June 28, 2006

Contractors

How far down the chain?

IRWIN RAPOPORT

correspondent

MONTREAL

A subject that is being debated in the construction industry centres on what information a subcontractor is entitled to regarding tender charges in contract payment security requirements.

“A number of cases have recently been brought to our attention whereby bonding requirements that were in place or expected to be in place were not at the time of the subcontractor’s bid to the prime contractor,” said Doug Hotston, secretary of the Canadian Construction Association’s Trade Contractors’ Council.

“Those payment security requirements were gone by the time they actually signed the contract because of negotiations between the prime contractor and the owner.”

“By taking out some of the prime contractor’s bonding requirements, there is a cost savings to the owner. But to what extent is there an obligation to inform all the subcontractors that payment securities are gone on labour and materials?

“The onus is on us to inform. Members need to make sure that what you were bidding on is also the basis on which you are signing your contract. If they are not, you need to make some adjustments because it affects your pricing and the amount of risk you are assuming.”

Hotston pointed out there are products on the market whereby a prime contractor can buy insurance which would almost replace labour/material bonds for subcontractors.

The council is seeking a legal opinion on whether an owner or prime contractor has a legal responsibility to inform subcontractors or “should it just be up to the due diligence of anybody who is signing a subcontract to make sure what they are signing is what they bid on?

“Of course,” added Hotston, “we would hope, if there are any changes in the prime contract and bonding requirements, that the prime contractor and the owner would automatically make those changes in those conditions known to all.”

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