Prompt Payment

Issue

Timely cash flow throughout the construction payment chain is fundamental to a healthy construction industry. Delay in payment anywhere in the supply chain chokes economic growth in that it reduces profit, restricts innovation and investment in plant, machinery and people. It also increases the cost to finance company operations and drives up the cost of construction overall.

The impact of payment delays on small and medium-sized enterprises can be disproportionately severe, and even a minor delay in payment of one or two invoices can put smaller businesses under severe financial stress.

Nationwide, $46 billion in construction invoices remained unpaid beyond a 30-day period, an amount representing approximately 16 per cent of the estimated $285 billion in annual construction activity in Canada. Worse yet, between 2007 and 2012, the average duration of receivables increased by more than 13 per cent, rising from 62.8 days to 71.1 days.

In December 2017, the Province of Ontario became the first Canadian province to pass legislation to address payment delays after reforming its Construction Lien Act. The legislation flowed from recommendations contained in the Construction Lien Act Review Report written for the Province of Ontario by Bruce Reynolds and Sharon Vogel.

In early 2018, the Government of Canada announced its intention to consult, draft, and pass legislation that would guarantee prompt payment and an adjudication system for federal government-owned projects.

Current Status

VRCA is supporting the Canadian Construction Association’s efforts to see prompt payment legislation enacted by the Government of Canada. Federal legislation would apply to federally funded projects.

VRCA is also supporting the British Columbia Construction Association’s effort to see prompt payment legislation introduced by the Province of British Columbia. Provincial prompt payment legislation would apply to publicly and privately funded projects in British Columbia.

Status Updates

Province of British Columbia prompt payment legislation

At the Oct. 17 Division meeting, VRCA President Fiona Famulak shared that B.C. Attorney General David Eby recently responded to BCCA’s correspondence indicating that while the provincial government wishes to consult the construction industry in the coming months on the need for prompt payment legislation in B.C., it would be at least a year out before any action is taken because the government wants to study the success and shortcomings of the dispute resolution system to be implemented in Ontario in 2019.

BCCA wrote to the Honourable David Eby, Attorney General of B.C. asking him to fund and manage a comprehensive review of the Ontario report and subsequent legislation for the purpose of making informed recommendations to BC’s provincial government and construction sector at large. Read more.

A coalition of construction trade associations and trade contractors in B.C. is formed with the goal of convincing the provincial government to legislate a solution to payment delays in the construction sector. The coalition is known as Prompt Payment BC.

Prompt Payment BC hosted two meetings in March 2018 at VRCA that drew 84 construction leaders to learn about the prospect of prompt payment legislation in B.C.

Following the meeting, Prompt Payment BC launched a letter writing campaign to connect concerned construction professionals with their MLA.

Government of Canada prompt payment legislation

The Government of Canada released the Executive Summary: Building a Federal Framework for Prompt Payment and Adjudication. Read more.

The Government of Canada announced its Action plan on prompt payment in the construction industry. Read more.

Public Services and Procurement Canada commissioned Singleton Urquhart Reynolds Vogel LLP to lead an industry engagement initiative on a potential federal legislation aimed at improving the timeliness of payments for federal construction contracts throughout all tiers of the construction industry and to consider the results and lessons learned from the recently completed Bill 142 (the Construction Lien Amendment Act) in Ontario.