCA Journal // VOLUME 9 • ISSUE 5 // SEPT- OCT 2020

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SAFETY

WORK-LIFE BALANCE Canadians are finding it increasingly challenging to balance their work demands with the healthy management and enjoyment of life outside work. Two main aspects often affect worklife balance: the first is lack of time and scheduling conflicts, and the other is feeling overwhelmed, overloaded or stressed by the pressures of multiple roles.

This infographic explains why work-life balance makes good business sense, the factors that can affect it, and what employers can do to support their workers.

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GVCA Journal // VOLUME 9 • ISSUE 5 // SEPT- OCT 2020

Editor’s note: this infographic was created by the Canadian Centre for Occupational Health and Safety. For more information, visit www.ccohs.ca.

GVCA Journal // VOLUME 9 • ISSUE 5 // SEPT- OCT 2020

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FINANCIAL

OPERATING THROUGH COVID-19 AND BEYOND While trying to keep your employees safe and healthy was, and is, a top priority throughout the COVID-19 pandemic, so was ensuring your business survived the economic halt.

At the time of writing, the Canadian government had just announced the extension of the wage subsidy program to the end of 2020 to continue to support businesses. However, more challenges are ahead as we continue to re-open the economy and move past the pandemic.

What happens after the government benefits end? As a business owner, you must keep the following in mind to make it through 2020 and thrive in the future.

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P IPELINE

S UBCONTRACTOR PREQUALIFICATION

Is your pipeline of work planned out for several months? Or do you just operate from job to job without planning for what comes next? As construction was an essential service for parts of the pandemic and some companies only saw a month of shut down, many construction companies have not seen a large impact on their operations to date (in part thanks to the government support). However, the slowing of tenders and work due to uncertainty in the economy could become a problem in 2021.

As benefits end and wages are no longer supported by the government, there is an increased risk of companies not being able to pay their staff. Subcontractor prequalification will become even more important to ensure jobs do not have cost overruns due to a subcontractor going bankrupt.

BREAKING CONTRACT There may be times when breaking a contract could be more beneficial than trying to complete the work with resources already stretched thin.

Assess all contracts in these situations and ensure you get a legal opinion on the cost of breaking a contract before moving forward.

J OB MARGIN While focusing on your pipeline of work to keep your staff busy for the next six to nine months, you must always think about the margin expected on those jobs.

Now is not the time to take on low-margin or no-margin jobs just to keep staff busy.

By taking on such work, your operating expenses will quickly eat away at your cash flow. Assess each job to ensure the work will be profitable to withstand potential slowdowns or a second wave of the pandemic.

S HIFTING FOCUS AND PROCESSES One thing the pandemic taught many businesses is that things can be done differently. Now is a good time to take a high-level look at your business and processes to determine if a shift is necessary.

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This shift could be anything from a change in the work your business does, to streamlining processes and reducing operational costs. Use the lessons learned about operating your business through the peak of the pandemic to inform your future.

A DVERTISING While reducing operating costs may still be a focus as the economy continues to re-open and your business tries to get back into a normal rhythm, some strategic spending could make the difference between those businesses that succeed and grow after the dust settles and those that do not. By spending on advertising while others are not, you could stand out to consumers and generate a higher return on your investment.

C ASH FLOW As always, a rolling cash flow projection

that can be updated as events occur is vital to the success of your company.

Such a tool allows you to make informed decisions. Using the cash in the bank as an indicator of your company’s wellbeing could be disastrous once the government benefits end and any deferred taxes need to be paid.

S TRATEGIC ACQUISITIONS If you were considering buying your first business or a strategic acquisition to grow your current operations before the pandemic, now may be the time to act. The value of many businesses and assets will be depressed allowing you to make that strategic purchase at a lower cost.

T AX CHANGES? With all the government spending to help Canadians make it through the pandemic, we cannot overlook the possibility of tax

changes in the near future to help pay for those benefits. While no one can predict what changes, if any, will come into place, it is a good time to reach out to your advisors to do some tax planning.

While you probably did not have a contingency plan in place for a global pandemic a year ago, we can take a lot of learning away from what we went through the last six months. Use what you learned to pivot your operations, trim unnecessary costs, improve processes and make strategic moves to focus on the future success of your company.

Written by Kimberly Aitken, CPA, CA, Co-Leader of RLB LLP’s Construction Team. Contact her at 519-822-9933 or visit rlb.ca.

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GVCA Journal // VOLUME 9 • ISSUE 5 // SEPT- OCT 2020

Turn to Link2Build.ca first for publishing: • Certificates of Substantial Performance • Notices of Non-Payment of Holdback • Notices of Termination • Certificates of Completion of Subcontract • Notices of Intention to Register a Condominium

LEGAL

SUPPLIERS HAVE AN ACHILLES HEEL, BUT DEPOSITS COULD PROTECT THEM You’re on your way to work and your co-worker calls to ask you to pick up some coffee.

