www.ecao.org 14 J THE NEW CONSTRUCTION ACT By Collingwood Brown, BEng MASc Partner, Surety and Risk Advisor, Petrela,Winter & Associates July 1, 2018, signals the beginning of a new age for construction in Ontario with the modernization of the Construction Lien Act. Now to be known as the Construction Act, the first phase of the implementation of the Act modernizes the rules governing trusts, lien periods, and holdbacks. This has important implications for electrical contractors acting as both prime and subcontractor. One of the most highlighted features of the Act is the requirement for prime contractors to post 50 per cent Performance and 50 per cent Labour and Material Payment bonds on any public contract greater than $500,000. Historically, there was a reasonable likelihood that a public project in Ontario would have bonds in place; now, it is mandatory. This should come as good news to electrical subcontractors that work these projects, as they are now being placed in a better position to control payment timelines. One of the intents of the Construction Act is to improve payment flow in projects, and a tool it is using to do so is prescribing new bond forms that contain specific provisions that should be of great interest to subcontractors. First, there are now specific timeframes for a surety to acknowledge and subsequently provide a position on a payment bond claim. Subcontractors with experience in making claims on Labour and Material Payment bonds will know that a common frustration has been in obtaining a timely response from a surety. Now, the surety must acknowledge a payment bond claim in three business days. They must also deliver their position no later than 25 business days from the receipt of a Notice of Claim. Sureties must now also pay any “undisputed” amounts within 10 business days of providing their position, and that is a major benefit because prime contractors would often withhold significant monies due to dispute, even while acknowledging that some funds were indeed undisputed. The changes mean that payment bond claimants may now be able to see some compensation from sureties within 38 business days of filing a claim. Second, similar to the federal payment bond, the new Labour and Material Payment bond is a “broad form,” which means second tier – or sub-subcontractors – may make a claim under the bond. Second tier claimants should bear in mind that they are only able to claim on the bond for amounts that the prime contractor is liable to them for under the Act – which means that in certain circumstances, that could be limited to a claim for holdback. Third, Labour and Material Payment bonds are in place to protect subcontractors in the event of non-payment – but the terms of the bond must be respected in filing any claim. The new Ontario Bond Subcontractors, Surety Bonding, and the new Construction Act