(updated February 21, 2020)
What is Prompt Pay?
Prompt pay legislation has been enacted in Ontario, Nova Scotia, Saskatchewan, and is currently under consideration by the Government of Alberta.
This is in response to chronic problems due to increasing delays in payment for work properly performed and invoiced. GC’s, Trades and suppliers often wait 70 to 90 days or more to get paid – well past expiry of current lien rights. Such payment delays on public & private projects are detrimental to the financial health of firms by restricting cash flow and effectively adding financing costs to projects.
A lack of knowledge of payment provisions in contracts further up the contractual chain and a reluctance to risk working relationships by enacting aggressive recovery steps have further combined to severely restrict the industry’s ability to fix delayed payment through current contractual means.
What are Your Associations Doing About Prompt Pay and the Government of Alberta Initiative?
The Alberta, Calgary, and Edmonton Construction Associations have successfully advocated for Service Alberta to initiate a review of construction payment legislation including the Builders’ Lien Act and ensured that a team of industry experts represented our industry in a recent series of Service Alberta consultation meetings.
Your associations also reached out to build consensus across our industry with the Alberta Trade Contractors Coalition and the General Contractors Alliance of Canada which contributed to consistent messaging at these meetings.
Key points of advocacy based on industry consensus
- Prompt payment provisions need to be legislated for all construction projects. The existing provisions of the Builders Lien Act focus on security of payment, not chronic delayed payment. The BLA excludes Crown projects under the Public Works Act, and design consultant contracts. Prompt pay legislation stipulates payment procedures, timelines, and actions to address disputes and delayed payment.
- Mandatory progressive release of holdback. Currently, BLA holdback can be retained until completion of the project, even for subcontractors whose work was completed early in the project. With prompt pay and progressive release of holdback, the impact of extended holdback could be significantly reduced.
- Faster and Less Expensive Adjudication by Recognized Experts endorsed by Industry groups. Legislated dispute resolution provides a means to resolve payment disputes with much less time and cost.
- Improved Transparency. Posting payment dates through a recognized repository such as BuildWorks Canada would inform project participants
How Can My Firm Be Involved?