Authors: Andrew Konopelny, John Dipple, Nicole Graham
The Ontario Dispute Adjudication for Construction Contracts (“ODACC”) recently released its 2021 Report. The ODACC annual report offers insight and guidance into what the construction industry in Saskatchewan may expect when prompt payment takes effect on March 1, 2022.
Read our Implementation Deferred: Status of Prompt Payment in Saskatchewan blog which outlines the 2020 ODACC Report.
ODACC is the Ontario Authority tasked with managing the adjudication process under the Ontario prompt payment regime. As part of its responsibility ODACC, is responsible for issuing an annual report, which discusses the number and types of adjudications and the cost of adjudications. This information provides guidance on what Saskatchewan can expect when prompt payment and adjudication is implemented in March.
Number and Value of Adjudication
Between 2020 and 2021 the number of adjudications initiated increased incrementally, with 32 adjudications initiated in 2020 and 50 in 2021. This increase by 18 adjudications indicates that Ontario is not yet seeing significant uptake of the adjudication system.
Perhaps unsurprisingly, disputes in the transportation and infrastructure sector were significantly higher in average value (~$225,000) than residential disputes (~$25,000). Industrial sector disputes were the highest in value, with an average claim value of approximately $1.25 million.
Types of Adjudications
Saskatchewan’s legislation is similar to Ontario’s which permits adjudication not only of matters stemming from the prompt payment requirements but also for various other construction disputes, such as disputed change orders.
Accordingly, it’s inevitable that adjudications in Saskatchewan will cover more than payment issues. Ontario’s experience reflects this – of the 34 adjudication completed in 2021: 13 were for matters adjudicated for the valuation of services or materials under the contract, 14 were for payment under the contract, including with respect to change orders, and only five for disputes as a result of a notice of non-payment. Disputes about the valuation of services or materials or changes orders likely goes beyond disputes about timely payment of the contract price. This indicates it can be expected that adjudications in Saskatchewan will likely involve both prompt payment disputes and other construction disputes.
Costs of Adjudication
The 2021 Report shows an increase in adjudication fees being collected, with $235,335 collected by ODACC and $131,026 of this amount paid out to Adjudicators.
The adjudication fees appears to average a few thousand dollars per adjudication. The 2021 ODACC Report does not compare the cost of specific adjudications to the amounts claimed, but the model appears to be achieving its goal of being low cost. It remains to be seen if this low cost model is ideal or suitable for large disputes over potential millions of dollars if the claimed value continues to trend upwards, or if there will be a corresponding increase in the average adjudication fees to handle large disputes.
Takeaways for Construction Industry Participants in Saskatchewan
To prepare for prompt payment, owners and contractors should be aware of, and prepared for adjudications not only relating to payment disputes, but for other construction disputes not related to timely payment of contract price.
Owners and contractors should be aware of what matters qualify for adjudication and be familiar with what the adjudication process, including timelines and procedure, in advance of the implementation of prompt payment in Saskatchewan on March 1, 2022.
MLT Aikins has the right combination of legal and industry experience to help you navigate the implementation of prompt payment and adjudication in Saskatchewan, including in updating your construction contracts, establishing administrative procedure and policy, as well as training employees. We can help your organization prepare for and appropriately implement prompt payment and adjudication measures, reducing the risk. Contact a member of our construction projects team for assistance.
Note: This article is of a general nature only and is not exhaustive of all possible legal rights or remedies. In addition, laws may change over time and should be interpreted only in the context of particular circumstances such that these materials are not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice in any particular situation.