ODACC’S response to: Getting adjudication right: Early issues and opportunities for improvement

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Editor’s note: On Dec. 20, Ontario Construction News published an article by Jay Nathwani and John Margie, Getting adjudication right: Early issues and opportunities for improvement.

ODACC has provided this response:

January 10, 2020

Ontario Dispute Adjudication for Construction Contracts (ODACC) is the Authorized Nominating Authority (ANA) under the Construction Act. As the ANA, ODACC is responsible for administering construction-related adjudications and for training and qualifying adjudicators.

In the Dec. 20, 2019 issue of Ontario Construction News, Jay Nathwani and John Margie (the authors) suggest ways to improve three aspects of the adjudication process. Their suggestions relate to: (a) Pre-Designed Adjudication Processes, (b) ODACC’s review of draft determinations, and (c) the fees charged for adjudications.

ODACC would like to express its appreciation to the authors and to others who have made suggestions for the ways in which ODACC can better serve the construction community. Anyone with suggestions for ODACC is invited to email those suggestions to ODACC’s project manager, Carina Reider, at authority@odacc.ca.

All suggestions will be reviewed and considered. In terms of the specific suggestions made in the article, ODACC has a number of comments it would like to make.

A: ODACC’s Pre-Designed Adjudication Processes

Under the Construction Act, adjudicators have the power to set the process for every adjudication. ODACC has created four Pre-Designed Adjudication Processes to give adjudicators ideas for how they may set the adjudication process.  If the adjudicator chooses not to use a Pre-Designed Adjudication Process, the adjudicator will design a customized process. Further information on Pre-Designed Adjudication Processes is available at: https://odacc.ca/en/claimants/adjudication-process-2/.

In the Dec. 20, 2019 article, the authors note that the Pre-Designed Adjudication Processes require the Claimant to submit to the adjudicator a copy of the disputed invoice. They state that the Construction Act does not give ODACC the power to require the Claimant to submit the invoice.

It is important to distinguish between the powers of ODACC and the powers of an adjudicator. ODACC agrees that ODACC does not have the power to require a party to submit an invoice.

Adjudicators, however, have the power to set the process and that authority includes the power to request that documents be submitted to the adjudicator.

The Pre-Designed Adjudication Processes are not imposed by ODACC; they are merely suggestions and ideas that adjudicators can use in fixing the process. So ODACC never requires that anyone produce an invoice.

The authors note that there may be situations where there is no invoice to be produced. As a result, ODACC has changed the wording of the Pre-Designed Adjudication Processes, to make clear that adjudicators should only request that the invoice be produced where it exists and when the adjudicator believes production of the invoice would be helpful to the adjudicator.

B: ODACC’s Review of Draft Determinations

            ODACC asks adjudicators to send a draft determination to ODACC five days before the determination due date, so that ODACC can review the determination, and let the adjudicator know if the reviewer thinks the determination is unclear or if there are typographical and grammatical errors that could be corrected. The adjudicators are free to accept or reject any of the suggestions made by ODACC.

In the December 20, 2019 article, the authors object to this process.

ODACC’s jurisdiction to review draft determinations stems from the Regulations under the Construction Act, which state that ODACC “may provide administrative support services for the purpose of facilitating the conduct of adjudications.”

ODACC believes that the administrative support of reviewing determinations is an enhancement to the adjudication process. ODACC implemented this process as a result of suggestions it received from users of adjudications in other jurisdictions who told ODACC that unedited determinations are often unclear, sometimes incomprehensible, often have errors, and are often in need of editing. ODACC has been told that the fact that there is no editorial assistance for adjudicators in other adjudication systems is a significant flaw in those countries. ODACC heeded the suggestions of those with experience in other jurisdictions and implemented the review process.

The authors raise concern that ODACC’s review of draft determinations could make the determinations subject to being overturned on judicial review. ODACC is not of the view that determinations are more likely to be overturned because editorial suggestions were made by someone at ODACC. Almost all arbitral institutions perform an editorial function for arbitral awards and ODACC is not aware of any court suggesting that that process is not appropriate. Importantly, ODACC can only make suggestions for edits to adjudicators and the adjudicators have the final say on the content of determinations.

As an aside, the authors also state that “it is not ODACC’s proper role to retain copies of awards made as part of a private adjudication.” As part of ODACC’s contract with the Ministry of the Attorney General, ODACC is required to maintain copies of all determinations.

C: Adjudication Fee

            The Adjudication Fee is the fee that parties to adjudications must pay. The Adjudication Fee may consist of a flat fee, or an hourly rate (times the number of hours spent by the adjudicator). The Adjudication Fee is negotiated between the adjudicator and the parties. If the adjudicator and the parties cannot agree on an Adjudication Fee, the adjudicator may ask ODACC to set the fee. ODACC will set the fee in accordance with the Schedule of Fees approved by the Attorney General, available at https://odacc.ca/en/claimants/fees/. Adjudicators must pay ODACC a percentage of the Adjudication Fee (the Administrative Fee).

In the December 20, 2019 article, the authors state that the amounts paid to adjudicators are not high enough.

In setting up the adjudication regime, the Ministry of the Attorney General had the challenging task of balancing three goals in setting fees: (a) having the lowest possible fees for consumers; (b) having high enough fees to adjudicators to allow for a roster of enough qualified adjudicators to handle the anticipated volume of work; and (c) giving ODACC a reasonable opportunity to recover its costs and make a reasonable profit.

The easiest part of the analysis is the fees that ODACC will require to cover its costs. ODACC was required to estimate its costs over the five-year period of its contract and to project gross volume of adjudications. The analysis and estimates were provided to an independent review team from Ernst & Young who were tasked with, among other things, assessing and confirming the accuracy of the estimates.

ODACC’s costs will include the cost of a state-of-the-art computer system, staffing costs and overhead costs. The projections for volume were based on the volume of adjudications in jurisdictions that had experience with adjudication.

In addition to paying the fees to allow ODACC to recover its costs, the users of the system need to pay for the work of the adjudicator. The challenge was to keep those fees as low as possible, while ensuring that they were high enough to attract an experienced roster of adjudicators.

That process resulted in the fees that were set and approved by the Attorney General.

The authors are concerned that the fees to adjudicators (set as a percentage of the Adjudication Fee) are either too low to attract quality adjudicators or are structured such that adjudicators will set the adjudication hourly rates unnecessarily high.

Fortunately, neither concern has proven to be valid. ODACC has attracted a significant number of experienced adjudicators at all hourly fee levels. The vast majority are also willing to adjudicate at fixed fees. As a result, consumers will have access to a large pool of qualified adjudicators who are willing to adjudicate at reasonable fees.

Once again, ODACC would like to thank the authors for their suggestions.
Carina Reider, Project Manager, ODACC

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