Adjudication: ODACC releases first annual report
On October 1, 2020, Ontario Dispute Adjudication for Construction Contracts (“ODACC”) issued its much anticipated 1st Annual Report (the “Report”), covering its operations for the fiscal year 2020 (ending July 31, 2020) – including the first 10 months since the adjudication provisions of the Construction Act (the “Act”) came into force on October 1, 2019.
The Report highlights that 32 adjudications have been commenced at ODACC – however, only three determinations have been rendered, which resulted in a total of $35,000 paid out in determinations (or, on average, $11,000 under each adjudication). All three of those adjudications were in the residential sector, outside city centres, and were rendered in the timelines specified under the Act. The adjudications that resulted in determinations dealt with the valuation of services or materials provided under a contract and payment under a contract, including in respect of a change order. None of the completed adjudications dealt with a notice of non-payment under Part I.1 of the Act, or the payment (or non-payment) of any holdback amounts under sections 26.1, 26.2 and 27.1 of the Act.
With respect to the rest of the adjudications commenced in the past year, only seven adjudications remained open as of the end of the 2020 fiscal year. The remainder were terminated largely because the dispute between the parties settled. All but one of those adjudications were terminated before an adjudicator was ever appointed.
The Report also sets out the total amount claimed in the adjudications that were commenced in the past fiscal year – approximately $2.9 million, or $90,000, on average. Of the adjudications that were commenced, the vast majority were in the residential sector (averaging $22,000). Only five adjudications were commenced in the commercial sector (averaging $360,000), with another five adjudications commenced in the public buildings (averaging $120,000) and the transportation and infrastructure sectors (averaging $125,000).
The Report also highlights that in the past year, ODACC developed its website (www.odacc.ca) and a computer system (the “ODACC Custom System”), and a training program for adjudicators (the “Construction Adjudication and ODACC Orientation Program”), which has been attended by 319 participants.* Of those participants, 85 applied to become adjudicators and ODACC has certified 65 as adjudicators. The certified adjudicators are 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.
The majority of ODACC certified adjudicators have chosen to set their hourly rates in the range of $250-500 per hour. Only a handful of adjudicators have set their rates above that range. 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.
During the fiscal year, ODACC received just under $5,000 in adjudication and referral fees for 25 of the adjudications that were opened. The vast majority of ODACC’s revenue has come in through the training fees it receives for participants in the Construction Adjudication and ODACC Orientation Program, totaling $315,000 for the fiscal year, as well as application fees and continuing training fees from certified adjudicators, totaling $21,000 for the fiscal year. Adjudicators themselves received $2,000 in fees over the course of the past year.
Overall, the Report highlights that uptake in the Ontario construction industry of adjudication is not widespread yet. Whether this is a result of the fact that many existing construction contracts are grandfathered under the old legislation per the transition provisions of the Act (as discussed here), because there is 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, 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 here).
The lessons learned from Ontario are invaluable given that other jurisdictions in Canada are in the process of setting up adjudication regimes as well based on the Ontario model (as discussed here).
*One of the authors of this post, Lia Bruschetta, attended the Construction Adjudication and ODACC Orientation Program in March 2020.