Canada Prompt Payment Act approved by Senate

Canada’s Senate has unanimously passed Bill S-224, the Canada Prompt Payment Act, regulating payments on federal construction contracts, but a major hurdle remains as the bill now faces the scrutiny of the House of Commons.

Bill S-224 requires that federal government project owners must make progress payments to a contractor on a monthly basis, or at shorter intervals provided for in a contract.

The payment requirement is consistent down the contractual chain, notes a media statement from bill sponsor Senator Don Plett. The bill also accounts for milestone payments, when applicable, and permits contractors the right to suspend work, terminate a contract and collect interest on late payment.

Third reading of the bill was reached May 4. Supporters of the bill issued statements praising the milestone.

"It’s a great day for Canada’s construction industry. We thank the Senate for their support on this industry priority and we look forward to working with Members of Parliament on the next phase. It’s all about doing the right thing," said Del Pawliuk, president of the Mechanical Contractors Association of Canada.

Ed Whalen, president of the Canadian Institute of Steel Construction, commented, "We are one step closer today to solving the construction industry’s most critical issue, and to securing millions of Canadian middle-class jobs."

"The Senate has shown incredible leadership by passing this bill," said John Galt, chair of the National Trade Contractors Coalition of Canada. "Trade contractors, tradespeople, suppliers, and any of the 1.2-million Canadians in the construction industry who work on federal government projects will benefit tremendously if the House of Commons also passes S-224."

Plett, a former trade contractor from Manitoba, was forced to introduce amendments at the committee stage to address last-minute concerns. The amendments were adopted unanimously by the committee and approved by the Senate.

Plett issued statements in response to questions from the Journal of Commerce, and indicated the amendments did not change the essential nature of the bill.

"They did not change the substance or intent of the bill, but brought some of the timelines in line with the recommendations from the Reynolds report," he said, referring to Ontario’s study proposing reform to the Construction Lien Act. "They addressed some of the concerns of the general contractors, and one dealt with a concern about an efficient timeline for adjudication.

"At the end of the day, all of the amendments clarified and strengthened the legislation. They were all supported by our trade contractors, and they passed unanimously."

Plett said there is bipartisan support for the bill in the House of Commons among backbenchers and that only cabinet could derail it. Liberal MP Judy Sgro is sponsoring the bill in the House of Commons.

"I have every confidence that, unless cabinet gets in the way, this legislation will pass," he said.

Plett acknowledged there is some concern the bill might contravene the constitutional division of powers but said constitutional expert Gerald Chipeur told the Senate committee the legislation is without question within the federal government’s jurisdiction.

As for adjucation of claims, Plett explained the British model was reviewed, the Reynolds report recommendations were reviewed and the unique nature of the Canadian system was taken into consideration in drafting the bill and in the end a provision in the Reynolds report was supported. Plett said general contractors and trade contractors both agreed, "a right to suspend should only arise following an adjudication and a failure to abide the adjudicator’s ruling."

"We had men in tears here," said Plett. "Passing the Senate was one giant step forward for this legislation and regardless of what happens in the House of Commons, it is clear from the passion of our subtrades, this bill will not go down without a fight."