No problem. You go through the drive-through on your way, but then your co-worker calls you back to say, “never mind”. You already spent the money on the coffee expecting to be reimbursed, so what do you do? Maybe nothing. After all, a few dollars for coffee isn’t a big deal, but what if instead of coffee you had spent hundreds of thousands of dollars on construction materials?

In the last decade, the trend toward modular construction has accelerated. Everything from pre-cast slabs to entire bathroom suites are being manufactured off-site. And for good reason. Building in a factory setting is more efficient, quicker, and typically results in better quality products.

The flip-side of modular construction is that suppliers are incurring significant costs before they ever set foot on site. Unfortunately, our legal system was built with a cast-in-place world in mind. It is important for suppliers of modular construction products to understand how conventional legal remedies fall short of securing their right to payment.

Contract rights For a supplier to apply for a progress payment under CCDC and CCA contracts, “the amount claimed shall be for the value of […] Work performed and Products delivered.” Under the contract, work need only be performed, whereas products must be delivered before you can bill for them. The question is: are modular construction supplies work or products? Under the standard language, it is unclear as to whether a supplier of material fabricated off-site has any contractual right to payment before delivering its products to the site.

Lien rights Furthermore, section 14(1) of the Construction Act stipulates that a lien is created only when labour or materials are supplied to an

improvement to the property. Construction supplies that are not delivered to the site, no matter how expensive or pre-made they are, may not give rise to a lien.

Deposits How can a supplier of modular building products secure payment for products that have not yet been delivered to the site? In the context of an RFQ it is hard to get an owner to make changes to the contract language. In the context of a negotiated contract, one potential solution is to insist upon receiving a sizable deposit before starting production. However, careful attention ought to be given to drafting the deposit provision and setting the amount of the deposit.

First, the contract should expressly state that any deposit is “nonrefundable”. If it is not, then the Court may treat the deposit as being a mere pre-payment to which your client is entitled to reimbursement in full or in part if the order is cancelled.

Second, the amount of the deposit should be reasonable. Even if your contract is clear that a deposit is non-refundable, a Court may still order you to refund part of the deposit to the client if the amount of the deposit is out of proportion to the damages you suffered when the order was cancelled.

In short, the best protection for suppliers of modular construction products may be to insist on a non-refundable deposit from their clients, ensuring that the amount of the deposit is reasonable.

Asking for a deposit before picking up some coffee for your coworkers isn’t necessarily advised.

Jesse Watts is a graduate of the Queen’s University Faculty of Law and is an articled student at Madorin, Snyder LLP in Kitchener. This article should not be relied on as legal advice.

GVCA Journal // VOLUME 9 • ISSUE 5 // SEPT- OCT 2020

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FEATURE

THE PITFALLS OF

EMAIL BID SUBMISSIONS Owners beware: receiving bid submissions over email may sound like an easy way to work around the challenges presented by the COVID pandemic, but experts advise the practice could open the door to all kinds of risky outcomes.

The COVID-19 pandemic has changed the world in ways no one predicted.

Take construction bidding. At the insistence of industry and with the support of funding from senior levels of government, municipalities are working hard to fill their pipelines of construction tenders, and keep the taps flowing. But the pandemic is causing a multitude of unanticipated disruptions.

Two among these are that municipal staff—save for a few front-line personnel—simply aren’t in their offices these days. Which means they’re not able to receive tender submissions on closing day the way they used to. The second problem they face is that most people don’t want to handle hard goods (i.e.,

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documents) for fear of the risk that those papers may have come into contact with a COVID carrier.

Under these criteria, a new—and largely undesirable—trend is emerging in construction procurement: email bid submission.

“That’s a no-go for us,” says GVCA president Martha George. “Email bid submission may seem like an obvious and simple work-around, but it’s filled with risk.”

In fact, there are a number of risks associated with the practice. They fall into two categories: mechanical and ethical, says Kurt Rohmann, Director of Sales & Marketing with eSolutionsGroup, which

produces the bids&tenders electronic procurement platform.

“Mechanical risks are things like a recipient’s email server rejecting a bidder’s email submission because a file size is too large, or the sender’s domain is blocked by a firewall, or the sender’s email ends up in a spam folder,” he says.

“They’re the technical risks that come from delivering anything important over email on a deadline.”

The situation can also occur where a bid submission takes five minutes to upload to the sender’s server and five more minutes to download from the recipient’s server, during which time the bid submission time has passed.

MECHANICAL RISKS ARE THINGS LIKE A RECIPIENT’S EMAIL SERVER REJECTING A BIDDER’S EMAIL SUBMISSION BECAUSE A FILE SIZE IS TOO LARGE, OR THE SENDER’S DOMAIN IS BLOCKED BY A FIREWALL, OR THE SENDER’S EMAIL ENDS UP IN A SPAM FOLDER / Kurt Rohmann

“All of these create all kinds of risk to the bid process, and could open the door for a purchaser to end up in litigation against a bidder,” he adds. “Imagine a compliant, low bid was delivered before deadline, but was caught in the purchaser’s spam folder, and never opened before the organization awarded a project to another, higher-priced company.”

