Bill 62 – An Act mainly to diversify the acquisition strategies of public bodies and increase their agility in carrying out infrastructure projects (“Bill 62”) was passed on October 2024 by the Québec National Assembly. This article discusses the key changes brought by Bill 62 and how the construction industry can harness these legislative changes.
Key Features: One of the key measures included in Bill 62 is the introduction of “partnership contracts” as a new type of contract available to public bodies governed by the Act respecting contracting by public bodies, the key statute governing public contracts at the provincial level. Partnership contracts are defined as “contracts entered into for the purposes of an infrastructure project for which a public body brings in a contractor to participate in designing and building the infrastructure and carry out other responsibilities related to the infrastructure such as its financing, maintenance or operation, and that involve a collaborative approach during or after the tendering process”. Pursuant to the new provisions, the expression “collaborative approach” may include certain bilateral workshops, pooling resources and information and an agreement to sharing risks and gains during the term of the contract.
Benefits of a Collaborative Approach: The fundamental focus of Bill 62 appears to be the notion of “early contractor involvement” (ECI) in infrastructure projects. Although it underscores “collaborative approach,” it implies that such collaboration is led by the contractor. New data supports a broader approach to collaboration. A McKinsey report in January 2020 found that collaborative models improve cost performance overall by 17.5 percent and improved schedules by 15 percent (health care project improvements in schedule were 35 percent). The report defined “collaborative contracts” as those having (a) a defined pre-planning period, (b) single contract among all critical delivery partners, (c) no-fault clause and (d) joint management structure. It also highlights that the use of collaborative contracts can substantially improve productivity on projects: “Using collaborative contracts best practices can increase global productivity from 48 to 60 percent and cost savings from 27 to 38 percent.” This is important where design and construction account for 14 percent of global GDP.
Recent research on relational contracts also supports a broader approach under Bill 62. In Contracting in the New Economy, authors David Frydlinger, Kate Vitasek and Jim Bergman point out the importance of a more relational approach to contracting. Supported by the work of five different Nobel laureates in Economics, they describe the differences between discrete, transactional contracts (like the design-bid-build scenario that has been present in Quebec before Bill 62) and relational contracts:
- The transactional contract is characterized by short-term duration, clear measurement, little personal involvement, and a low need for coordination and cooperation
- The relational contract is characterized by longer-term duration, less precise measurement, more personal involvement, and a high need for coordination and cooperation
We can safely say that all public infrastructure contracts are “characterized by longer-term duration, less precise measurement, more personal involvement and a high need for coordination and cooperation.” Frydlinger et al point out the benefits of each type of contract:
Other research supports the decision of the Quebec Legislature to move to more partnered, more collaborative contracting approaches that support “extending the duration for planning activities to increase confidence around project scope, schedule, quantities, etc.”
In our opinion, Bill 62 leaves room for flexibility and creativity. In particular, projects can now follow the Integrated Project Delivery (IPD) approach, which has been implemented elsewhere in Canada and abroad for several years. This approach has a proven record: resulting in maximized effectiveness, enhanced results on complex projects with many involved parties, and an increase in the number of interested proponents.
One shining example of an IPD infrastructure project is the Waaban Crossing, a bridge in Kingston, Ontario. The $180 million project was completed on time and under budget and the benefits exceeded expectations. Several IPD contract models are available for use in Quebec including CCDC 30 2018 (a new version is expected soon), the Hanson Bridgett Standard IPD model for Canada, and the AIA Document C191- 2009 Multi-Party Agreement – IPD, modified for project use and local law requirements.
Other models of collaborative contracting are gaining traction in Canada. Alliance contracts are increasingly popular in Canada for delivery of infrastructure projects. An Alliance model acts very much like an IPD contract except that the parties are required to put their corporate overhead and profit at risk (only profit in IPD) and certain kinds of behaviours (called Key Result Areas) can be bonused separately rather than by increasing the profit pool. One interesting feature is that Alliance contracts provide no enforcement mechanism. Parties actually waive their rights to go to court or seek arbitration or mediation. That means that all disputes have to be resolved internally by the team.
Infrastructure BC is using an Alliance model to deliver its Highway Restoration program for roads damaged during wildfires and severe weather. Metrolinx used an Alliance contract for the renovation of Union Station in Toronto. Progressive Design Build (PDB) contracts have been used by large North American owners like the San Francisco Airport to deliver billions of dollars of projects.
PDB differs from IPD in that after the first phase (like the validation period in IPD), the parties agree to a fixed fee or guaranteed maximum price (GMP) and a contractually mandated delivery date. The Greater Toronto Airport Authority has focused on PDB as its delivery model of choice for upgrades to Pearson Airport. The Quebec government selected a collaborative model that is somewhere between a PDB and an Alliance model to manage the design and installation of a new roof on the Stade Olympique in Montreal.
