Bill 142: Mandatory Surety Bond Requirements for MTO Contractors
After successfully voting in Bill 142 in December 2017, the Ontario government has now released new information regarding the Amendment to the Construction Lien Act. While the amendments will be enacted in two stages, it is important to be aware that contractors involved in MTO contracts will be directly affected as of July 1st of 2018.
Mandatory Surety Bonding on Public Works
Bill 142 states that contractors awarded Ontario public sector contracts valued over $500,000 will be required to provide a 50% Performance and a 50% Labour and Material Payment Bond.
As a result, MTO contractors may run into issues with respect to bonding. Some contractors may have bond facilities with inadequate limits while others may not even have a bond facility at all. Due to the process involved in order to obtain bonds, it’s imperative that contractor’s looking to bid on MTO projects after July 1st have a bond facility in place well beforehand.
Already Have a Bond Facility?
Although it is likely that many contractors bidding on MTO projects already have a bond facility in place, these requirements may pose a new obstacle with respect to existing facility limits. While contractors may have adequate limits for their current bonded workload, the addition of MTO contracts will result in a need to increase their bond facility limits. Increasing bond limits is hinged on the strength of the contractors balance sheet and in order to do so, some financial questions may need to be addressed.
Other Notable Changes and Revisions
In addition to the $500,000 minimum threshold for providing bonds, there are a number of key revisions that will impact bonding. These include;
- Sureties will have strict response timelines for performance and payment bond claims requiring them to reduce unnecessary delays.
- New standardized bond forms will incorporate mandatory communications between the parties involved in an attempt to mitigate the situation.
- Changes to the standard payment bond, broadening the definition of a “claimant” offering protection to all subcontractors and suppliers involved on the contract. This is similar to the federal government’s bond form.
What Is a Surety Bond and How do I Get One?
FCA Surety has been providing surety bond solutions to Canadian companies since 1919.
To get started, give us a call at (844) 241-5656 or review our blog posts for useful information.
- How to get a Surety Bond
- What is a Surety Bond
- Getting My first Surety Bond
- What is a Performance Bond
- What is a Material Labour and Payment Bond
- What is a Bid Bond