On the other side of the coin are potential ethical violations that come from receiving bids over email. Imagine the case where a bid comes in early over email, the

price envelope is opened, and that bid price is revealed to a competitor.

The solution to both problems, say both George and Rohmann, is to move toward e-procurement technology. Through platforms such as bids&tenders, buyers and vendors connect, submit and receive bids securely, and observe all the legal requirements and industry best practices for transparency and compliance.

“Electronic procurement systems remove all the mechanical and ethical problems associated with email bid submissions,” says George. “Since all

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GVCA Journal // VOLUME 9 • ISSUE 5 // SEPT- OCT 2020

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the bids are submitted over a secure platform and are stored in a digital lock box until closing time, there’s no risk of a purchaser not receiving a file, or opening a bid ahead of time.”

There are other advantages.

Digital procurement platforms can be configured to run full quality-control checks to ensure bidders don’t miss mandatory requirements. The system will simply not allow a bid to be submitted without those essential elements.

Most will also perform all mathematical calculations for bidders—so there’s no room for clerical errors. The systems can also help purchasers evaluate bids quickly and easily.

“There’s a huge time-savings to using e-procurement platforms like bids&tenders,” says Rohmann. “Our purchaser partners tell us they save about 35 percent of the time they used to spend on tender analysis. Plus, their build costs tend to be lower as they’re able to collect tenders from a wider geographic region than if they required bidders to come to their facilities to drop off hard-copy documents.”

Digital procurement platforms are, by and large, easy to use. Those designed with construction purchasing in mind come in both off-the-shelf models and versions that can be fully customized.

For those organizations simply looking to get started on the technology, staff can be onboarded in days. For those looking

BEST PRACTICES IN ELECTRONIC PURCHASING

to take deeper dives into the system and its potential, a longer training period may be needed.

“The great thing about bids&tenders,” says Rohmann, “is that our platform doesn’t ask purchasers to change their forms or their structures. It makes use of their forms, but does so in a way that’s easier to use.”

Already, bids&tenders counts more than 300 purchasers across the country, many of whom are located in Ontario, as well as tens of thousands of vendors. It, and digital procurement tools like it, are the way forward in the changing world of construction procurement that has been forced on us all by the COVID-19 pandemic.

The Windsor Construction Association says it is concerned about the rise of email bid submissions as a result of the COVID-19 pandemic. It is part of a group of seven local construction associations in Ontario—and dozens across Canada— that are working with eSolutions Group to promote the bids&tenders platform to purchasers and vendors.

Through Executive Director Jim Lyons and several members of the association’s board of directors, WCA is developing a series of best practice guidelines for purchasers and vendors when it comes to electronic procurement.

One of the tools developed by WCA is a list of best practices in digital procurement for construction project owners. Some of their advice follows:

Close mid-week.

Prefer digital bonds.

Post closings on Tuesdays, Wednesdays or Thursdays. Monday closings may require vendor staff to work over the weekends, while Friday closings could interfere with closing down sites for the weekend. Watch out also for long weekends, and statutory holidays, and select mid-afternoon closing times to allow contractors sufficient time to handle last-minute changes.

Digital bonding has become common practice. It’s the practice of choice for the industry and a safer, and preferred alternative to hard-copy documents or scans.

Collect sealed submissions only.

Use a digital procurement system that allows you to receive submissions that cannot be opened, accessed or reviewed until after the opportunity’s closing time, leaving no room for manipulation.

Let your suppliers complete their bids in chunks.

Preparing a submission can be a long and complicated process.

Don’t make it worse on the vendor by making them submit everything all at once. Allowing them to start and stop and save their progress as they go creates less stress. Some systems even allow multiple users to work on the same bid, saving time and hassle.

Offer free bid document previews.

Allowing potential bidders to view an entire bid document package without paying to register helps keep the procurement process open and transparent. Consider also displaying lists of plan takers and/or pre-qualified contractors as a courtesy to subtrades.

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Create a clear, concise and realistic project scope.

Clarity is everything in bidding. When people understand what they’re bidding, they can price easily. Your instructions on pricing, submission requirements and evaluation method should be as clear as possible to encourage bidders. The reverse—complex scopes with hard-to-understand practices —can deter submissions.

Create forms that encourage compliance.

Most digital procurement platforms will allow you to create forms that show suppliers exactly what needs to be completed for their bids to be compliant. Doing so eliminates the need to reject bidders for non-compliance, and makes your job of choosing a supplier that much easier.

FEATURE

PURCHASING IN A PANDEMIC OGCA president Giovanni Cautillo talks about some of the changes he’s seeing in construction procurement language as a result of the COVID-19 pandemic.

Giovanni Cautillo may be new to the job as President of the Ontario General Contractors Association (OGCA), but don’t mistake him for anything other than a fierce advocate for the association’s approximately 200 members.

He jokes that OGCA won’t be a kinder, gentler organization when it comes to troublesome contract conditions with him at the helm.