Specific Provisions: Bill 62 provides that tender documents must, if the collaborative approach includes sharing risks, savings, gains or losses, contain a “statement that the terms and conditions of the sharing will be agreed upon by the parties and specified in the partnership contract”. Some have raised questions about the scope of the information that will be included in the calls for proposals related to the collaborative components of the project and how the partners will be selected by the owner. To allow potential bidders to properly assess their appetite for proposing on the project, the owner’s information should be detailed enough to encourage a response focused on project collaboration. More generally, well-defined guidelines and information available from the start of the implementation of these “partnership” contracts could help increase the interest of all involved parties.
Some from the construction industry have expressed concerns around the wording “a public body brings in a contractor” cited above and emphasized that collaboration should not be imposed upon them. They advocate that contractors should have the ability to partner with professionals and specialized contractors of their choice with whom a relationship of trust is already established. In particular, no collaboration should be imposed between firms that experienced legal conflicts resulting from previous contractual management. On the other hand, public bodies want to be able to select partners on an individual basis in each discipline/trade, so that they can have the best ones involved on the project.
A criticism we have heard is that partnership contracts will only be within reach of the major industry players, who may lose interest in the smaller markets, including regional ones. These projects are currently undertaken by major players that specialize in road, bridge, water treatment and other infrastructure. Supply chain concerns should be considered by both legislators and owners. For example, how do you enable smaller players equal access to smaller infrastructure projects so they can build capacity and enable a broader supply chain to deliver more projects.
Another potential consequence of fostering more collaborative contractual approaches is that the role of engineering and architecture consulting firms may have to evolve. More specifically, in some variations of partnership contracts, engineering consulting firms could be more frequently called upon to play a subcontractor role for construction contractors. This situation changes the dynamics and, according to an industry association, may lead to the engineering consulting firms no longer being able to fully play their role as strategic advisors to public organizations. In addition, the professional liability exposure of firms could be increased in certain cases, notably where project-related information is pooled, and a firm fails to conduct a complete review of the documentation. Further, where project-related resources are pooled, the engineer’s independence could be challenged.
All involved parties seem to agree that, for partnership contracts to be a success, a change of culture will be required on the part of all players. Culture change needs more than just change management; it requires an understanding of the paradigm shift from transactional contracts to relational contracts. To get there, all players will have to participate. Industry associations will need to provide training to the supply chain. Responsible ministers, notably the Minister for Transportation and Sustainable Mobility, and senior management of public organizations will need to state a positive commitment to these collaborative models and demonstrate changed culture in procurement, participation and project management. While this ministry and the Société québécoise des infrastructures (SQI) are authorized to use partnership contracts, other public bodies must obtain an authorization from the responsible minister. Coaching firms and academic institutions will need to offer training and skills development to underscore the objectives and scope of partnership contracts.
Another really interesting key change brought about by Bill 62 is the right for a public body to award a contract by mutual agreement when no compliant response is received in response to a call for proposals, a more common situation recently. Some have noted practical obstacles to the intended usefulness of this provision. For example, if no compliant proposal is received at the end of the RFP process, it seems uncertain that a third party could meet the initial contract requirements. In addition, the new provisions do not expressly allow public bodies to enter into agreements related to preliminary work by mutual agreement, which are regularly used to secure the project schedule by carrying out certain critical path activities in advance.
Bill 62 was a direct response to the Québec Strategy in Public Infrastructure released earlier this year, whose title, Quality Infrastructure Completed More Quickly and More Cost-effectively, is compelling as to its three key objectives: 1) accelerating project delivery, 2) improving costs and 3) improving the state of our public infrastructure.
Conclusion
Bill 62 was a direct response to the Québec Strategy in Public Infrastructure released earlier this year, whose title, Quality Infrastructure Completed More Quickly and More Cost-effectively, is compelling as to its three key objectives: 1) accelerating project delivery, 2) improving costs and 3) improving the state of our public infrastructure.
Bill 62 is a step in the right direction, but other measures[1] and sustained implementation efforts will be required to achieve these objectives and foster interest for public contracts by contractors, a third of which are losing interest in public contracts according to recent figures.
While contracts with municipalities are not subject to Bill 62, a separate bill introduced in the National Assembly on November 7 would expand the toolbox of municipalities, including allowing them to launch calls for tenders for partnership contracts. Municipalities in other parts of the country are leading the charge in using collaborative contracts to deliver everything from water treatment plants to fire halls to recreation centres. National Assembly action in this area for Quebec municipalities should certainly be a priority.
