Adjudication: ODACC’s fourth Annual Report highlights growth in the number of adjudications and amounts paid out

Ontario Dispute Adjudication for Construction Contracts (ODACC) has issued its fourth Annual Report (the report) for the 2023 fiscal year, running from August 1, 2022, to July 31, 2023. The report highlights an increase from the prior year in the construction industry’s use of adjudication and the amounts being paid out pursuant to adjudication determinations.

Summary

During ODACC’s fourth year of operation, 269 adjudications were commenced, 80 adjudications were terminated and 161 determinations were rendered. For the second time in two years, the number of adjudications commenced and the number of determinations rendered more than doubled.

Of the 161 determinations rendered during the 2023 fiscal year, only 65% were rendered within the 30-day timeline prescribed by section 13.13(1) of the Construction Act^[1](the Act), a decrease from the 75% of determinations rendered within 30 days in the 2022 fiscal year.

In the report, the distribution of subject matters and industry sectors involved in adjudications largely continued trends observed in previous annual reports. As in prior years, most determinations related to matters involving either the valuation of services or materials provided under a contract, or payment under a contract, including in respect of proposed or approved change orders. One significant change was the number of adjudication decisions that addressed a notice of non-payment under Part I.1 of the Act, increasing from only three in the 2022 fiscal year to 20 in the 2023 fiscal year.

Of the adjudications commenced in the 2023 fiscal year, 91 (34%) involved the residential sector, 81 (30%) involved the commercial sector, 64 (24%) involved the transportation and infrastructure sector, 22 (8%) involved the public buildings sector and 11 (4%) involved the industrial sector. The commercial sector experienced the largest year-over-year percentage increase, with only 23 adjudications commenced in the 2022 fiscal year.

The total amount claimed in adjudications in 2023 rose to approximately $68.9 million; however, the total amount to be paid pursuant to determinations in 2023 was only a portion of the much larger amount claimed: $24,381,989.90 (compared to $3,449,619 in 2022 and only $908,123 in 2021).

Broken down by industry sector, the average amount required to be paid pursuant to a determination rendered was $432,464 in the industrial sector, $213,773 in the residential sector, $106,914 in the commercial sector, $102,031 in the transportation and infrastructure sector and $57,981 in the public buildings sector.

For stakeholders contemplating the use of adjudication to resolve a dispute, ODACC’s adjudicator registry currently lists 52 ODACC-certified adjudicators. The vast majority of adjudicators have set their hourly rate in the range of $250–500, and 93% of adjudicators are willing to conduct adjudications for a flat fee (ranging from $800–$3,000) that is proportionate to the amount in dispute. In addition, many of the adjudicators are willing to travel across Ontario to address disputes without any travel or disbursement charges.

Implications

Overall, the report highlights that adjudication has gained slightly wider acceptance by the construction industry over the last year. Given the short timelines for adjudication prescribed by the Act, and the high threshold that Courts have set for judicial review of an adjudicator’s determination, it is important for stakeholders to be prepared for an adjudication, as well as for what comes after receiving an adjudication determination, as we have previously discussed.