One of the most serious problems facing the construction industry is the endemic plague of late payments. Contractors are often forced to wait 120 days or longer to receive payments for work that has been completed and certified. This has a very drastic effect on the industry and on the broader economy. It leads to lower levels of employment in the construction industry, less investment in apprentices and training, reduced investment in capital and equipment and inevitably drives up the costs of construction.
Most construction work is project based and a typical construction project involves an owner who makes a contract with a general contractor to organize and oversee the work and make contracts with various trade contractors to perform the work. The trade contractors often enter into contract with other contractors to perform some of the work and with suppliers. Very often, payment for work that has been satisfactorily completed and certified is needlessly delayed as it flows from the owner to the general to the trade contractors and their sub- contractors and suppliers. Needless to say, these delays put significant pressure on the cash flows of many small construction enterprises.
Bill 211 and Bill 69
The widespread problem of delayed payment in the construction industry is already well understood at Queen’s Park as two Private Members Bills have been introduced to combat it. First was Bill 211, Protecting Contractors Through Prompt Payment Act, 2011 introduced on June 1, 2011 which died on the order paper as the legislature prorogued for a general election. Then there was Bill 69, Prompt Payment Act 2013 introduced on May 13, 2013 and which got as far as public hearings in the legislative process before being set aside by Committee after the government had announced on March 28, 2014 a review of the Construction Lien Act which would also consider the delayed payment and cash flow issues that arose in the Bill 69 hearings. The was eventually review launched on February 11, 2015 with Bruce Reynolds as Counsel and Sharon Vogel as Co-counsel leading it.
Why it's important
- General contractors and trade contractors working on construction projects deserve to be paid in a timely fashion for the work they have completed, like any other business operating in Ontario
- Prompt Payment legislation has been adopted in many other jurisdictions including the US, UK, Australia, Ireland and New Zealand. The EU has also recently adopted a motion to require all members to enact prompt payment legislation.
- Ontario needs to lead the way in Canada by enacting prompt payment legislation that supports small business construction owners by ensuring all contractors are paid in a timely fashion for the work they have completed.
- Prompt Payment legislation will create more construction jobs, encourage greater use of apprentices, enable more investment into machinery and equipment and lower the cost of construction.
- Everyone deserves to be paid on time!
COCA supports legislation that will:
- require payment for construction work certified as being complete within 30 days of that certification.
- Allow for monthly progress payments on projects of longer duration.
- Allow for interest and penalties to accumulate where payment within 30 days is not forthcoming.
- Allow for contractors to suspend work where payment is not forthcoming for unreasonable periods.
COCA’s Advocacy Role
- COCA has been advocating for prompt payment legislation to combat the problem of delayed payments that is so prevalent in the construction industry since 2011
- COCA has used its annual industry lobby days at Queen’s Park to advocate for prompt payment legislation
- COCA held its 7th Construction Day at Queen's Park on Monday, February 29, 2016 and it proved to be one of the most successful construction industry days ever. Thirty-eight volunteers (a COCA record number) from 17 COCA member associations (also a record number) participated in 48 meetings (another record high number) with cabinet ministers, PAs, MPPs and senior political staffers to advance the need for prompt payment legislation for construction projects in Ontario. Representative of all three political parties offered their support including the Minister of Labour, Kevin Flynn, who stated he was speaking on behalf of the Premier
- In 2013, in partnership with the NTCCC and the OGCA, COCA ensured that Bill 69, the Prompt Payment Act, was introduced in the legislature as a private members bill; Bill 69 passed first and second reading and was referred to Committee with the support of all three parties