Challenges

In keeping with this growing trend toward automation, the construction and surety industries are continuing to explore the use of technology to enhance the level service provided to their clients and to streamline their administrative processes. In the construction/surety world, the tendering process lends itself very well to automation for several reasons:

· The time pressures involved in the bidding process where even one minute late can mean disqualification. An automated approach where documents are delivered instantaneously can alleviate the last-minute pressures of a tender closing.

· The laws of tendering require strict, error-free compliance with the bid documents. Automated creation of the bid bond and other tender documents can significantly reduce the chance of errors which can lead to a bid being declared informal.

· The ease and economy of transmission: Not only is delivery easier, faster and “greener” (i.e. smaller carbon footprint), it is far less expensive and can reduce or eliminate mounting courier costs.

As is the case with any major change, the shift from paper to a digital environment is not without its challenges. In addition, the unique nature of the surety product and process magnifies some of these issues and adds a few more.

Commercial Challenges

E-tendering has been described as the train that’s always coming but never seems to arrive. Despite the tsunami of technology that pervades every aspect of personal and commercial life, the construction community has been frustratingly slow to embrace the tools of automation to streamline the tendering process.

Such hesitation may be understandable given the natural human reluctance to stray from one’s comfort zone and adopt a radically different approach to a century-old practice. Other factors come into play as well; lack of manpower and resources, concern about the stringent rules governing bidding practices etc. Whatever the reasons however, the surety industry in Canada has made very little progress in automating the tendering process.

Legal / Legislative Challenges

On the legal/legislative side, a prime concern of any owner who receives an electronically generated bond is that any such bond be as valid and legally enforceable as any paper generated equivalent. In fact validity/enforceability of agreements is probably an overriding concern for any business as they move to an e-commerce approach.

Addressing this key issue of enforceability is the primary purpose of the various electronic commerce laws passed by federal and provincial jurisdictions across the country. In 2000, Parliament passed the Personal Information Protection & Electronic Documents Act (PIPEDA). This is an umbrella legislation which established a template for provincial and territorial jurisdictions to follow; all of which passed their own electronic commerce legislation within two years of PIPEDA receiving Royal Asset.

It’s important to remember that PIPEDA, like its related provincial and territorial statutes is “enabling” legislation that doesn’t impose a daunting regimen of restrictions. The purpose here is to create a legal environment that facilitates the use of electronic documents and promotes consumer trust in electronic commerce.

One particular challenge that is unique to the surety industry is the vexing issue of seals. From a legal perspective, a bond is not a true contract and must be validated by affixing the seals of executing parties. While PIPEDA and the provincial statutes all include clear provisions that set out what constitutes a valid and enforceable electronic signature, all but two (Ontario and Nunavut) are silent on the crucial issue of electronic seals.

SAC in conjunction with legal counsel has found a way around this dilemma by the use of the “deemed seal” concept. This concept is more fully described in the document; Exploring Electronic Pathways Together and will allow sureties and contractors and others to execute a valid electronic document under seal.

Technological Challenges

From a technical standpoint, the good news is that the technology to create, record, execute and deliver electronic bid bonds is readily accessible. Indeed, there are a number of commercially available electronic surety systems; some homegrown, others developed in the U.S.

As discussed earlier, regardless of the system used, it is important that the end-user trusts the process and is assured that the “document” received is as valid as any paper equivalent. In that regard it’s crucial that any electronic document received meet three threshold criteria:

1) Integrity of Content: the assurances that the document received is the true document executed and the content has not been changed or altered

2) Secure Access: restricting the access to the document to those authorized to view and/or download it.

3) Verifiability / Enforceability: assurances that the document was duly executed by the parties identified and that it is enforceable in law.

SAC has devised a method of assisting members in evaluating the capabilities of the various electronic surety bond systems. Our association has developed a set of criteria that has been published as a guideline for vendors of surety software entitled Evaluation Guidelines: Electronic Bonding Technologies.

In addition, SAC has taken these criteria and formulated them into a Checklist to evaluate existing software packages. The assessments of existing software packages can be accessed by SAC members in the Solutions and Assessments section. Project owners and their representatives can obtain copies of these assessments by contacting the SAC office at 905-677-1353, or by email at surety[at]suretycanada.com .