The former Executive Director of the Ontario Sewer and Watermain Construction Association and the Greater Toronto Sewer and Watermain Contractors Association worked alongside his predecessor Clive Thurston for years. He has a keen understanding of what’s appropriate—and what’s not—in the world of construction procurement, and he doesn’t like how the COVID-19 pandemic has opened the door for some owners to insert troublesome conditions into their procurement contracts.

“The pandemic has caused all kinds of problems for businesses and governments everywhere,” he says. “Municipalities in particular are having a hard time. Their revenues have been hit hard, and they’ve suffered from the losses of a lot of good people in their procurement departments, whether through retirement or layoffs.”

With those departures comes the loss of a lot of institutional knowledge, and in particular knowledge about what’s fair and what’s appropriate in the world of construction procurement. As a result, Cautillo says he’s heard from a number of the association’s members about new procurement staff

bringing back old, unfair clauses that OGCA dealt with years ago.

“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,” said Cautillo in a recent OGCA newsletter.

One of the big issues the association finds itself dealing with is the question of holdbacks. Some owners are asking for more than the 10-percent figure required under law. It’s simply unacceptable, says Cautillo.

“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,” he said.

Although not an issue the association has resolved previously, the question of force majeure provisions and the effects of COVID-19 on work is something that is not going away. Some owners are amending their force majeure clauses to exclude pandemics—effectively suggesting that international outbreaks of infectious diseases are things that contractors should reasonably expect in their day-to-day affairs.

Claiming against force majeure clauses is another issue the industry is struggling with. While many owners are allowing claims for additional costs relating to personal protective equipment and delays, some are digging in their heels.

“It’s unfortunate, but some owners are using contractors as scapegoats. They’re making the problem of the pandemic our responsibility,” says Cautillo. “That’s not

fair. This is a global issue that we’re all facing.”

To that end, Cautillo says he has met with Ontario Premier Doug Ford to discuss specific measures that the province can take to backstop not only the construction industry through the pandemic, but also municipal governments.

IT’S UNFORTUNATE, BUT SOME OWNERS ARE USING CONTRACTORS AS SCAPEGOATS. / Giovanni Cautillo That means specific remedies such as lines of credit that are supported by government and which contractors can draw on should carrying costs become too great, as well as a stimulus program for municipalities that can be easily accessed, and which is available to governments of all sizes.

“This stool has more than one leg, and all of them have to be standing on level ground for the industry to build these great shovel-ready projects everyone is talking about,” he says.

As for the troublesome contract conditions that are being advanced, Cautillo says he and his colleagues will continue to do what they do best: advocate and educate.

“We’re talking about just a small number of owners that use these kinds of clauses; most understand why they’re not fair or appropriate,” he says, “And usually, once we step in to explain things, the owners see that it’s in their best interests to work with us to mend their terms.

“We’re all trying to achieve the same goals.”

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FEATURE

COVID-19:

The Top 5 Things to Look for in Construction Contracts As parties to construction contracts continue to navigate the impacts of the COVID-19 pandemic, we highlight below our top five things to look for in construction contract clauses dealing with COVID-19.

Editor’s note: This article was written by Rocco Sebastiano, Jagriti Singh and Elliot A. Smith of Osler, Hoskin & Harcourt LLP. It was originally published on the firm’s Construction and Infrastructure Law in Canada Blog on July 22, and we reprint it here with permission.

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How are COVID-19 pandemic impacts addressed in the contract?

For contracts finalized pre-COVID-19, the impacts of the pandemic are most commonly captured by the existing force majeure clause. Post-COVID-19, the trend has been to move COVID-19 out of the force majeure clause to its own section.

This makes sense. Even though many elements of a typical force majeure clause would apply to the pandemic, the remedies applicable to COVID-19 impacts as well as some contractual elements may be different.

For an existing contract, it’s necessary to identify all of the possible clauses throughout the contract that may be triggered, not just the force majeure clause. For example, governments and public health officials have responded to the pandemic in a number of ways, including by issuing stop work orders and new health and safety requirements like physical distancing and the use of PPE. This has contractual implications (e.g., GC 6.5.2 of the CCDC 2 and CCDC 5B forms of contract deal with stop work orders, and some parties have claimed the pandemic has triggered a contractual change in law). For a new contract, if drafting a clause to deal with COVID-19, it is usually a good idea to bring all of the relevant contractual provisions together in a single section so the contract is easier to administer and to help make

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GVCA Journal // VOLUME 9 • ISSUE 5 // SEPT- OCT 2020

it clear that there are no other contractual remedies elsewhere for COVID-19 impacts. This prevents parties from trying to pick another clause that is more advantageous to them.

2

What’s the contractual remedy for COVID-19 pandemic impacts?

Generally, from a contractor’s perspective, there are two possible remedies for these types of events – additional time to complete the work and additional compensation for increased costs. However, each of these has its complications. Regarding additional time, there is a question of whether the contractor would be allowed additional time for all impacts or only those that affected the critical path. Regarding additional compensation, there is the issue of what types of costs are compensable.

