In a previous post, we introduced several of the most widely used contract models across the construction industry. This article is the first in a new monthly series that takes a closer look at each contract type individually, beginning with one of the most common and well-established forms: the stipulated price contract (CCDC 2).
The CCDC 2 is a traditional design-bid-build contract in which the owner and contractor agree on a fixed contract price for all work outlined in the contract documents. The price is “stipulated” at the outset, based on detailed drawings, specifications, and schedules. The contractor undertakes the work for that fixed amount, subject to adjustments only for approved changes. This model contrasts with other forms such as cost-plus or unit price contracts, where the final cost can vary with actual quantities or reimbursable costs. The stability of a fixed price makes CCDC 2 attractive when the design is complete, the scope is clear, and both parties want certainty around financial commitments.
At its core, CCDC 2 is designed to balance risk and responsibility:
- Fixed Contract Price: The contract sets a firm price for the defined scope of work. Unless there are changes authorized through formal change directives or change orders, the contractor is responsible for delivering the agreed work at that price.
- Risk Allocation: Risk for scope definition and design completeness typically rests with the owner. Because the contractor bases its price on the contract documents, any ambiguities or omissions can lead to disputes unless they are clarified before tendering.
- Clear Scope and Specifications: CCDC 2 works best when drawings, specifications, and schedule information are thorough and coordinated. Detailed tender documents reduce the likelihood of disputes and change orders.
- Payments and Holdbacks: The contract includes provisions for progress payments, holdbacks, and release timelines in accordance with provincial lien legislation. This structure protects both the owner’s financial interests and subcontractor rights.
- Changes and Adjustments: While the price is fixed, changes can and do occur. CCDC 2 contains provisions for change directives and negotiated changes, enabling the parties to adjust scope, time, and price when unforeseen conditions or new requirements arise.
The primary benefit of a stipulated price contract lies in its predictability and simplicity. Owners gain cost certainty, while contractors, knowing the scope up front, can plan production and procurement with confidence. For lenders, stakeholders, and project teams, the transparency of a fixed price helps with budgeting and risk management.
However, CCDC 2 is not without its challenges. Because the contractor assumes price risk based on the contract documents, incomplete or unclear design information can lead to claims or adversarial negotiations. For this reason, clients using CCDC 2 should invest in quality design development and document coordination prior to tender.
The CCDC 2 remains a familiar and widely used foundation in Canadian commercial construction, particularly where scope clarity and cost certainty are priorities. Understanding how this contract allocates responsibility, manages risk, and supports the traditional design-bid-build process helps project teams make informed decisions before procurement begins. As this series continues, the focus will shift to other CCDC contract models that respond to different project drivers, such as schedule pressure, evolving design, or the need for greater collaboration, highlighting how contract selection can shape project outcomes long before construction starts.
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