One of the most notable changes to the Amended Construction Lien Act (The “Construction Act”) is the requirement for contractors to provide the owner a performance bond as well as a labour & material bond for all public projects in Ontario over a prescribed amount. The exact prescribed amount has yet to be determined however initial predictions are in the $500,000 range.
The requirement to provide surety bonds will provide more security to owners with respect to contractor performance while offering enhanced payment security to subcontractors and suppliers of the prime contractor.
Who will this affect?
With the exception of architects and engineers, this requirement will affect all contractors who enter into a contract with an owner that is the Crown, a municipality or a broader public sector organization (a “public contract”) in Ontario. In addition, subcontractors and suppliers should be aware that when working for a contractor on a public project, a labour & material bond will now exist providing them with additional protection.
What Bonds Will They Require?
Bill 142 states, that all those awarded a public sector contract in Ontario will be required to provide at a minimum, a 50% Performance and a 50% Labour and Material Payment Bond. Although not noted in the Act, these projects will likely require a bid bond and agreement to bond accompanying bids at the tender stage.
Although Bill 142 received Royal Assent on December 12th and is now law, only some minor amendments came into force immediately. The remainder of the Act is expected to come into force upon proclamation, which will follow a review for public feedback in February. At that point there will be more clarity with respect to the minimum contract value requiring surety bonds.
What Is a Surety Bond and How do I Get One?
FCA Surety has been providing surety solutions to Canadian companies since 1919. Our specialists are eager to work with you. Give us a call at (844) 241 – 5656 or take a look at some of our other blog posts for useful information.