Jeremy Nixon, P.Eng.,BSS
Brown & Beattie Ltd.
Five Commonly Asked Questions about Engineering
Q: Regarding Construction Act holdbacks, why is this man- datory/needed? What is this used for?
A: These are for preservation of liens and no other purpose. Anyone who provides products and/or services have lien rights, which would potentially be paid from Statutory Holdbacks if validated. There are very clear timelines on when Statutory Holdbacks are to be released. There is common confusion that Statutory Holdbacks can be used to enforce deficiency resolution, which they cannot; separate, additional funds should be withheld for that purpose.
Q: Why is pricing so different in the Reserve Fund for large projects compared to actual costs of the project? (essentially how are the figures calculated)
A: Presently, supply chains have wreaked absolute havoc on the construction industry (and essentially all others around the world). The present volatility is like nothing experienced in recent memory, and there is no clear end in site. Even during more “normal” times it is challenging enough to reasonably predict Reserve Fund expenditures and timings as experts attempt to make predictions about owner decisions that have yet to be made or even contemplated. Reserve Fund Studies typically approach funding models in a ‘like for like’ manner, however are often used as an opportunity to consider upgrades, whether technical and/or aesthetic. ‘Scope creep’ is also a common phenomenon that occurs, that is not always considered at a surface glance of a funding model.
Q: Site Separation – what is this and why is it needed for multiple contractors/ projects?
A: Site separation is essentially a risk assessment and insurance consideration for the Owner. The Ministry of Labour typically considers that a building may only have one major “Constructor” on-site at a time. The risk of having multiple Constructors (Contractors) on-site at the same time is that the Owner could in turn be considered the Constructor, with each separate Contractor being considered as sub-contractors to the Owner. The Owner could in turn be taking on construction risks unbeknownst to them that they are unqualified to assess and not insured for. Owners should do everything that they can to avoid this possibility. Should two projects need to proceed concurrently, efforts should be made to separate them by time and/or space. One contractor could also be requested to take on the Constructor (General Contractor) role with the other as their sub-contractor. This of course results in additional risks for that Constructor that they might not be willing to undertake without additional compensation or even at all.
Q: What does it mean for a contractor to be bonded, and why is this important?
A: Bonding can be thought of as ‘insurance-like’ protection against a contractor’s ability to execute and warranty the work. A bonding (financial) company essentially takes on this risk and has significant leverage over a contractor as a result, should it be needed. Until it is needed, bonding is typically an afterthought; however it is a powerful tool in those rare instances it is required. Conversely when bonding is declined and a project goes sideways, very costly legal pursuits that can drag on for years, can result. Bonding should be required on every significant construction project.
Q: Some Boards have asked for penalties for their contracts if the contractor doesn’t complete the work, or its delayed due to unforeseen circumstances, in the outlined time frame of the bid. Is this a good idea, why or why not?
A: Penalties are a tricky one as they are usually wrought with exceptions that can become a significant administrative task on their own, distracting from the objective of just getting a project done, and done well. The other aspect of penalties that are often overlooked is the ‘bonus’ side should a contractor exceed expectations. These types of clauses are more common on the type of ‘mega’ projects, not normally associated with Condominium capital expenditures.
Jeremy Nixon, P.Eng., BSS is Vice President at Brown & Beattie Ltd., a building science engineering firm dedicated to providing clear and sensible building improvement, maintenance, and repair planning advice by listening to clients’ objectives. Jeremy is licensed with Professional Engineers Ontario (PEO) and holds a Building Science Specialist (BSS) designation.
