Canadian construction lawyers will have to wrap their heads around radically foreign principles when they represent clients engaged in Integrated Project Delivery (IPD) project execution, delegates attending a recent Toronto legal seminar were advised.
Lawyers attending the IPD session at the Ontario Bar Association (OBA) Institute’s construction law conference in Toronto Feb. 8 were told by seminar panellist Geza Banfai of McMillan LLP that the Canadian Construction Documents Committee (CCDC) has recently unveiled CCDC 30, a new IPD contract intended to govern responsibilities and obligations among owners, consultants, contractors and other IPD parties.
The new CCDC 30, released Jan. 28, promotes intensive collaboration and includes risk pooling and waivers of liability to a degree currently unheard of in standard construction contracts, Banfai said.
“It’s radically different compared to what the industry typically is working with,” said Banfai, who chaired the CCDC task force that cobbled the new document together over the course of the last two years.
“There will definitely be a learning curve for all of us. The contract contains its own vocabulary, which is new and relatively unfamiliar to most parties, but also it contains fundamental concepts that are foreign to the legal mainstream.
“I am thinking of waivers of liability, I am thinking of the degree of open collaboration, the kind of trusting behaviours the contract encourages.”
Core principles of IPD include a single multi-party contract that starts, initially, with an owner, a consultant and general contractor then generally accommodates numerous additional parties; the early involvement of key participants; highly collaborative decision-making; problem solving in real time; co-location of project participants in a “Big Room”; and the liability-waiver stipulations.
The process is extremely collaborative to a degree that is foreign to us
— Geza Banfai
The profits of the design/construction team are allocated to a risk pool that remains at risk subject to the achievement of project objectives, the CCDC explains.
“As lawyers, we are used to allocating risk away from our clients. It is our first instinct, to protect the clients who retained us, our whole orientation is fundamentally adversary. IPD is not like that at all,” said Banfai.
The delivery model is best suited for large, complex projects where it is difficult to assign a significant share of the risk to any one party, panellist Melinda Nycholat, vice-president of operations at Defence Construction Canada (DCC), told the delegates. By sharing risk, parties are encouraged to innovate in a safe environment, she said.
DCC has just embarked on the first-ever federal project where IPD is being used, the new $80.6-million base for the Royal Canadian Dragoons at 4th Canadian Division Support Base Petawawa in Ontario.
“It is important for us as owners, where projects are becoming more and more complex, during the valuation phase for us to truly identify and cost the risks,” said Nycholat.
“To achieve the solutions we want we are more and more having to bring in experts, so why not bring in experts who are actually going to deliver the project?”
Banfai told the OBA delegates he is currently involved in a project with 24 parties in total all working in collaboration, and he has heard of teams with 70 parties.
“The process is extremely collaborative to a degree that is foreign to us,” Banfai said, noting some goals mentioned in the CCDC 30 are “aspirational.”
“It requires a different mindset that accepts and encourages collaboration.
“I am not sure what that means to the legal profession, we’ll work it out as we go.”
As the project proceeds, the waiver of liability means the parties have to work out differences rather than resorting to lawsuits, Banfai noted.
“The screwup of one contractor is going to put all profits at risk but since they can’t sue each other they have to work it out,” he explained.
“The whole goal will be to resolve problems in real time and minimizing the kinds of disputes that typically find their way into projects.
“There will be some court cases. Anything is possible. But I think the number of claims on IPD projects will be much, much less than with traditional projects.”
The third panellist, Karine Desforges, a legal director with WSP Canada, discussed WSP’s experience with IPD in Australia and elsewhere, where the industry is much more familiar with the model.
“It does work. All of them have been pretty well claim-free and profitable,” said Desforges.
“For us it is a great success story and hopefully you can replicate that in Canada and with the model contract the CCDC put together. It should work just as well.”