Ontario sets standards for contractors

Infrastructure is a perennial focus of the Canadian Council for Public-Private Partnerships’ yearly conference, and November’s meeting in Toronto heard from lawyers on procurement and P3 law, and from Canada’s consul general in Detroit on joint Canadian-American projects.



Vendor Performance Program

Infrastructure Ontario (IO) announced that it will launch a new vendor performance program for construction contractors in 2017. The program will impose a scorecard on any contractor to the Ontario government, and infractions would result in penalties that could affect a vendor’s ability to win future procurements.

During the conference breakout session, “Let’s Get Jurisprudential: Hot Topics in P3 Law and Procurement,” IO’s General Counsel and Corporate Secretary, Marni Dicker, described the new program.

“We have created this program out of a real need: to appreciate and understand … the good performers.” The greatest risks to a project are during a construction phase, she said, and so the new program applies only to construction contractors.

The AFP Vendor Performance Program, as it’s called, was expected (at time of writing) to have launched in January 2017 and be fully phased in by January 2018. The approach to vendor performance has been informed by due diligence within IO and dialogue with industry members. The program will be reviewed no later than fall 2018 in order to assess lessons learned during the first 18 months of implementation.

This program will measure vendor performance based on a clearly laid out set of criteria, and will introduce a scorecard for construction contractors who participate in Infrastructure Ontario projects. Construction contractors will be given a performance score, similar to a report card, whereby the contractor’s performance on alternative financing and procurement (AFP) projects over the past 24 months will be assessed against specific AFP contract requirements. Construction companies will be informed about their actual past performance results to help them better understand the consequences for future projects, and will be encouraged to take a continuous improvement approach towards their performance.

Contractors will accumulate demerit points for any of 12 infractions, based on IO criteria and linked to its P3 project agreements; they may also be given points for good performance. Four or more infractions in the 24-month period before the RFQ submission deadline, though, “will affect you on a future procurement,” Dicker said. “If you were delayed, we need to know that. We need to know your schedule. If you’re late, we need a new work schedule. Performance criteria isn’t yes or no; it can be disputed, and we will adjust the scores if we’re wrong,” Dicker said, adding that “poor performance can affect a whole team. We want team members [including bankers and other partners on a project] to ask a construction contractor, ‘What’s your score?’”

Scores will be updated on a monthly basis, she said, and will remain confidential. IO is arranging one-on-one meetings with contractors about scorecards so that they understand what the program means and can provide input. “We’ve met with several of the associations that represent their memberships,” which have all been briefed on the program, Dicker reported.

Dispute Resolution

Tim Murphy, a partner in McMillan LLP in Toronto, discussed some of the problems seen in dispute resolution. Exceedingly few cases that his firm has seen have gone to arbitration, he said; however, one recurring problem is that of poor scheduling and falling behind. The construction contractor is “being given a bunch of stuff earlier on in the project. What happens is, they wake up a few months later, they realize they have an accumulation of very small things,” and deadlines have been missed.

Another source of friction can be sub-contractors, and McMillan LLP has been involved in disputes “where major subs have been involved,” Murphy said. In many of these cases the cost of resolution can be high. Subs often don’t have the ability to carry cash, and “one thing we have seen is … to get the authority [from Infrastructure Ontario] to write a cheque … requires some degree of independent report. It extends the time to get to resolution, and adds to the cost of resolution.”

Innovation

“When you engage as a public agency, you have to have innovation in mind,” said Andrée Blais, a partner in Nossaman LLP in Los Angeles who previously advised Canadian public sector owners on project development, delivery model selection, procurement, closing and contract administration.

“Something agencies need to figure out is competing principles of publication, the need for transparency and restrictions in procuring.” In order to engage in innovation, public agencies need to be involved in projects from the beginning, Blais added, and to focus on their goals for the project in order to develop specs, etc., that will achieve those goals.

In the United States, the Alternative Technical Concept (ATC), a flexible contracting process, is most commonly used in design-build project delivery, Blais noted. The ATC approach promotes competition and the exchange of innovative approaches early in the design process, and the project owner has the chance to consider submissions privately and select the design and construction solutions that offer the best value. “Then, that ATC is stapled onto the project agreement, and supersedes contractual terms that don’t comply with it.”

However, Catherine Doyle, a partner in Blake, Cassels & Graydon LLP in Toronto and whose firm acts for the private sector, told session participants that “ATCs have come and gone in Canada,” and that Infrastructure Ontario has done away with it.

Canada-US Relations

Douglas George, Canada’s consul general in Detroit, discussed Canadian-American trade relations and projects in the pipeline during a luncheon keynote address.

“Canada-US relations have been so broad and so deep that the two countries will work well together no matter who’s in office,” George said, noting that Canada’s ambassador to the United States, David MacNaughton, “doesn’t see that relationship changing.” President-elect Donald Trump has offered support for improving infrastructure, and has said he sees a need for private-sector involvement.

The Canada-US relationship is the largest trade relationship in the world by far, George added, amounting to $880 billion a year and $2.4 billion a day in goods and services crossing the border. Canada exports twice to Michigan what we do to China, George noted, and buys more from the United States than from China, Japan and the UK combined. “We work together to compete around the world,” George said, and this relationship is “underpinned by deeply efficient infrastructure. We operate over 100 points of entry; 400,000 people use this infrastructure every day.”

One major infrastructure project is the Gordie Howe International Bridge, planned to be constructed across the Detroit River. The bridge will be located at the busiest trade crossing between Canada and United States, making it faster and safer for people as well as goods to travel from one country to another. “The Gordie Howe Bridge will serve as an ambassador to two countries,” George said.

The government is also exploring the need for high-speed rail lines along the Vancouver-to-Seattle and Toronto-to-New York corridors. But while the US-Canada relationship is strong, it has its challenges, George noted. Protectionist talk was strong throughout the US presidential campaign, putting joint projects such as bridges, roads and railroads potentially at risk.

“We will continue to work with you to make a case to Congress that protectionism hurts the competitiveness of companies on both sides of the border,” George said, concluding that “we are optimistic about infrastructure projects moving forward around the world.”