Despite the surprise loss by the Liberals last month in Nova Scotia, the president of the Construction Association of Nova Scotia (CANS) remains confident the newly elected Progressive Conservative government will pass prompt payment legislation by the year’s end.
“We feel very confident that the commitment made by government will be honoured,” says CANS president Duncan Williams. “It was an election issue and something they were aware of…even when they were in opposition (in the legislature).”
That commitment is to work with the construction industry to finalize regulations and an adjudication structure by late December.
Williams says that delinquent payments in the construction industry in Nova Scotia are “an endemic problem and the blunt instruments we have now just don’t work.”
He points out the number of delinquent payments in the industry has “consistently grown” since CANS conducted its first survey of contractor members in 2015. Close to 70 per cent of respondents in the most recent poll say they see delayed or delinquent payments “on a regular basis.”
The association believes about 35 of its companies go out of business every year in Nova Scotia, “mostly because of delinquent payments.”
Of the 800 or so member companies in the association, about 70 per cent are trade contractors, 10 to 15 per cent general contractors and the remainder are suppliers, manufacturers and others.
The payment problem starts sometimes with owners or general contractors but it can also be trade contractors that don’t meet payment obligations.
“It’s not one source (to blame) and it is pretty much evenly divided between the public and private sectors.”
The association president says sometimes payment delays result because of “a misapplication of the law,” he points out.
Payments, for example, are held back because of a deficiency when the issue is actually a maintenance one.
“There can be a dispute over an item that, let’s say, is $1,000 but $100,000 gets held back. It is not (done) with malicious intent but it has the same impact.”
The construction association is leading a coalition lobby of about 10 industry groups that include the building trades unions, merit shop contractors, roadbuilders, architects and engineering associations.
He says along with regulations, the industry needs a simple, “very efficient” adjudication process to move cases along.
In jurisdictions with adjudication processes in place around the world, the number of cases is shown to decline as parties often turn to settle their disagreements face to face, Williams points out.
He says the pandemic probably has not exacerbated the payment problem in Nova Scotia where the industry has operated safely with no shutdowns to date.
Gord Gamble, president of Iron Dog Inc., says the mechanical contractor avoids bidding on jobs where a general contractor has a history of delinquent payments — sometimes which exceed 120 days.
“When you think about the finance charges associated with delay of payment, it starts to eat away at that profitability pretty quickly.”
That is especially true with multimillion-dollar projects where risk exposure increases, Gamble says. Iron Dog is a small to medium-sized mechanical contractor with service and construction divisions for heating, plumbing and cooling in commercial and multi-family residential.
The new legislation should be clear and simple, points out the contractor.
“We don’t want to get into long adjudication processes or have to engage lawyers to interpret legislation.”
Payment terms should be “well defined” and parties should be held accountable to meet those terms, he adds, noting operations like his will improve if progress payment terms are 45 to 60 days, rather than 90 to 120 payment terms common today.
“We all understand there are deficiencies and holdbacks…but there is a lot of money that can be flowing earlier.”