For example, there may be additional out-of-pocket expenses for PPE or additional rental equipment, additional labour costs for extra cleaning, productivity impacts from performing work in a more physically distant way, and indirect costs from the extension to the construction schedule. The contract should specify whether some or all of the above are eligible for compensation – and in many cases the parties may agree to share the costs. An alternative approach is to establish a contingency allowance in the contract to deal with costs arising from unknown (or known but not yet quantified) pandemic-related risks.

3

How are COVID-19 pandemic effects that are known as of the date of the contract being dealt with?

Events that have impacts that are known by the parties as of the date of execution of the contract are often excluded from relief clauses in construction contracts. The underlying principle behind this is that these should already be factored into the contract price and construction schedule since they are known events. The effects of the COVID-19 pandemic are more complicated, as there are both known elements, such as existing PPE requirements, and unknown elements, such as the possible effects from a “second wave�. Unknown elements could also include new laws and regulations and supply chain disruptions resulting from the first (or subsequent) wave in another jurisdiction.

To address this, any clause dealing with COVID-19 should be clear as to what any known impacts are and whether they are addressed in the baseline construction schedule and contract price or if they will be addressed as a change order during performance of the work. Alternatively, as discussed above, they may also be addressed through the implementation of a contingency allowance.

4

What type of COVID-19 pandemic impacts are contemplated?

As we have seen over the past several months, there has been a wide-range of effects flowing from the pandemic. The most obvious are direct site impacts, like additional site cleaning, reducing staff, and changing shift schedules. We have also seen extensive supply chain impacts, which can have knock-on effects on other aspects of the work. There are also extensive travel restrictions that have impeded the ability of personnel and specialized

technical advisors from making site visits. Lastly, even where it is technically possible for the work to continue, the owner for its own reasons may want to suspend construction work, for example due to internal health and safety policies or if COVID-19 is impacting their underlying business and the need for the project.

In reviewing clauses related to COVID-19, all of these potential impacts and any others should be considered, to ensure the clause provides the intended relief for any anticipated implications. In addition, parties should consider the possibility of new and unanticipated impacts based on the evolution of the COVID-19 pandemic and the measures in response to it and ensure their contracts are carefully drafted to achieve the intended effect even for unanticipated impacts.

5

What are the notice and supporting documentation requirements?

The final area for consideration is the notice and supporting documentation requirements associated with COVID-19 impact claims. Under a typical force majeure clause, there is usually an obligation to provide prompt notice with particulars and documentation at the time of the claim or to follow when available.

The particulars of the claim also need to address what obligations under the contract have been impacted. This presumes that a force majeure event is acute in nature, such as a winter storm or a fire. With the COVID-19 pandemic, the impacts may be more chronic in nature, possibly extending over the entire life of a project, and potentially with changing implications depending on the project phase. Accordingly, a one-time notice may not be sufficient or appropriate. Instead, regular reporting and updates on an ongoing basis may be more useful, with an established protocol for how relief may be provided.

GVCA Journal // VOLUME 9 • ISSUE 5 // SEPT- OCT 2020

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FEATURE

RCCAO REPORT:

SUPPORT NEEDED FOR MUNICIPAL INFRASTRUCTURE INVESTMENTS

A report commissioned by the Residential and Civil Construction Alliance of Ontario suggests an urgent need for senior governments to support municipal counterparts.

A new report prepared for the Residential and Civil Construction Alliance of Ontario (RCCAO) suggests that if the provincial and federal governments don’t work together to help their municipal counterparts recover from the economic effects of the COVID-19 pandemic, employment and tax revenues will take a major hit over the next 30 years.

It’s no secret that municipal governments are facing serious economic shortfalls as a result of the pandemic. Many services are on hold, staff are being laid off, and revenue streams such as transit fares and user fees have all but dried up as members of the general public observe physical-distancing guidelines.

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GVCA Journal // VOLUME 9 • ISSUE 5 // SEPT- OCT 2020

The Federation of Canadian Municipalities recently estimated that local governments face a short-term financial gap of between $10 billion and $15 billion. The City of Ottawa estimates its year-end deficit will be in the neighbourhood of $192 million.

Toronto Mayor John Tory has forecasted a loss of revenue of $1.5 billion by year’s end.

That’s a problem as Ontario’s Municipal Act does not allow municipalities to run deficits. Cities across the province will therefore have to implement measures to address their operating losses.

The RCCAO report, Navigating the COVID-19 Socio-economic Shock: How Infrastructure Investments Will Facilitate Future Growth in Ontario, was prepared by the Canadian Centre for Economic Anal-

ysis (CANCEA). It suggests that growing municipal operating deficits could compromise those infrastructure investments being targeted by the federal and provincial governments as part of their plans to reboot the economy during the pandemic.

It further warns that if the Government of Ontario were to dip into its provincial capital budget to help alleviate municipalities’ deficits, it would have less money available for new infrastructure projects. Alternatively, were the federal and provincial governments to do nothing to help municipalities close their deficits, the lower levels of government would have to cut even more jobs, and further erode their abilities to serve the public.

