Builders and trades in Alberta have joined forces to encourage the provincial government to bring in legislation that would speed up payments along the entire contracting and design chain of construction.
The Alberta Construction Association (ACA) and the Alberta Trade Contractors Coalition (ATCC) are urging Minister of Service Brian Malkinson to follow the example of Ontario and review the situation.
Ken Gibson, executive director of the ACA, said the groups want government to undertake a third-party assessment of the present construction legislation and come up with a made-in-Alberta solution.
“Delayed payment for work properly performed and invoiced is of concern for all parties throughout the design and construction contractual chain, including general contractors, subcontractors and suppliers,” explained Gibson.
“The concern is particularly acute for trade contractors, as they finance the majority of the value of any building project.”
Gibson said Alberta can learn a great deal from the other reviews, noting the ACA “favours a review by construction legal experts with extensive experience in Alberta’s construction market and with Alberta construction payment legislation and processes.”
The ACA and ATCC sent a letter to Malkinson calling on the provincial government to undertake the review.
The letter, written by ACA chairman Paul Heyens and ATCC chairman Terry Milot, states the organizations appreciate the government’s interest in facilitating timely payment through the construction chain, and that timely payment for work performed and invoiced is a priority for general contractors, subcontractors, design consulting primes and subs, and their thousands of employees.
“Together, we urge that your government commit to and announce undertaking a review of the legislation governing payment along the construction value chain, including payment along the contracting chain, and along the design chain.”
The chairmen noted much of the groundwork and lessons learned have been developed through recent reviews in Ontario and at the federal level.
Data from across Canada indicates that delayed payment is a serious and growing issue
— Ken Gibson
Alberta Construction Association
“What is needed now is the retention of Alberta experts, with input of an advisory council of stakeholders, to review Alberta’s legislation in the context of Alberta’s marketplace.”
The ACA, which represents 3,000 firms, contractors and suppliers in Alberta, has been working for several years with owners, members and other stakeholders to create points of consensus to address the prompt payment issue.
Earlier in the year, the ACA unanimously approved a motion on prompt payment that calls for a third party review of the entire project chain, including consultants for the construction industry in Alberta.
Specifically, the ACA is advocating for a multi-stakeholder ad hoc committee to be set up to look into the issue so that the opinions of all industry stakeholders are reflected.
Such a review, the association states, should also encourage prompt payment terms be specified in provincial procurements and where the province contributes more than 50 per cent of project funds.
A research report compiled for the ATCC three years ago indicated Alberta trade contractors struggle to receive timely payment from general construction contractors.
For example, 86 per cent of companies surveyed said late payments were a moderate or serious problem, and that in 2014 the average number of days in accounts receivable was 79 days, the average amount of bad debt reported was $17,018, and the average amount outstanding for accounts 60 days or more overdue was $223,819, predominantly from private accounts.
The report noted when payments are delayed in any part of the construction payment process, contractor cash flow is directly affected and cash flow is crucial to project success and survival of the industry.
The report indicated late payments affect the ability of contractors to pay their suppliers on time and also, with reduced working capital, caused 80 per cent of them not to bid on additional contracts due to fear that a late payment for their work would threaten the financial health of their company.
A proposed solution to decrease payment times included proper money-handling, such as setting up a trust to ensure an owner has the money to pay contractors, more communication, revisions to the lien act and increased consequences for late payments.
Gibson said late payments have a negative effect on the industry and it’s an issue that needs to be resolved.
“Data from across Canada indicates that delayed payment is a serious and growing issue for all types of construction projects in all construction markets,” he said.
As for next steps, the ACA continues to offer government support and assistance to resolve the issue, Gibson said, and looks forward to government launching a review as soon as possible.
In the meantime, contractors are being encouraged to keep the issue in the spotlight.
“The ACA urges all construction and design firms to remind their elected MLAs of the importance and urgency of this issue,” said Gibson, “and the need to launch the review.”
This is a very serious situation, and needs to be fixed ASAP
It is about time this was taken care of, from my own personal experience, this delayed payment has destroyed my contracting business.
Thousand of labourers have not been paid. When labourers work from payday to payday, and do not get paid, it causes family breakups, etc.
Subcontractors go broke, then close-up their business, labourers go unpaid, then there is no money to fight the big companies and the cycle continues.
I personally have been ripped off twice in four years. If you need help in pushing this forward, please contact me at (780) 293-6206.