March 2, 2017
Prompt Payment Update – March 2017
We’re closer than ever to Canada’s first ever Prompt Payment Law! We need your help to push your Member of Parliament to support this initiative. By following the easy steps at this website you can have your voice heard.
We need elected officials to know that passing prompt payment legislation is the right thing to do!
Federal Prompt Payment Update – January 2017
As someone involved in the construction industry, you know that payment delays have serious and negative effects on your business, and the efficiency of Canada’s construction sector.
The Canadian Roofing Contractors Association (CRCA) has been working hard with our partners in the National Trade Contractors Coalition of Canada (NTCCC) to fight payment delays for years and incredible progress was made in 2016—now we need your help.
Bill S-224, the Canada Prompt Payment Act is at a crucial stage of deliberation in the Canadian Senate. CRCA is asking our members and your colleagues in the construction industry to use NTCCC’s letter tool to send a message of support to Senators in your home province.
Please click on the following link www.promptpayment.ca to send your letter and let government know how important it is to solve the issue of delayed payments in Canada.
Construction Cash Flow Problems – Overblown issue, or serious business challenge?
The need for prompt payment is increasingly flagged as a key issue facing the construction industry today.
Understanding its scope and impact is challenging because it’s very difficult to accurately and efficiently track payments from owners to prime contractors and on to sub-contractors.
There is urgency to understand this issue better; blocked cash flow adds risk as well as cost and impacts the timely delivery of projects, impacting the overall financial health of the industry.
RCABC is an active part of the Deputy Minister’s Industry Infrastructure Forum (DMIIF), which includes senior representatives from the provincial government and the construction industry. Our collective goal is to work together to understand and create solutions for key sector issues: prompt payment is one of those issues.
We urge you to add your opinion, perspective, and experience to an online discussion:
- Is the timeliness of payment an issue in the BC construction industry?
- If so, how would you fix it?
To be part of an invitation-only online discussion hosted by the Deputy Minister’s Industry Infrastructure Forum, simply click here to self-register. Your responses will be kept confidential and your contact information will only be used for the purposes of this online discussion.
CRCA Wants to Hear From You
The Canada Prompt Payment Act, will again be in front of the Canadian Senate at Parliament Hill in Ottawa for a second reading in the last week of September or by the first week of October at the latest. After this it will be most likely sent to the Senate Standing Committee on Banking Trade and Commerce.
This committee is expected to hold four meetings to discuss the legislation and we need your help to make sure Senators hear how damaging payment delays can be for small businesses, project progress, and the tradespeople who are affected by them. CRCA is planning to participate and to testify before the committee along with MCAC – the Mechanical Contractors Association of Canada and possibly more NTCCC member trade associations. We expect the committee meetings to take place between October 3rd and October 28th.
All contractors who were or are impacted by payment issues are encouraged to submit their stories to articulate the negative impacts of payment delays, and to show how Bill S-224 can ensure these problems are no longer seen on Federal projects.
- Have payment delays caused your business to lay off staff? (If so, please explain further)
- Have payment delays caused you to not bid on projects?
- Have you previously, or do you know of another trade contractor who has faced insolvency due to a payment delay? (If so please tell us your story)
Submit your story to [email protected] All responses will remain anonymous and your company will not be identified during the presentation.
If you feel that your responses may go into deep detail, please feel free to contact Rob LeForte directly at [email protected]. Rob works at Impact Public Affairs and is heading our advocacy/lobby campaign for NTCCC and he will gladly will follow-up with you to obtain more about your story and use it as an anecdote when NTCCC representatives and supporters are testifying before the committee. Although we are looking examples of payment problems at the federal government project level, all examples will be compiled.
Prompt Payment Summit 2016
April 21, 2016 The National Trade Contractors Coalition of Canada (NTCCC) held the 2016 Prompt Payment Summit from April 17 – 20 in Ottawa, following in the footsteps of the successful summit held in 2015. The event engaged trade contractor associations and observers from across the country to discuss the urgent need for Federal prompt payment legislation and to discuss the progress that has been made provincially. This year, the event was capped off by an advocacy and awareness push on Parliament Hill where attendees met with nearly 40 Parliamentarians and senior ministerial advisors to discuss the issue of payment delays in Canada’s construction sector. Meetings focused on generating support for Bill S-224, the ‘Canada Prompt Payment Act’, a landmark piece of legislation for the construction industry, recently tabled by Manitoba Senator Don Plett.
“Payment delays in construction don’t just affect our members”, said Richard McKeagan, NTCCC Director and CEO of the Mechanical Contractors Association of Canada. “The lack of prompt payment legislation is hurting small businesses, preventing job growth, and limiting apprenticeship access across the country.” Trade contractors play a vital role in the construction industry, performing well over 80% of the work in the sector. Despite this, they regularly face cash flow problems stemming from parties who add undue delays to the payment process. This has limited the number of contractors who can bid on projects. As a result, governments end up paying more for their infrastructure projects. Delays also limits employment and apprenticeship opportunities, and have forced many small businesses into bankruptcy. The summit allowed trade contractors to share cases from across Canada in which delayed payments resulted in small business failures. Attendees agreed that, while awareness is much higher than in previous years, now is the time for the government to take action.