“Governments face a stark choice as they plan for the post-COVID-19 recovery,” said RCCAO executive director Andy Manahan.

“Failure to address municipal deficits and maintain infrastructure spending would have devastating economic consequences on Ontario citizens and businesses.”

The report researchers propose two scenarios over the next 10 to 30 years, based on differing levels of infrastructure spending. In a risk scenario, the federal and provincial governments’ infrastructure investments are unchanged from pre-pandemic levels—at 0.4 percent and 2.4 percent of GDPs respectively. Additionally, the province draws from its capital budget to help offset municipal deficits.

A preferred scenario sees federal and provincial infrastructure investments again unchanged, but the federal government makes an additional contribution of $3 billion to Ontario’s capital budget that covers 56 percent of municipal operating deficits.

The difference between the two models is stark.

In the risk scenario, the province loses 55,000 jobs over 10 years and more than

INTEGRITY

SERVICE

79,000 over 30 years. Moreover, the federal and provincial governments lose $8 billion and $12 billion in taxation revenue over the same period, and $36 billion and $51 billion over 30 years.

McKenna to heed its report findings.

The preferred scenario, on the other hand, creates an additional 61,000 jobs over 10 years, while boosting federal and provincial revenues by $9 billion and $13 billion, respectively. Over 30 years, the job gain climbs to 189,000 and the federal and Ontario governments will see an increase in their taxation revenue of $86 billion and $123 billion, respectively.

RCCAO has said it welcomes the announcement of the federal government to accelerate $2.2 billion in funding from the Gas Tax Fund to support municipalities. However, it urged federal Finance Minister Bill Morneau and Infrastructure and Communities Minister Catherine

In addition, the alliance says it is concerned by the potential of the COVID-19 crisis to worsen Ontario’s already-growing infrastructure gap.

While spending on state-of-good repair projects is labour intensive, and often seen as a good solution to providing immediate economic impact, the report stresses that also investing in major projects is important for boosting long-term growth.

“These are unprecedented times which demand bold measures,” said CANCEA president Paul Smetanin. “Decisions that are made today about how much to invest in infrastructure and how to address municipal operating deficits will have far-reaching impacts on our future.”

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GVCA Journal // VOLUME 9 • ISSUE 5 // SEPT- OCT 2020

21

FEATURE

COVID-19: A GREEN

OPPORTUNITY? There is general agreement that governments will try to bolster the COVID-19blasted Canadian economy by making billions of dollars’ worth of investments in infrastructure construction.

By Paul Knowles

A government-appointed group, the Task Force For A Resilient Recovery, has issued a preliminary report arguing that much of that investment needs to be green.

The introduction to the report states, “Our vision is for Canada to emerge from the COVID pandemic with a more competitive, resilient and sustainable economy by 2025…. Our focus is on fiveyear investments and policy measures that go beyond short-term stimulus to put our economy on a low-carbon, climate-resilient, sustainable and competitive pathway.”

The task force is not alone in this emphasis. The Canada Green Building Council (CaGBC) has also released a report arguing that, “the green building industry can re-ignite Canada’s economy.”

The CaGBC recommendations target three key areas of investment: workplace training and skills development, removing barriers to, and incenting deep energy retrofits, and shifting the industry to zero-carbon building.

The organization finds a silver lining behind the dark pandemic clouds: “We believe this health crisis has precipitated what could be the tipping point we need to transition Canada toward a sustainable and low-carbon economy.”

Tony LaMantia is President and CEO of the Waterloo Economic Development Corporation. He believes that COVID-19 is having impacts that will not go away any time soon.

“I view most things through a COVID-19, contact-free economy and investment retention/expansion lens these days, and believe it’s possible we’ll be stuck in this mud for a while (years, not months),” he told the GVCA Journal.

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LaMantia sees real potential for advancements in sustainability, and not only through government investment. He says, “the cost of green infrastructure is going down and the ROI (business case) is going up (across the board) so investments in green infrastructure (led by the private sector) will be both transformational and profitable.”

But LaMantia cautions funders and visionaries not to focus only on the future, and thus ignore the very real infrastructure deficit already existing in Canadian communities.

“We need to keep a keen eye fixed on existing infrastructure gaps in Waterloo Region—not just roads, bridges, IoT/tech infrastructure, but also the basic plumbing—e.g. water (pipe maintenance), sewers, etc. Those gaps and maintenance (which is expensive and mostly borne by municipalities) must be addressed on a parallel path.”

The CaGBC report does not focus on the kinds of infrastructure LaMantia has mentioned, but it does recommend retrofitting Canada’s existing building stock to become energy efficient and low carbon.

And it states that, “Despite aging infrastructure and economically viable projects, renovations are not happening at the depth or pace necessary. Barriers to these projects include the perceived high level of risk in energy efficiency investments, deficiencies in market capacity to identify retrofit measures, and limited lending products to support deeper emission reductions.”

Bob Zehr, of Nith Valley Construction in New Hamburg, is a member of the Grand Valley Construction Association. His company has been involved in many green projects, and he is a strong advocate that government infrastructure investment should come with a focus on sustainability.

