ENABLING ECONOMIC POTENTIAL THROUGH PROMPT PAYMENT LEGISLATION (2023)

Issue

The Province of British Columbia does not have a prompt payment legislation currently in place. This is creating challenges in the construction industry where contractors and vendors are often faced with prolonged payment terms in comparison to other provinces like Ontario, Alberta, and Saskatchewan. In many instances, this means non-payment beyond 180 days after completion of work.

Background

The BC Construction Association, and the Vancouver Regional Construction Association, along with more than 30 other associations across the industry in B.C., are advocating for the implementation of prompt payment legislation. This joint advocacy effort for prompt payment legislation has resulted in the endorsement of said legislation by the Select Standing Committee of Finance and Government Services in both their 2022 and 2023 budget consultation reports.[1]

The implementation of prompt payment legislation would vastly improve cash flow, remove non-registered borrowing pressures, and alleviate risks throughout the entire construction ecosystem. The implementation of prompt payment legislation would also serve to remove any opportunity to either intentionally or unintentionally delay payment and thus have spin-off benefits, such as keeping many claims out of the court system, thus saving time and cost to business owners looking to get paid and pay they sub-tradespeople.

While this legislation would govern payments throughout the construction ecosystem, it would be particularly helpful for ensuring timely payment from the provincial government where organizations, such as the BC Construction Association  “stress that a lack of prompt payment costs government in excess of $3 billion per year.”[2]

Legislation for prompt payment already exists in other jurisdictions across Canada, such as Alberta (since August 2022), Saskatchewan (since March 2022) and Ontario (since 2019), as well as internationally (e.g., United States and United Kingdom). The advantage of this proposed legislation now is that our province working with all interested industry stakeholders can learn from the successes and failures in competing jurisdictions to address the nuances of our local B.C. market in support of all businesses.

Any potential Prompt Payment legislation introduced in B.C. should look to include several fundamental components using lessons learned from other jurisdictions such as Ontario, Alberta and Saskatchewan for any final legislation:

• Adjudicating process: appointment of provincially-designated, independent adjudicators, with an understanding of the construction industry, would be able to make a fair and efficient determination, leading to prompt payment for the contractor for the work completed to the promised quality;
• Dispute Resolution: The adjudication is final and binding. However, the adjudicator may refer the dispute to the court, and the adjudicator’s decision may be subject to judicial review on grounds specified in the legislation;
• Invoice requirements: the legislation would specify the timeline for issuing an invoice and defining a “proper invoice” to a written bill or some other request for payment. The timeline for issuing an invoice, based on provincial comparisons, could be broadly defined as monthly or more specific, such as every 31 days as in Alberta,[3] while a proper invoice would include such things as contractor’s name and address, date of services, materials used, name/address of where to send payment, etc.;[4]
• Payment timelines: the payment will clearly outline what payment has to be made to the contractor and subsequently when the contractor has to be pay their subcontractors and so on. For comparison, other Canadian jurisdictions have set payment at within 28 days of receiving a proper invoice, unless disputed within 14 days of receipt, with contractors paying their subcontractors within 7 days of receiving payment, and subcontractors paying their sub-subcontractors within 7 days of receiving payment; [5]
• Penalties: should late payment penalties become necessary, the legislation should define what those costs should look like be it through the contract itself or a statutory rate such as the Court Order Interest Act.

Urgency

The Province of B.C. can quickly address the issue of delayed payments in the construction industry by adopting a similar model of prompt payment legislation proven successful in other provinces. The construction industry, which plays a crucial role in rebuilding the economy post-COVID-19, is unified in its call for prompt payment legislation and the lack of political will is causing setbacks with a majority of stakeholders and in the industry at large. With the support of industry organizations and the proven success of this legislation in other provinces, the adoption of the prompt payment legislation will provide the much-needed framework for sustainability and expansion the construction industry craves in British Columbia.

THE CHAMBER RECOMMENDS 

That the Provincial Government

1. To pursue made in B.C. prompt payment legislation, in collaboration with all impacted construction industry associations and stakeholders to take into account construction best practices and to ensure that legislation is implemented in a way that minimizes negative effects on this sector while still promoting vibrant construction business activity.