The need for prompt payment legislation has been one of the biggest and longest-standing issues facing the Canadian Institute of Steel Construction (CISC). However, it appears the organization’s lobbying work is paying off as headway has been made with a number of provinces and the federal government now on board.
“It’s been one of the most important aspects to our industry because you can get all the work in the world but if you don’t get paid for it you’re still going to be out of business,” explains Ed Whalen, president and CEO of the CISC. “It’s been a very important point and our members have really pushed for that.”
At the federal level, the Federal Prompt Payment for Construction Work Act has received Royal Assent but it’s expected to take eight to 12 months before regulations are in place. The law would apply to federal contracts.
In Ontario, prompt payment and adjudication are due to come into effect Oct. 1 and similar legislation has received approval in Saskatchewan and Nova Scotia. Quebec passed a law authorizing a pilot project that includes testing a prompt-payment regime. Alberta, meanwhile, already has prompt-payment clauses in its contracts.
While work remains to be done in the other provinces, Whalen said the CISC is pleased with the progress and intends to keep pressing for contractors and subs to be paid within 30 days of completing a project.
All construction companies down the supply chain were becoming banks but they were getting no compensation for that,
— Ed Whalen
Canadian Institute of Steel Construction
“We’re really excited that we’ve got this far,” he says. “Years ago we heard from some other opponents of prompt payment that thought this would never happen, so now that three years later we’re this far ahead is good. But we’re not finished yet and we will continue to make sure that the regulations are appropriate. It’s one thing to have a blanket legislation, but it’s how it’s implemented that counts and we still have a lot of work to do both at the federal level and all the rest of the provinces to ensure that it’s done right.”
The CISC, along with the National Trade Contractors Coalition of Canada (NTCCC), has been lobbying for changes for more than a decade and, says Whalen, even up to a few years ago neither thought there was going to be any change. But then Ontario got on board and with that province backing a change, a domino effect began to happen.
Delayed payments to contractors and subcontractors, he notes, have been a major challenge in the Canadian construction industry due to the negative impacts that recurring cash-flow problems have had on the supply chain, tradespeople, Canadian families and the overall construction economy.
The CISC maintains that legislation will provide a secure playing field for trade contractors who do 80 per cent of the work in Canada’s construction sector because, with the new rules, they can better plan and bid on more projects.
Often, he says, contractors wait 90 days or more to be paid for their work although their contracts stipulate 30 days.
“The industry couldn’t survive the financial pressures of trying to finance that so long. We didn’t have it in our prices.”
The lag time and uncertainty about getting paid seemed to be getting longer and longer, he says, noting contractors are then put under extreme financial pressure from the banks and, as a result, get more desperate.
“In effect, not only our industry but all construction companies down the supply chain were becoming banks but they were getting no compensation for that. That was basically being taken off any margin that they may have had so they were either breaking even or losing money on projects if they could collect at all.”
The first glimmer of light on the federal front came last November when Finance Minister Bill Morneau indicated that the government was committed to passing prompt payment legislation. In April, the government did pass legislation and it received Royal Assent in June. Regulations are expected next year.
There was still a problem with payments on federal projects and they saw that they could actually do something,
— Ed Whalen
Canadian Institute of Steel Construction
Whalen says the CISC, along with the NTCCC, played a pivotal role in keeping the issue front and centre with the Liberal government by presenting data to politicians and bureaucrats and also letting them hear the personal stories of contractors who’d been negatively affected by money not being paid on time.
“Advocacy takes a long time. It’s not a short game. It’s a very long game,” he says. “And what we found is bringing our members and letting the government hear from them was important.”
At the beginning, says Whalen, the federal government was totally opposed to legislation, but over time officials began to see the light.
“We always had our pedal to the metal, as you will, on this issue because it’s so important to us.”
Government officials argued that federal projects represent only one per cent of construction activity across Canada, but the CISC countered that one per cent of a million dollars is a lot of money to many contractors.
“What they realized was that there was still a problem with payments on federal projects and they saw that they could actually do something.”
Once they saw the data, officials and politicians warmed to the idea, says Whalen.
“I think where we saw the turnaround is when the government actually saw that we weren’t just crying and that they were part of the problem and they could actually fix it. We let them see projects that they could recognize and we let them see our payments or lack of payments so it was the real-live situations that they then couldn’t ignore.”
Whalen says the CISC compromised with the federal government by agreeing to put legislation on hold to give officials more time to do additional stakeholder engagement, get more information and do industry consultations so they could get input from across the country and feel comfortable it was being done right.
While the federal regulations are still a-ways off, Whalen says he’s encouraged as the government has already tendered for an authorized adjudication body similar to what’s been done in Ontario.
“So, they’re a little bit down the road. The process has started and that’s good.”
He expects the dominos will start falling in the holdout provinces once Ontario and the federal government are up and running.
“Everyone wants to use the Ontario model. There are some things coming to light that maybe they can improve on that model, but the major principles are being accepted.”
Recent Comments
comments for this post are closed