March 13, 2025
An Open Letter to Public Sector Owners: Navigating Tariff Impacts
Dear Public Sector Owners and Buyers of Construction,
Recent tariffs imposed by the United States, along with Canada’s counter-tariffs, are creating significant cost pressures and uncertainty within the entire construction industry and will directly affect the viability of projects moving forward.
The Ontario General Contractors Association (OGCA) is committed to providing public sector owners with resources and best practices to help navigate these challenges. This is an issue that affects us all, and by working together, we can find fair, practical solutions that support project success and industry stability. This letter outlines key contractual considerations, best practices, and procurement recommendations to help public sector owners and buyers of construction navigate the impacts of tariffs on construction projects.
Public sector owners and buyers of construction play a vital role in the sustainability of the construction industry. The contractors delivering your projects are not just businesses; they are workers, taxpayers and property owners, employing local workers and strengthening our communities. While the federal government is right to respond in kind, we call for all governments to consider economic measures to support Canadian businesses and stimulate our economy, in consultation with industry.
In this everchanging situation, fairness and collaboration are essential to maintaining stability and ensuring the continued delivery of the public infrastructure we all rely on.
Best Practices for Public Sector Owners
To ensure fairness and stability in public construction projects, we urge public owners to:
- Engage in open dialogue with their general contractors, consultants and the trade contractors to mitigate risks and explore alternative solutions, where possible.
- Clarify documentation requirements for proving cost increases due to tariffs, recognizing that precise cause-and-effect proof may not always be black and white, or possible.
- Maintain a fair, transparent and reasonable approach to procurement, using longstanding best practices to facilitate a smooth process.
Duties and Tariffs in CCDC Contracts
CCDC contracts are the foundation of the ICI construction sector in Canada, making it critical to understand the contractual obligations under CCDC 2 – 2020, General Condition 10.1 (Taxes and Duties.)
This contractual obligation is not limited to CCDC 2 – 2020: similar provisions exist in other standard CCDC contracts, including CCDC 17 (2010), CCDC 5B Appendix Stipulated Price Option (2010), and CCDC 14 (2013), all of which contain clauses addressing changes in taxes and duties in the same manner. Owners using these contract forms should ensure they are applying the same principles when dealing with changes due to tariffs. For the CCDC 3 and 5B cost-plus contracts, tariff costs are incurred as they arise.
Key Considerations Under CCDC 2 – 2020, GC 10.1 Taxes and Duties:
- The bid closing date – not the contract award or execution – is the determinant for whether a tariff change qualifies for a contract price adjustment.
- Contractors are entitled to adjustments in the Contract Price when new taxes, duties, or tariffs are imposed and increase costs.
- The clause equally applies whether tariffs are repealed or modified, impacting the cost.
In Procurement
Following best practices and norms in public sector procurement is more critical than ever to ensure a fair, open, and transparent process that supports industry stability and delivers value to taxpayers. In light of current economic challenges, we encourage owners to consider the following approaches:
- Bid Closing as the Key Determinant – Under CCDC 2-2020 GC 10.1, the bid closing date – not the contract award or execution – is the determinant for whether a tariff change qualifies for a contract price adjustment.
- Encourage Canadian-made substitutions – Include an explicit provision in procurement documents that encourages general and trade contractor bidders to propose Canadian- made and produced substitution items through the tender’s RFI process, as long as they meet the performance requirements of the specifications.
- Facilitate evaluation of substitutions – Add a line item to the general contractor’s bid form
– or, in the case of a construction management project, the trade contractor’s bid form – to help owners assess the cost and feasibility of incorporating to newly approved Canadian-made alternatives. - Collaboration not cancellation – Owners should avoid canceling projects due to tariffs and instead work collaboratively with industry to manage cost impacts.
The bid closing date determines whether a tariff change qualifies for a contract price adjustment under GC 10.1. However, given how fluid the situation is, it is OGCA’s opinion that even if tariffs were imposed in the days leading up to bid closing, their full impact may not yet be clear across the supply chain. We suggest owners should approach this with flexibility and fairness, recognizing that the impacts may take time to assess and address.
Tariffs and contract price adjustment
Under CCDC 2-2020 GC 10.1 the adjustment to the contract price based on changes to taxes or duties is mandatory, not permissive:
- While the contractor or trade contractor will still need to demonstrate the change, it will be entitled to the adjustment.
- While the hope is the parties will agree to an adjustment, GC 6.6 (Claims for a Change in the Contract Price) likely provides the process for resolution under the relevant CCDC contracts, if necessary. [Note that under the CCDC 14 (2013) the process for the adjustment is expressly GC 6.6 (Claims for a Change in the Contract Price)].
In addition to cost impacts, tariffs may also affect project schedules due to budgetary concerns, supply chain disruptions and material availability. Public sector owners and buyers of construction should remain open and receptive to reasonable schedule adjustments to accommodate these challenges.
In dealing with the issue of tariffs, it will likely not be a simple matter of presenting documentation, as tariffs affect costs throughout the supply chain—whether in raw materials like copper or finished products like lighting fixtures—making direct attribution challenging. For change orders, consider, at the very least, inserting a term in the change order permitting adjustments similar to CCDC 2-2020 GC 10.1 to ensure fairness.
Overly rigid approaches to proving cost impacts or mitigation efforts can easily create unnecessary roadblocks—not just for adjusting the contract price, but for getting the project built and the relationships between all parties. Given the unpredictability of supply chains, pricing and tariff impact, the focus should be on fairness and practicality rather than adding extra hurdles.
Open, clear communication and cooperation between owners, contractors, trades and consultants will be key to managing these obstacles.
As in all contractual situations, the OGCA strongly recommends that the parties involved obtain appropriate independent legal advice. Please note that this communication does not constitute legal advice, but is intended to inform our members about the potential pitfalls from tariffs.
Reasonable and proactive decision making will help keep projects on track, continue to build our communities and support industry stability. If you have questions or need guidance, please reach out to the OGCA directly at info@ogca.ca.
(Original letter drafted and circulated by the British Columbia Construction Association (BCCA) and provided to be amended and distributed to the entire construction industry)
Sincerely,
Giovanni Cautillo
President
Ontario General Contractors Association