Recently, the OGCA Board of Directors discussed US tariffs and how they are addressed in CCDC contracts. As previously noted to our members; in order to adequately capture tariff fluctuations, the CCDC 2 contract needs to include the following language:
“10.1.2 Any increase or decrease in costs to the Contractor due to changes in taxes and duties after the time of the bid closing shall increase or decrease the Contract Price accordingly.”
The Board of Directors noted that they consider the existence of an error in the CCDC 5B.
The problem is that in the CCDC 5B, unlike CCDC 2, there is no language that allows the contractor to increase the Guaranteed Maximum Price (GMP), unless the parties exercise the stipulated price option and they agree to a GMP.
Which means that, while contractors may get the cost of work reimbursed for the increase, you will be squeezed on the delta to your GMP. This is all assuming the tariff impact is passed down to the contractor. And, once the GMP is exceeded, the cost is borne by the Contractor.
As well, a change in tariffs is not necessarily going to be a “change in tax”. If the contractor is not the one doing the import, the tariff will simply cause their sub-contractor/supplier to increase the “cost” to the contractor.
Overall, the contractors need to ensure that there is language in the CCDC 5B contract that accurately encapsulates the possible increase or decrease in overall cost or work to the project due to the threat of tariffs being imposed.
To that end, the contractors may consider utilizing language similar to that found in the CCDC 2 language:
“Any increase or decrease in the Cost of the Work, including [Division 1 or general requirements] costs, due to changes in the cost of sub-contractor and/or supplier products or services, after the time of the bid closing for this Contract, shall increase or decrease the GMP accordingly.”
Alternatively, the contractors may also consider utilizing the following language:
“The price of building materials and equipment, both imported and domestic, are fluctuating and sudden price increases could occur as a result of executive orders, tariffs, taxes and other trade restrictions that have been or may be imposed by the U.S and foreign governments (“Governmental Actions”). The pricing included in this [insert type of submission: proposal, GMP, or other] accounts for all currently known impacts of such Governmental Actions as of the date of this [insert type of submission: proposal, GMP, or other]. However, the price and availability of material and equipment may fluctuate further due to future impacts stemming from such Governmental Actions. [insert applicable enterprise entity] will use its best efforts to obtain the lowest prices and the earliest delivery timelines from suppliers, and will provide notice of pricing increases and/or procurement delays due to such Governmental Actions when they become known to [insert applicable enterprise entity]. [Insert applicable enterprise entity] reserves the right to seek equitable price and schedule adjustments as necessary.”
Please note that this bulletin does not constitute legal advice, but is intended to inform our members about the potential pitfalls from tariffs.
As in all contractual situations, the OGCA strongly recommends that the parties involved obtain appropriate independent legal advice.
Should you have any specific questions about tariffs, contracts or any other legal issue that may affect your company, please consult your legal counsel directly.
Should any OGCA members have any questions, please contact Giovanni Cautillo directly at giovanni@ogca.ca.