Canadian Bill Would Mandate Performance, Payment Bonds on Government Projects

Oct. 4, 2017

Legislators in Canada have introduced a bill that would make it mandatory for a contractor who enters into a contract with a public sector owner to provide a labor and material payment bond, and with a performance bond.

If enacted, Bill 142 would apply if the contract price is above a certain threshold set by regulation, according to a report in Canadian Underwriter. “Mandatory surety bonds would protect subcontractors and suppliers and make sure they get paid in case a project becomes insolvent,” said Lorenzo Berardinetti, parliamentary assistant to Ontario Attorney General Yasir Naqvi, during debate on the second reading of the bill, according to the report. Currently, no such mandate for bonds exists.

According to the bill, labor and materials payment bonds would need to be written by insurers licensed under the Insurance Act to write surety and fidelity insurance and have coverage limits of at least 50% of the contract price; the same is true for insurers of mandatory performance bonds.

The bill would also mandate that construction lien claims under $25,000 go to small claims courts, which lawmakers hope will speed the dispute resolution process.

– Nicholas Stern, managing editor

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