Clive Thurston: The future of Ontario’s Construction Act and adjudication

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By Clive Thurston

Special to Ontario Construction News

Recently Ontario Construction News printed a story following a webinar hosted by the Ontario General Contractors Association (OGCA) discussing whether adjudication was gaining traction as contractors began to discover the new Act and how it works. Participants included OGCA president Giovanni Cautillo, Matt Ainley, a former OGCA chairman and a current adjudicator and Elise Teitler, project manager at ODACC (Ontario Dispute Adjudication for Construction Contracts) that administers and oversees the process. 

The seminar laid out the statistics up to June 21 and talked about how the system worked, how adjudicators are appointed, fees, enforcement of decisions, ambushing, and fairness.

We wanted to look a little in depth at the whole issue of the new Act and adjudication to determine if there is a reluctance among stakeholders to use the system and, if so, to understand the reasons. In preparing this report, we spoke to several industry stakeholders, contractors, lawyers, and trades to get their take on what they believe are the major issues facing the system and what the future holds for adjudication and the Act.

We found very similar comments and opinions as to why the Act was not being used as quickly as was originally expected. All respondents recounted many of the same issues, perhaps not in the same order of importance but nonetheless the same issues. 

The adjudication provisions came into effect on Oct. 1, 2019, following the proclamation of the Act itself, and one of the clear problems that stakeholders encountered was figuring out which law applied (the new Ontario Construction Act or the old Construction Lien Act).

While transition guidelines were presented in several helpful seminars and in guidebooks developed by organizations like the OGCA, many people still did not understand which Act governed their project. This created quite a bit of confusion for those involved in contract disputes. That problem is going to disappear as we move further away from the October date and these crossover issues will no longer be a problem.

One cannot discuss delays in the Construction Act’s implementation or take-up without touching on COVID. Just as the Act and adjudication were coming into force, the world experienced a pandemic unlike anything seen in recent history. Many felt that one of the reasons that there was not a great interest in adjudication was that we were all trying to survive from the pandemic before getting into a new regime for payment and liens.

As the pandemic appears (hopefully) to be receding and we try to return to as normal a life as possible, there is a question as to whether we will see more interest in the Act and its tools than previously. In my opinion, I and others think that is quite a reasonable assumption that we will see an increase in adjudication, albeit gradually.

Several people raised the issue about how suppliers, trades and general contractors are concerned about “rocking the boat” and so fail to implement the Construction Act’s provisions. Too many times I have heard: “Well I really don’t want to complain because I have worked for them before, and I want to work with them again.” This is a comment I have heard from trades, suppliers, and general contractors: “Let’s not upset people.”

These attitudes extend to adjudication. Many individuals feel that in simply exercising their rights, they could be blacklisted. This is a very real fear and one I understand as I think most of us can, but the reality is that an owner who is not a good owner doesn’t deserve to be allowed to get away with flaunting the law and treating you unfairly.

We are not talking about owners where you have a good relationship and who are in conversation with you and have discussed the problem and have assured you as to when payments will be coming. We are talking about owners who just don’t pay and have a reputation of not paying . . . the owners who come up with all kinds of deficiency lists, find ways that delay payment using any excuse to not comply with the law. It is sad that such practices still occur.

Our industry has been notorious for ignoring the winds of change until it actually impacts what we are doing. Then construction association staff hear cries: “Why didn’t I know about this? Where was my association?”

Will the problem of trying to avoid conflict continue to be a problem? Unfortunately, I think it will, but I am hopeful that the stakeholders will realize this is simply not right and that they have a right to be paid fairly and on time. Many people worked very hard to give them that right. If an owner gets upset simply because you are following the law, then that says more about the owner than it says about you or our industry.

Some still feel that adjudication was always a solution in search of a problem in that it fails to deal significantly with the issues that can impair cash flow which could threaten companies’ financial strength. Many times, these types of issues are very complex and there are those who believe a superficial review by an adjudicator on a short timeline may not be the best way to deal with them. The Act also doesn’t consider the fact that many contracts already have built into them mechanisms to resolve disputes.

