The BC Construction Association recently submitted a report on prompt payment to BC’s Ministry of the Attorney General, Minister of Finance, and Premier David Eby.
The report, called “The Time to Act Promptly is Now,”commissioned by the BCCA and prepared by WeirFoulds LLP, outlines the objectives and benefits of Prompt Payment Legislation and Adjudication, which affect government, construction businesses, workers and the taxpayers of British Columbia.
The report noted that in the construction sector, lack of prompt payment is one of the most significant issues. According to the report, the estimated cost in BC’s construction sector is $4 billion, mostly due to risk premiums, interest charges, and legal fees.
According to the report, solving the prompt payment challenge in B.C. will help improve cash flow for everyday British Columbians. It will also help small contractors to pay their staff and bills as well as manage their business without taking on extra debt and financial expenses. The report noted that when contractors can’t rely on payments, they can’t invest in training or innovation.
BCCA is working with industry stakeholders to urge the provincial government to introduce legislation immediately.
The report noted that while frustration with delayed payment on construction projects is at an all-time high in B.C., so
are levels of support for the adoption of prompt payment legislation.
According to the report, for many years, prompt payment legislation has been recognized as an important means of addressing payment delays by facilitating the timely flow of funds throughout the construction industry.
While progress has been slow, the advocacy efforts undertaken by industry groups in the province are gaining traction among policy makers, noted the report.
According to the report, the BC Standing Committee on Finance and Government recently expressed their commitment to prioritize its enactment after years of encouragement from businesses and industry leaders in B.C. for the development of prompt payment legislation, and recommendations to this effect from government officials.
The report noted that it is important to note that the objective of prompt payment legislation is to facilitate cash-flow down the multi-tiered contractual structure inherent to construction projects through mandatory payment processes that are imposed upon all parties.
According to the report, a critical feature of the prompt payment and adjudication regimes in force in Canada is that prompt payment timelines apply regardless of whether these obligations are contained in a contract. Additionally, it is also true that parties cannot contract out of the application of prompt payment rules.
The report also noted that the more streamlined payment processes can be made across the entire industry through prompt payment legislation, the more opportunity there will be for success. It also noted that prompt payment will reduce administrative and practical management burdens on business owners, in-house counsel, and accounting staff by streamlining payment, invoicing and notice processes.
According to the report, subcontractors and small- to medium-sized businesses can take comfort that regardless of what sector of the industry they belong to or the nature of the project they are working on, their rights to be paid promptly will be protected.
Those already paying promptly will not be overly burdened by the implementation of a new standardized regime, and
while existing internal systems may need to be adjusted, the downsides to transitioning to the new system will be greatly outweighed by the benefits felt across the industry, particularly among those who are more vulnerable to the impact of delayed payment, noted the report.