“Any green venture is a good venture,” he says. But he adds a note of caution—not about the intention, but about the methodology used by government in encouraging such projects. He harkens back more than a decade to another time when government investment was essential to kick-starting the economy. “Don’t put in the crazy timelines they had last time… [too-short application times] led to improper design, and shoddy workmanship.”

He calls on the funders to “benefit us all in the future by doing it right.” But while he sounds that note of methodological caution, Zehr does say that new projects are scarce in the construction industry, and “hopefully the government can step up” in creating funding for sustainable infrastructure projects.

We need to keep a keen eye fixed on existing infrastructure gaps in Waterloo Region—not just roads, bridges, IoT/tech infrastructure, but also the basic plumbing—e.g. water (pipe maintenance), sewers, etc.

Those gaps and maintenance (which is expensive and mostly borne by municipalities) must be addressed on a parallel path. / Tony LaMantia

If the federal government agrees with its Task Force for a Resilient Recovery, there will be significant funding available for green infrastructure projects. The Task Force calls on the feds to invest $50 billion over the next five years. The money would including “investing in climate resilient and energy efficient buildings”; “Jumpstarting Canada’s production and adoption of zero-emission vehicles”; “Going big on growing Canada’s clean energy sectors”; “Investing in the nature that protects and sustains us”; and “Growing clean competitiveness and jobs across the Canadian economy.”

While the Task Force looks at a $50-billion investment over five years, the CaGBC projects that “a government stimulus package that prioritizes green building can contribute almost $150 billion to the economy and employ 1.5 million people by 2030.”

The CaGBC concludes, “Such a massive investment will have far-reaching impacts for Canadians well into the future. But as Canada battles this pandemic and its economic fallout, the government must not overlook the opportunity to achieve its commitment of net-zero emission by 2050.”

GVCA Journal // VOLUME 9 • ISSUE 5 // SEPT- OCT 2020

23

FEATURE

SHOWDOWN ON COMMUNITY BENEFITS? Do community benefits clauses actually bring optimum benefits to communities?

By Paul Knowles

The requirement in some construction contracts to include community benefits has been a hot-button issue for at least the last three years. Today, in the COVID-19 era, the potential for significant government investment in infrastructure construction as a boost to the economy has brought the issue even more to the fore.

The Toronto Community Benefits Network (TCBN) recently called on government leaders to strengthen the community benefits requirements in COVID-19 recovery funding. The organization has stated, “Canada’s Federal Government has identified infrastructure as a key component of Canada’s economic recovery from the Novel Coronavirus (COVID-19) pandemic. They are planning to invest over $187 billion taxpayer dollars on infrastructure projects across Canada over the next ten years.”

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The group continued, “It is imperative that government leaders leverage Community Benefit Agreements to create local workforce and business opportunities for Indigenous peoples, women, persons with disabilities, veterans, youth and newcomers.

Commitment to infrastructure, employment, and improved outcomes for diverse communities must go hand in hand.”

But, the TCBN claims, “some construction and engineering firms are lobbying the government to remove community benefits requirements on these projects.”

The Canadian Construction Association (CCA) says that the matter is not nearly that cut-and-dried. Association President Mary Van Buren says that the construction industry has been proactive for years in many elements of community benefit provision.

For instance, she says that “the industry is very much advocating for under-represented groups to come into the industry… women, indigenous people, new Canadians.” She adds that this approach was well underway long before the 2018 federal government regulations that stated that provinces receiving federal funds for infrastructure needed to build a “community benefits” element into their calls for bids.

Van Buren says that such training and recruitment programs are a win for everyone. They provide training and good jobs for under-represented groups, and meet the need for more workers in the construction industry. She said that in the current pandemic era, as some sectors of the economy struggle or are struck in limbo, construction continues to be strong. Supported by further government

Quickfall agrees with Van Buren and Dreyer, arguing that inflexible quotas or demands can make for untenable conditions for bidding. He also argues that some of the expectations of community benefits programs actually cause an imbalance in bidding. “It’s not apples to apples, anymore.”

Van Buren concurs, especially when it comes to one element of community benefit clauses. Some of the contracts include a demand that each bidder create a community benefit as part of their bid—essentially, she says, answering the question, “What else are you going to do?”

That, says Van Buren, “is a no-go.”

Says Quickfall, “This leaves the bidding landscape uneven and unfair,” and open to “unintended consequences.” Van Buren insists, “It’s up to the owner to decide what they need. That needs to be in the contract, to be fair and transparent.”

A REQUIREMENT THAT A CERTAIN PERCENTAGE OF WORKERS ON A JOB BE FROM SPECIFIC UNDER-REPRESENTED GROUPS CAN BE IMPOSSIBLE FOR SOME COMPANIES TO FULFILL. funding, it could be a primary supplier of additional jobs.

Van Buren also notes that imposing specific targets as part of calls for bids is problematic. She says that a requirement that a certain percentage of workers on a job be from specific under-represented groups can be impossible for some companies to fulfill. There simply may not be enough workers from that specific community available to the employer, which would eliminate that company from being a qualified bidder.