“We were thrilled to have Senator Plett table Bill S-224 this month, which would enact Federal legislation in support of prompt payment,” added McKeagan. “This Bill supports small businesses and employment in the trades in Canada, and underlines the principle that people who do good work deserve to be paid in a timely manner.” The Bill concerns contracts where the Federal government is the owner, which encompasses a large number of construction projects in Canada. It follows Australia, New Zealand, Ireland, the United Kingdom, The United States federally and virtually every U.S. State who have already enacted prompt payment legislation. Canada has been an outlier for many years.
“NTCCC Representatives received overwhelmingly positive feedback from Parliamentarians who are looking forward to supporting the Canada Prompt Payment Act as it moves through the Senate and House of Commons,” said John Blair, Executive Director of the Canadian Masonry Contractors Association. “Parliamentarians demonstrated strong knowledge about the need for this legislation, and many affirmed their support because this is the right thing to do.
The National Trade Contractors Coalition of Canada (NTCCC) was established in 2004 to provide an organized forum for Canada’s national trade organizations to share information, resources, and to collaborate on issues that are of common interest to all. The membership is currently comprised of: Canadian Roofing Contractors Association, Canadian Automatic Sprinkler Association, Canadian Masonry Contractors Association, Canadian Electrical Contractors Association, Mechanical Contractors Association of Canada, Interior Systems Contractors Association, Thermal Insulation Association of Canada, Heating Refrigeration and Air-Conditioning Institute of Canada-Contractors Division, Sheet-Metal Contractors Association, and the Canadian Institute of Steel Construction. For more information, please contact: Rob LeForte, Director of Government Relations and Campaigns 613-233-8906 [email protected]
Charbonneau Commission & Prompt Payment Legislation
January 4, 2016 The Charbonneau Commission recently released a report that included 60 recommendations on the granting and management of public contracts in the Quebec construction industry. The Charbonneau Commission has recommended prompt payment legislation (PPL) as one of their recommendations and NTCCC is very happy to see this recommendation come to light.
This may speed up the process in Quebec and will result in Quebec being the first province to introduce PPL in Canada. If this occurs,many other provinces will follow. The report referred to as the RCGT report in the Commission recommendation is one that was produced by the Quebec PPL movement which includes the Quebec Master Roofers Association.
Extract from the inquiry report on the granting and management of public contracts in the construction industry (Charbonneau Commission)
Recommendation 15 – To reduce delays in payments to construction contractors
During testimony before the Commission, several contractors have reported the problem of delays in payment of invoices submitted to public work providers (DOP). Generally, payment of accounts payable is 30 days after the invoice date, but payment delays in the construction industry are now 3 to 6 months, according to the latter.
These observations were confirmed by other witnesses involved in the public administration. According to the director of supply of the City of Montreal between 2003 and 2006, Serge Pourreaux, the Finance Department had estimated that in 2003 or 2004, 80% of invoices were paid within varying from 4 to 6 months.
During his testimony, the engineer and investigator Jeannette Gauthier Commission echoed this concern. Having met 25 of them and six suppliers of materials, she first said that the average payment period reached four months. She also said that this situation, generalized to all work providers, seemed worse with the public sector.
A study by the firm Raymond Chabot Grant Thornton (RCGT) also confirms this information. In Canada, the average time of collection of receivables in the construction industry exceeded 11.3 days in 2002 that of all the other industrial sectors. And in 2011, this gap has increased from 20.6 days. Worse, in the construction industry, the sectors with the highest percentage of customer accounts receivable over 120 days are those of the civil engineering and roads and the institutional setting. Customers in these areas are mainly in the public sector.
For the Commission, this situation presents three major problems. First, it gives significant power to site supervisors, since they must approve such progress payments. According to the approval rate of these, these professionals can intimidate or encourage construction contractors, thereby contributing to private corruption ploys. Second, this situation contributes to restricting competition in the industry, thus promoting the creation and maintenance of collusive agreements. Indeed, having already paid their workforce, suppliers and subcontractors, entrepreneurs must financially support these payment terms. This lack of liquidity limits the number and growth by restricting their ability to undertake new mandates. In this regard, in 2013, over three-quarters of contractors have refused to answer at least one tender, judging unfair payment terms or anticipating payment problems. In addition, late payments penalize more small and medium businesses (SMB) who do not always have easy access to credit. They are therefore more at risk of experiencing financial difficulties. This is not likely to encourage them to engage in new markets.
Third, this situation favors the infiltration of organized crime in the construction industry. Indeed, (SMB)s facing financial difficulties arising from excessive accounts might be tempted to resort to other non-traditional funding sources. In fact, this is what happens. The non-traditional financing is used by a significant proportion of construction companies because of late payments.
To these three major problems must be added a fourth, this time for the state. This situation encourages contractors to consider this financial risk in the price of the tenders submitted. In other words, these financing costs are transferred to the public work providers, and thus taxpayers.
To counter these adverse effects to the progress of the construction industry and development of the economy, several States have undertaken to supervise payment terms to their suppliers. These are the United States, the European Union, the United Kingdom5 and the State of South Australia in Australia.
The Commissioners therefore recommend to the Government to adopt legislative or regulatory provisions in order to propose, as part of a prime contract and subcontracts a standard production time progressive statements and payments to reduce the grip of construction supervisors and DOP on companies working in the construction industry as well as the possible infiltration of organized crime.