A broad coalition of construction employers, product manufacturers and labour groups in B.C., along with some national industry heavyweights, are asking the province to bring in prompt payment legislation.
The group maintains that lack of prompt payment in B.C. is a big problem that results in inflated costs for construction projects because everybody involved in a venture must build in contingencies for late payments.
“What we see right now is that, all the way along the bidding process entities are having to inflate costs in order to anticipate late payments,” said Chris Atchison, president of the B.C. Construction Association (BCCA).
The situation, he noted, causes a “cascade effect” that results in projects costing more than they normally would.
The BCCA is part of the 28-member coalition. The coalition recently sent a letter to Premier John Horgan and Attorney General David Eby requesting that the government fund and manage a comprehensive review of Ontario’s experience and move forward with legislation to improve payment procedures.
Ontario became the first province to adopt prompt payment legislation when it passed Bill 142, the Construction Lien Amendment Act, near the end of 2017.
The letter states there is a “significant” prompt payment issue in B.C.’s construction sector which places undue risk on contractors and negatively impacts cash flow throughout the industry and the provincial economy. It encourages the government to proceed with enabling legislation next spring.
“We’re a big country, but in the construction world there’s a lot of mobility and there should be consistency of contracts and in the way we do work and the respect we give the workers who are involved in the process,” said Atchison.
“There’s a huge incentive to adopt this. What we’re looking for is not to just sort of have a far-out approach in this province, it’s to have a measured review of what is being undertaken in Ontario and then apply that with a B.C. lens.”
Atchison said prompt payment legislation is important because contractors, subtrades and workers already have to wait long enough to get their money.
Because there is no system in place, trade contractors routinely receive late payments, which can lead to cash-flow problems, he said, but the adoption of prompt payment legislation would ensure contractors and subcontractors are paid within reasonable timeframes, removing the uncertainty that exists.
In a lot of cases, Atchison said, there are “pay-when-paid” clauses on projects, whereby the work may be completed but those who did the work might not get paid for 60 or 90 days, which hurts the smaller contractors.
“It’s often the small businesses, the smaller trade contractor or subcontractor that is at the end of that supply chain of construction who has done the job that has to wait the longest to get payment.”
Problem is, said Atchison, those are often the people who need money the most.
“So that puts people into situations and they’re having to take out lines of credit or second mortgages just to try to keep their business continuity.”
Prompt payment legislation, he said, would ensure the money flows faster.
“It would provide a healthy payment flow from the start of a project right down to the end of the food chain. It’s essential for contractors to be paid promptly,” he said.
Atchison said it’s ironic that one of the reasons construction associations came into being was to advocate on behalf of payment issues and now, 100 or so years later, “we are still, in some jurisdictions, lobbying for and advocating for fair payment practices throughout the payment chain of the industry.”
The coalition, he said, merely wants to ensure people receive timely payments for goods and services rendered, “just like we would in real life. There’s no reason that construction needs to be done any differently.”
The coalition states in its letter there is an estimated $4 billion in risk premiums on projects currently underway in B.C. and contractors must mitigate the late payment risk by increasing costs of construction to cover the anticipated financial costs of carrying debt.
“When we’re looking at the benefits of having prompt payment legislation and a system to remedy prompt payment now all of a sudden you’re demonstrating a savings to projects,” Atchison explained. “When you’re demonstrating a savings on a provincial or federal contract, you’re demonstrating a savings to the taxpayer, and all of a sudden our money can go a little bit further. We can have more projects and do more building.”