She suggests that it would be better in the long run for efforts to be focused at the high school and STEM university level to recruit new workers for the construction industry, with specific focuses on students from under-represented groups.

GVCA Board Member Ted Dreyer of

Madorin, Snyder LLP echoed Van Buren’s concern. He says that while government contracts, “might make quotas for a certain number of apprentices or a certain number of people from disadvantaged communities, these people may not even be available to hire.”

Wes Quickfall, President of Conestogo Mechanical, served on the CCA board of directors for three years. The federal government introduced the concept of community benefits during that time. He told the GVCA Journal that it was not so much a matter of negotiation with the industry; more “It was happening and get ready.”

Nonetheless, there has been ongoing discussion between the construction industry and the various levels of government since then, and there have been some successes, from the CCA point of view.

Van Buren says that in addition to recruiting and training under-represented groups, and ambiguous community benefit contract demands, there is a third issue with community benefits: the lack of flexibility inherent in a funding model that starts at the senior level of government and flows down through two or three levels. A community benefit that seems desirable at a higher level may, in fact, “be a mismatch for the needs of the specific community.”

It is not clear which perspective is likely to carry the day.

The Community Benefits campaign led

by TCBN is part of a national campaign, endorsed by over 75 labour, business and community organizations across Canada.

It asks the Canadian government to guarantee that community benefits requirements are included in all post-COVID-19 infrastructure investments, claiming that this will contribute to a more “inclusive recovery.” The campaign is asking that the federal government both implement and expand community benefits requirements in all publicly funded infrastructure projects.

GVCA Journal // VOLUME 9 • ISSUE 5 // SEPT- OCT 2020

25

Van Buren makes the argument that some community benefits requirements can be more easily met in a diverse city like Toronto, but may be much more difficult, if not impossible, to meet in some other communities. “The infrastructure situation needs to be balanced across the country,” she says, and so, “We believe that infrastructure investment needs to be flexible.”

“Canada is very broad,” she adds. “Each community has different priorities.”

Clearly, there are two very different perspectives on the current community benefits issue. Both Van Buren and Quickfall want to head off any perception that their perspective does not involve meeting community needs. Quickfall pointed to a national industry program called “Construction Cares,” which highlights the ways the industry gives back to the community; Van Buren noted that the members of the construction industry have long been community supporters, helping in areas as broad as the spectrum of community needs, and most recently, stepping up as major suppliers of much-needed personal protective equipment.

Said Quickfall, “We do care. We do provide back to the community.

We do contribute to the community… just don’t force us to do it in an unfair system.”

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GVCA Journal // VOLUME 9 • ISSUE 5 // SEPT- OCT 2020

6 KEY TAKEAWAYS FOR MUNICIPAL INFRASTRUCTURE Municipalities have been heavily hit by the COVID pandemic and are facing large operating budget gaps to plug, balanced with backlogs of deferred maintenance, and ambitious infrastructure plans for the future. Global Public Affairs and Renew Canada hosted a webinar with Edmonton Mayor Don Iveson, Mississauga Mayor Bonnie Crombie, and Halifax Mayor Mike Savage. Here are the key takeaways:

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GVCA Journal // VOLUME 9 • ISSUE 5 // SEPT- OCT 2020

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EDUCATION & EVENTS SEPTEMBER - OCTOBER 2020

Our education courses are specially designed for our new normal. They happen in an online forum with Virtual Instructor-Led Training. Our instructors encourage participation and have structured their courses to include group discussions, breakout rooms and/or demonstrations. All courses are interactive.

Approved Working at Heights and WAH Refresher sessions take place at the GVCA, but class sizes are reduced in order to respect social distancing and to keep our members and staff safe. Policies and procedures have been put in place by both GVCA and Total Rescue to ensure all equipment and classroom areas are sanitized thoroughly, and disposable gloves and masks are available.

EDUCATION

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Excel Basic

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Building Your Lean Network - How to Start a CoP

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Approved Working at Heights

8,10,15 & 17

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Getting Paid and Managing Cash Flow

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Managing Change

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We are adding to our schedule regularly, including two new sessions that will soon be in our calendar: Leadership: Personal Productivity & Time Management and Leadership: Conflict Management & Personalities

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21 & 28 for Foremen

Visit our online calendar at www.gvca.org for dates and times, or give us a call.

All education courses and training courses take place at GVCA, 25 Sheldon Drive, Cambridge (unless noted otherwise). The safety of all participants for in-class training is important to us. Special protocols are in place for instructors, staff and participants to protect against the spread of COVID-19.

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EVENTS

October 22, 28 & 29 - CDBI Virtual Conference

Out of the care and concern for our members, all one-on-one events are cancelled until we are in a safe zone that will allow us social interaction.

We are monitoring this closely, and will notify you when our events can be scheduled again.

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GVCA Journal // VOLUME 9 • ISSUE 5 // SEPT- OCT 2020

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