MCAC urges support for prompt payment legislation

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The Mechanical Contractors Association of Canada is urging its members to get behind prompt payment legislation introduced in the Senate.

Manitoba Senator Don Plett, himself a former mechanical contractor, introduced the Canada Prompt Payment Act (Bill S-224), which sets out payment requirements on federal government projects. The bill passed first reading in the Senate April 13 and second reading April 19.

“Although this is a huge step in the right direction, we need your assistance to help us move Bill S-224 forward. We ask that you contact your local/regional/provincial construction association and ask them: Are you supportive of Bill S-224 – Canada Prompt Payment Act?” said MCAC CEO Richard McKeagan in a letter to members.

Construction officials believe that, if it becomes law, Bill S-224 will act as a catalyst encouraging and expediting provincial/territorial jurisdictions to enact their own legislation which would apply to provincial/territorial government projects as well as those that are within the private sector. A similar scenario occurred in the United States, reported McKeagan.

Significant benefits for contractors
Some of the benefits associated with Bill S-224 include:

  • Payment for work certified as being completed within 30 days
    Allow for progress payments on larger projects according to schedule draws, subject to certification that work has been satisfactorily completed to allow these draws
  • 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 without the contractor being in breach of contract
  • The draft legislation contains the principle that payments for work certified complete down the construction chain should flow monthly, which itself is a principle embodied in the standard CCA and CCDC contracts
  • It also makes reference to milestone payments as well as a dispute resolution process

Prompt payment legislation is required because the common practice is that purchasers of construction altar standard contracts to get around obligations set out in policies and procedures, said McKeagan.
Prompt payment legislation is a worldwide issue and has been adopted in the United States, the United Kingdom, Australia, New Zealand, Ireland, and the European Union.

Wide industry support

The National Trade Contractors Coalition of Canada (NTCCC), which has been spearheading prompt payment legislation, held its 2016 Prompt Payment Summit from April 17-20 in Ottawa, following a similar successful summit held in 2015. The event brought 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 politicians and senior ministerial advisors to discuss the issue of payment delays in Canada’s construction sector.

Members of the Canadian Institute of Plumbing & Heating (CIPH) joined MCAC members for the “Day on the Hill” May 9-10 where prompt payment legislation, along with harmonized codes and standards, where the two key topics in meetings with politicians.

The Canadian Construction Association (CCA) is also backing prompt payment legislation. During the 50th annual joint meeting of the CCA and the federal government on construction procurement and contracting practices, held April 11 in Meech Lake, Que., Ray Bassett, chair of the CCA Task Force on Federal Prompt Payment, explained to federal officials how, even if they pay promptly, often subcontractors and suppliers further down the chain don’t see the money in a timely fashion and the resulting lack of cash flow prevents them from bidding on projects, driving up the cost.

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