Whether you agree or not, there are always two points of views to every situation. In my opinion, the old legislation did not work. It was unfair and it certainly played to the fact that “he who had the gold made the rules” and it was rare that a small contractor or sub-trade could gain satisfaction through the previous lien process.

When asking whether respondents felt the Act had changed the culture of buyers of construction, the overwhelming answer was “yes”. Public sector owners were changing, and bidders were seeing a positive move towards better systems of payment. 

Conversely, in the private sector there has been very little change. We asked why, many said because private owners have always been more prepared to pay and deal with the issues as they came up rather than delay them to the end of the project.

As we mentioned, we wondered if there would be a significantly increase in traction of the use of adjudication as COVID-19 recedes and people become more informed about the Act and their rights. Some felt that they would likely not be seeing a large increase, citing the previously mentioned fear of blacklisting of those who bring adjudications against owners. 

Others felt that there would be an increase, not the tsunami that had once been predicted. Instead, as people became more comfortable with the Act and understand how it works, they expect to experience an increase in the use of adjudication where necessary.

Some expressed concerns about the adjudicators’ qualifications and level of training. I believe that ODACC is ensuring the highest standards are met in certifying adjudicators. The idea that knowledgeable professionals within the industry can’t render a fair decision is not to my mind true. It doesn’t always require a Court and Judge to make a fair decision. In fact, industry professionals probably have a far better understanding of the issues because of their relevant specialized knowledge.

Many felt it was important to note that we are in an economic boom. There is plenty of work to do and not enough people to do it. The question is whether things will change when we reach an economic slowdown? Some respondents strongly felt that it would and that we would see increases in adjudication then.

Overall, one of the most positive responses coming from everyone is that the Act is having the impact that we who were involved in developing it always hoped it would. Simply put, the hammer wouldn’t have to be used because the Act itself would drive better behaviour. From all indications, that is what is happening. Improved procurement and payment systems based on fairness and equity are becoming watchwords for those who procure the design and construction services in this province.

Most buyers are working, not to get around the Act, but to comply with it and to ensure that it works fairly. That is not to say that there are still some significant owners out there well known to all of us who would like nothing better than to scrap this whole process and they are still looking for ways around it, with some owners saying: “I can’t possibly pay at 28 days. My system isn’t set up to do it.” These attitudes are similar the excuse we used to get from some buyers that “we are really sorry but the controller who signs the checks is away on vacation, so you have to wait till they come back.”

Those excuses were not acceptable then and they are less acceptable now and should never be a reason for delaying payment. Technology has significantly advanced. We have seen several owners moving to efficient electronic systems and are finding that it pays off for them.

In summary at the time of the first article, 66 adjudications had been commenced. In the following two months, we are up to 88. The number of determinations went from 30 to 39, so we are seeing a slight uptick that the industry should expect to see continue in the future.

It is interesting to note the order of greatest to least adjudication issues by sector:

  • Residential
  • Transportation and Infrastructure
  • Commercial
  • Public Buildings
  • Industrial

No matter what your views may be on the new Act and adjudication, it is here to stay. We must learn to find a way to work with it. More importantly, we need to find a way to continue to improve it as there are still some technical issues that need to be resolved. 

It continues to be a great disappointment that a report submitted to the government prior to COVID that outlined some easy-to-implement changes to improve the Act to improve its efficiency and close some loopholes is gathering dust on a shelf.

I have no doubt that my former colleagues will be remounting their efforts to see that this government follows through on those changes so that we can continue to move forward with a successful Act. Thanks to all my industry friends who responded to my questions and took the time to speak with me.

Clive Thurston is the OGCA‘ s former president. He can be reached at (416) 399-2250 or email clive@thurstoncs.com.

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