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Surety Association of Canada unveils new bond form for IPD projects

Surety Association of Canada unveils new bond form for IPD projects

MISSISSAUGA, ONT. — The board of directors of the Surety Association of Canada (SAC) has given its approval to a new specialty bond form designed for use with Integrated Project Delivery (IPD) projects.

The new template had been in development for over a year and is designed to be used in conjunction with the standard CCDC-30 Integrated Project Delivery Contract, explained a May 27 statement.

The release explains the bond reflects the unique nature of the IPD model, which creates a team approach where all parties enter into a single contract, with the decision-making, risks and profits shared. One challenge of the model, states the association, surrounds risk mitigation.

“Bonding companies have learned the hard way that the risk of contractor default doesn’t always originate within the four walls of the project itself,” said association president Steve Ness in the statement. “Many and perhaps most of the issues that give rise to project contractor failure are business/finance related and may have little or nothing to do with that contractor’s ability to successfully perform the work on any particular project.”

While the new bond template is intended for use with the CCDC-30 standard, it is also intended to be flexible enough for use with modified versions of the document and for other variations on the IPD theme, said the SAC.

Highlights include:

The new bond arrangement contemplates that each construction participant in the project will post its own bond that guarantees the performance of its obligations under the IPD contract. Thus, there may be several bonds on any given project, posted by each of the major construction parties.

  • As the source of project funding and ultimate bearer of the financial risk of a cataclysmic event, the owner is the logical choice as obligee/beneficiary under the bond, said the SAC. The SAC IPD Performance Bond identifies the owner as the sole obligee under the instrument.
  • The SAC IPD Performance Bond will protect the owner from any increase in costs of completing the principal’s work under the IPD contract following that principal’s default and termination under the terms of the IPD contract. This will include any additional direct costs to complete the principal’s work along with any HST/GST and owner’s expenses as defined in the bond.
  • A claim on the bond can be advanced when the principal is in default of its obligation and its participation in the project has been terminated by the other members of the IPD team.

A specimen copy of the new SAC IPD bond, along with a user’s guide, can be found on the association’s website.

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