Adjudication: ODACC releases second annual report
In Ontario, the Construction Act, R.S.O. 1990, c. C.30 (the Act), defines the authority responsible for administering construction related adjudications and for training and qualifying adjudicators. Ontario Regulation 306/18 requires the authority, currently Ontario Dispute Adjudication for Construction Contracts (ODACC), to issue an annual report. ODACC recently issued its second Annual Report (the report), covering its operations for the fiscal year 2021 (ending July 31, 2021) – its first full year of operations.
The report highlights that 50 adjudications (compared with 32 in 2020) were commenced at ODACC and 34 determinations (versus 3 in 2020) were rendered. Five of those determinations related to adjudications commenced at the end of fiscal year 2020, the other 29 were commenced in fiscal year 2021. Of the 34 determinations rendered in 2021, 79% were rendered within the 30-day timeline contemplated under section 13.13(1) of the Act. For 21% of the determinations rendered, the section 13.13(1) timeline was extended before its expiry and after the provision of documents to the adjudicator, in accordance with section 13.13(2) of the Act, or on the consent of all parties to the adjudication.
Determinations primarily related to matters involving either the valuation of services or materials provided under a contract, or payment under a contract, including in respect of a change order, whether approved or not, or a proposed change order. No adjudications dealt with matters involving amounts retained under section 12 (set-off by trustee) or subsection 17(3) (lien set-off), payment of holdback under sections 26.1 or 26.2, or non-payment of holdback under section 27.1 of the Act.
With respect to the rest of the adjudications commenced in the past year, only eight adjudications remained open as of the end of the 2021 fiscal year. The remainder were terminated largely because the dispute between the parties settled or the contract or procurement that was the subject of the dispute between the parties pre-dated the October 1, 2019, implementation of prompt payment and adjudication under the Act. Of those adjudications half were terminated before an adjudicator was appointed.
The total amount claimed in the adjudications that were commenced in the past fiscal year was approximately $8.7 million, or an average of $174,193 per adjudication – nearly twice the average value reported in 2020. Of the adjudications that were commenced, 19 (38%) were in the residential sector (averaging $26,779), 15 (30%) were in the transportation and infrastructure sector (averaging $224,545), 10 (20%) were in the commercial sector (averaging $99,647), 3 (6%) were in the public buildings sector (averaging $32,632) and 3 (6%) were in the industrial sector (averaging $1,246,107).
Notably, the total amount to be paid pursuant to the 34 determinations rendered in fiscal year 2021 was significantly lower than the total amounts claimed. $908,123 was awarded to the 34 adjudication claimants where determinations were rendered – leading to an average pay-out of $26,710 per adjudication. Breaking those numbers down by sector, the report sets out that the average payouts were as follows: residential sector ($9,583); transportation and infrastructure sector ($43,736); commercial sector ($29,724); public buildings sector ($13,927); and industrial sector ($0).
The report also highlights ODACC’s two training programs and its slate of certified adjudicators. Although 15 individuals applied to become adjudicators in 2021, ODACC did not certify any additional adjudicators. There are currently 59 ODACC certified adjudicators listed in ODACC’s adjudicator registry. A brief review demonstrates that the adjudicators come from a wide-variety of professional backgrounds, including accountants, arbitrators, architects, engineers, project managers, quantity surveyors and lawyers.
All but one of the ODACC certified adjudicators have chosen to set their hourly rates in the range of $250-500 per hour. In addition, 95% of adjudicators are willing to conduct adjudications for a flat fee rate (ranging from $800-$3,000) that is proportionate to the amount in dispute. While many of the adjudicators were willing to travel across Ontario to address disputes, without any travel or disbursement charges, ODACC also has the capability of conducting video-hearings for adjudications during the COVID-19 pandemic.
Overall, the report highlights that adoption of adjudication by the construction industry in Ontario continues to be slow. While participation in adjudication has increased since the last fiscal year, the numbers continue to trail behind the more widespread adoption seen in other regions internationally. Whether this is a result of a lack of familiarity or comfort among industry stakeholders with the adjudication process itself, or because payors are adhering to the prompt payment regime and drafting adequate contract provisions to help resolve potential disputes before they occur, remains to be seen.
Whatever the reason for the slow uptake of adjudication in Ontario, it is worth noting that the tight timelines prescribed by the Act and regulations are still applicable, so it is important that stakeholders take appropriate steps to ensure that they are prepared for an adjudication as well as what comes after the determination, as discussed in our previous blog post: So you received an adjudication determination: what comes next?