CCDC 5A versus CCDC 5B –Benefits of Each Contract

Chris Court, PQS(F)

In 2022, I focused my Editor’s Messages on the general topic of housing and, more specifically, on the hot topics of housing affordability, inflation and the housing industry, potential solutions to the housing crisis and the importance of inclusive zoning policies in high-density areas. With this issue, I would like to shift gears away from housing affordability and discuss the form of project delivery structure and contracts that are most commonly adopted by condominium developers. I should mention that my perspective remains anchored in the high-rise residential construction sector because that is my sector of expertise.

Over the years, the Construction Economist has published commentary by lawyer contributors about various forms of construction contracts, their intended uses and their specific benefits and pitfalls. The most recent example was a detailed review of Alliance Agreements by Joshua Strub in our Spring 2022 issue. My intention here is to share my real-time observations about residential high-rise projects built under a construction management structure, and to compare and contrast between CCDC 5A and CCDC 5B projects.

Since my focus has been high-rise residential construction for most of my career, I have had the opportunity to work with multiple construction managers, general contractors and developers/ owners. During my employment with consulting firms, a developer and a construction manager, I noticed that most of the construction management companies were working with the owner under the CCDC 5A contract. The first project on which I worked – which involved a CCDC 5B contract with a Guaranteed Maximum Price (GMP) between a developer and a construction manager/ general contractor – was for the construction of a multiple-tower development. The developer had locked in unit rates with multiple trade contractors so their costs for major divisions were known before the GMP contract was signed.

The Canadian Construction Documents Committee (CCDC) defines the CCDC 5A – 2010 Construction Management Contract – for Services as follows:

“CCDC 5A – 2010 Construction Management Contract – for Services is a standard contract between owner and construction manager for which the work is to be performed by trade contractors. The construction manager acts as a limited agent of the owner providing advisory service and administering and overseeing the contracts between the owner and trade contractors.”1

A CCDC 5A model, with negotiated supplementary conditions tailored to the requirements of the specific project, is often conducive to true collaboration between owner and construction manager. Specifically, on most of my past and current projects, I have noticed the following:

• Alignment of owner’s and construction manager’s interests.

• Full transparency between owner and construction manager over budget, schedule and project administration, and records.

• Significant owner decision control over all aspects of the project with the safety net of the construction manager’s knowledge, experience, and industry relationships.

• Where the construction management fee is calculated based on a percentage of the actual cost of construction, plus a percentage of any savings realized against the construction contingency, the construction manager has a significant incentive to ensure construction stays within budget (and within schedule).

• This fee structure also eliminates an incentive for the construction manager to issue change orders on its own behalf (as change orders would deplete the contingency).

• Trades contract directly with the owner, but the construction manager administers them and negotiates prices with them on behalf of the owner to make sure awarded contracts remain within budget.

• The construction manager monitors and enforces the schedule in the best interest of the owner and the project.

• Practically non-existent adversarial tensions among the project team members.

The Canadian Construction Documents Committee (CCDC) defines the CCDC 5B – 2010 Construction Management Contract – for Services and Construction as:

“CCDC 5B – 2010 Construction Management Contract – for Services and Construction is a standard contract between owner and construction manager to provide advisory services during the pre-construction phase and perform the required work during the construction phase. At the outset, the work is performed on an actual-cost basis, plus a percentage or fixed fee which is applied to actual costs. The parties may agree to exercise the following options: Guaranteed Maximum Price (GMP), GMP Plus Percentage Cost Savings, and conversion to a Stipulated Price Contract.”2

A CCDC 5B notably provides the owner with certainty of cost and schedule – or at least that is the intent. Specifically, on past projects that involved a CCDC 5B, I have noticed the following:

• The construction management fee is fixed based on the agreed scope and budget. If the scope remains unchanged, the owner has cost certainty and the construction manager is not entitled to additional fees.

• The schedule is typically also fixed and the risk of delays – other than delays caused by the owner or by force majeure events (if such a clause is agreed on) –is the construction manager’s risk.

• The construction manager is the single point of responsibility for all the construction work; it contracts with the trade contractors, therefore taking any resulting liability and shielding the owner from that liability.

• The interests of the owner and the construction manager are often polarized around the schedule (and resulting delay claims by the construction manager) or budget (with construction manager change orders).

In my experience, both contracts have their pros and cons for both the owner/developer and the construction manager. I am interested to see what the future holds with the cost uncertainty that our industry is facing right now. The industry is seeing more trade contractors coming back after the contract has been signed and the project is under construction, requesting the approval of cost increases due to unprecedented supplier and subcontractor cost escalations. Under a CCDC 5A contract, the construction manager will advise the owner in real time so these increases will not come as a surprise later in the project. The construction manager will work with the owner to find solutions. Will more owners/developers request the CCDC 5B to pass the risk to the construction manager, or will they continue working with a CCDC 5A contract?

If you have feedback, suggestions and of course any articles that you would like to be considered for publication, please email editor@ciqs.org or ceo@ciqs.org.

Chris Court, PQS (F) Editor

1 CCDC 5A - 2010 Construction Management Contract – for Services definition. Retrieved from https://www.ccdc.org/document/ccdc5a/.

2 CCDC 5B – 2010 Construction Management Contract – for Services and Construction definition. Retrieved from https://www.ccdc.org/document/ccdc5b/.

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