Canadian Consulting Engineer

Consulting Engineers of Ontario preparing position on prompt payment

Independent review of Lien Act and prompt payment gets under way this fall

September 14, 2015   By Bronwen Parsons

In Ontario, associations representing all the different stakeholder groups in the construction industry are busy working on what they would like to see changed in the province’s Lien Act. In particular they are concerned about issues around timely payment.

The Prompt Payment Ontario coalition, which consists largely of trade contractors, product suppliers and unions, has been lobbying strongly for legislation to set strict time schedules — 30 days is their goal — for paying subcontractors for work that has been certified and complete. Bill 69 last year proposed legislation along these lines, but instead the government has decided to order a review of the entire Lien Act. In February, the Ministry of the Attorney General and Ministry of Economic Development, Employment and Infrastructure asked independent counsel Bruce Reynolds, a construction law expert with Borden Ladner Gervais, to conduct the review. He and his team are hearing deputations this fall and are supposed to report back by December.

Consulting Engineers of Ontario (CEO) is one of around 70 groups invited to take part in the review process. David Zurawel, director of government and stakeholder relations with CEO, says they are working to develop the association’s position and that they have established a task force for the purpose.

“We want to see changes to the Act, and we do support timely payment for certified, completed work,” says Zurawel.

However, he says, “One of Our big concerns is the potential liability for consulting engineers in certifying payments. We’re working really closely with our insurance partners and legal counsel on this issue. What happens if the consulting engineer certifies payment for too little work, or for too much? We are being very mindful about what those potential risks are for our members as we develop our position.”

Zurawel says that whatever system emerges as a result of the review, it has to be nuanced and flexible. “The system has to have a process in place that will effectively provide for timely payment for certified, completed work, but it has to be a prudent process. It can’t be a process that essentially functions by rote.” He says the payment process should account for the different nature of services supplied. “If we’re looking for a new payment system for Ontario, that system has to have the inherent flexibility to recognize the needs of every stakeholder that’s involved,” he says. “And an important part of that is a dispute resolution system that works for everybody as well.”

From the trade contractors’ point of view, the issue is pressing and the Prompt Payment Ontario coalition has been doing research this summer to prove their case that trade contractors and other suppliers are suffering. “[D]elinquent payment in construction is a rampant and a growing problem,” says their website. “Trade contractors are commonly made to wait for periods of four months or longer to get paid for work that has been certified as being complete.”

Sandra Skivsky, who speaks for the coalition and is director of marketing and business development with the Canada Masonry Centre, says “The industry has changed incredibly in the last 40 years and the risk has flowed downstream to those least able to repel it. I’m not saying general contractors don’t get their share of grief, but when you are at the low end of the power spectrum it’s hard to push back because it’s so easy to get a replacement.”

She points out that prompt payment is already incorporated in the standard documents issued by the Canadian Construction Documents Committee (CCDC), but that owners, developers and general contractors are not often adhering to these standards. The coalition argues that the effects of delayed payments trickle down and are harming the economy as a whole. To prove it the coalition has conducted an online survey of benefit providers as third-party organizations who see the effects when companies and employees can’t pay their dues.

Skivsky would like any payment legislation to “set out a clear framework” that would ensure that the trade contractors are paid on time for satisfactory completed work.

While Reynolds is scheduled to issue a report in December, judging by the information package that has been issued to stakeholders, the scope of his work is vast and complex. The Ontario Lien Act originated in 1983 and has not been significantly changed since then despite the evolution of P3s, design build and other new contracting arrangements. To see the extensive information package issued to stakeholders, click here.

Other jurisdictions already have prompt payment legislation in place, including the U.S. federal government, many U.S. states, the EU, U.K., Australia and New Zealand.

In Canada, the Alberta Construction Association is also starting to investigate prompt payment legislation and held a meeting of stakeholders in August.


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2 Comments » for Consulting Engineers of Ontario preparing position on prompt payment
  1. Karl says:

    One of the big issues at the moment in the construction industry is how major equipment product suppliers are being paid.
    We are the authorized dealer in the GTA for one of the big standby power generator manufacturers from the USA. As a dealer we have to pay the manufacturer in full within 30 days of them shipping the generator to us. Depending on what modifications or extra witness testing has to take place here in Ontario, it can take anywhere from 2 weeks to 2 months to ship from our facility in Ontario to the site. We invoice at time of shipment on Net 30 days terms. Almost always we have to wait for construction draws that can delay the payment 45-60 days and then the contractors are holding back 10% of the payment until they have completed enough of the installation (usually anywhere from 2-weeks to 6 months or more) that we can come in to commission the new generator (basically ensure their installation will not interfere with the proper operation of our generator) and then wait another 45-60 days for the draw to receive that final 10%. All in all, this routinely ends up taking us 6 to 8 months after shipping to receive full payment for a product that we had to pay for in full 7 to 9 months previous.
    In one extreme case we are going through right now on a large municipal project, the city is withholding 10% from all contractors until substantial completion of the entire project, not just our generator part, which of course means the contractor is withholding our 10%. The project was supposed to be completed within 1-year of our shipping the generator product to site, but for various reasons, none of which relate to us, the project is already 2-years behind schedule and still is not complete. As this was a very large project, we have been very unfairly delayed payment exceeding $300K, but have paid our invoices to the manufacturers 3-years ago. To make it worse, the generator industry does not make high margins, typically in the 10-15% range so this often represents the bulk of any profit for us.
    As the supplier we are not performing construction or contracting work on the site, but are routinely being unfairly penalized and denied prompt payment. This is not unique to just the generator suppliers, but some other equipment suppliers as I understand.
    This needs to change.

  2. David Thompson says:

    Could the ACEC – CAN give their position on timing of payment of sub consultants.
    Consultants who work directly for Contractors are paid in a significantly shorter time than those consultants that work for prime consultants. The prime consultants are commonly ACEC-CAN members.

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