Action plan on prompt payment in the construction industry

From: Public Services and Procurement Canada (PSPC)

Consult the action plan developed by the government-industry working group, made up of the Canadian Construction Association, Defence Construction Canada and Public Services and Procurement Canada, to learn more about some of the proposed solutions being explored to improve payment timeliness in the construction industry. In the first phase, the working group is focusing on construction contracts valued over $100,000 managed by Public Services and Procurement Canada and Defense Construction Canada.

Engagement strategy

A guiding document that describes the commitments made by Public Services and Procurement Canada, Defence Construction Canada and the Canadian Construction Association to collaborate through a government-industry working group to improve the timeliness of payment throughout the contract tiers on Public Services and Procurement Canada and Defence Construction Canada contracts above $100,000. This document identifies context and objectives.

Status: Completed

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Prompt payment principles

Our principles advocate for a prompt payment culture and mirror the Canadian Construction Association's policy statement 4.15 and Defence Construction Canada's principles on prompt payment.

Status: Completed

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Transparency and prompt payment disclosure

Disclose on a public website information on payments made to Public Services and Procurement Canada's (PSPC) and Defence Construction Canada's construction prime contractors and businesses (such as payment date, company name, and contract and project numbers).

Status: Completed. PSPC has developed a publicly-viewable payment disclosure website. As a second phase, the working group is looking at ways to increase the number of website hits, and ensuring that the information reaches the intended audience.

More information - Transparency and prompt payment disclosure

Fair terms throughout the construction supply chain

Consider inserting a statement in Public Services and Procurement Canada and Defence Construction Canada documents requiring prime contractors to pay subcontractors within a certain time period to highlight the importance of fair terms and encourage subcontractors to adopt the same practice. The industry will be reviewing standard construction documents to identify opportunities to outline such payment terms.

Status: On hold, pending the recommendations from the industry engagement initiative.

Payment certification process

The department is reviewing the payment process from receipt of invoice to issuance of payment to assess any opportunity to reduce timeframe. Further validation is required to ensure reduced timeline would not compromise due diligence and accountability for ensuring value for money to Canadian taxpayers.

Status: The review of the payment process has been completed; the opportunity to reduce payment timeline will be further examined in light of the recommendations from the industry engagement initiative.

Review of payment terms

Review payment terms in federal construction contracts and assess against industry standards.

Status: Completed. Public Services and Procurement Canada has compared its contractual practices and payment terms with those of the provinces, territories and Defence Construction Canada. Overall practices are fairly similar, however opportunities for more consistency will be explored based on the recommendations from the industry engagement initiative.

Dispute resolution

The Canadian Construction Association will review existing process and consider establishing a set timeline for resolving disputes.

Status: The Canadian Construction Association has completed its review of the Canadian Construction Document Committee's and the federal government's processes for dispute resolution and concluded that both are well aligned.

Next Steps: The industry engagement initiative will seek input on a potential adjudication process which could be used as a recourse for payment dispute.

Metrics

Develop metrics and a method to measure prompt payment improvements.

Next steps: In progress. The Canadian Construction Association is developing a survey to be administered through local construction associations to capture industry feedback on the current situation and allow the working group to establish a baseline.

Contractual holdback

Review the need and purpose of holdbacks on Public Services and Procurement Canada and Defence Construction Canada construction contracts (such as where lien legislation does not apply). Consider progressive release of holdbacks for completed portions of the work.

Status: The department is examining the use, benefits and purpose of holdbacks and will advise on potential improvements to current practices.

Education

Develop and roll-out an education program to ensure contractors and sub-contractors throughout the contracting chain are aware of their responsibilities and remedies, especially on federal construction projects.

Status: In progress. The working group is drafting some educational content around contract terms, service standards, frequent bottlenecks, remedies for delayed payment, and payment best practices on federal construction contracts. A training package will be developed for use by local construction associations.

Treasury Board 30-day payment period

Review the Treasury Board 30-day mandated payment period to determine if there is flexibility to reduce this payment period.

Status: Completed.

Treasury Board Secretariat has reviewed its Directive on Payments which has now been in effect since April 1, 2017.

Prompt payment codes and protocols for the industry

Similar to the "better business bureau" idea, this action would look at a protocol and opportunities for companies to self-identify as adhering to prompt payment principles.

Next steps: In progress. This practice is being done in the United Kingdom. Initial reaction is that this would be difficult to monitor and ensure validity. The Canadian Construction Association will further investigate.

Project close-out

Consider opportunities to improve project close-outs on federal construction contracts and release of final payments. Opportunity to build on work already underway by an Alberta taskforce working on this issue.

Status: Completed. The Canadian Construction Association has consulted with the Province of Alberta and shared results with the working group. Best practices information will be included in the training material.

Legislation

Bill S-224 was introduced to Senate in April 2016, Senate Committee hearings occurred in February 2017. The bill passed third reading in the Senate in May 2017 and is awaiting to be referred to the House of Commons for consideration.

Status: In progress. Public Services and Procurement Canada announced that a third party expert was commissioned to lead a national industry engagement initiative to explore the concept of a federal legislation on prompt payment. A recommendations report, based on industry feedback will be presented to the federal government for consideration and development of an effective legislative solution.

Additional initiatives led by Public Services and Procurement Canada

National Trade Contractors Coalition of Canada

Public Services and Procurement Canada has consulted with the National Trade Contractors Coalition of Canada in order to consider their concerns and point of view on the various action plan initiatives.

Next steps: The department will continue to meet with the National Trade Contractors Coalition of Canada to ensure that potential prompt payment actions have an impact at all levels of the construction supply chain.

Federal-provincial-territorial forum

Public Services and Procurement Canada continues to engage with provinces and territories to discuss common issues and share best practices. In general, practices regarding construction contracting at the provincial and federal levels are fairly well aligned.

Status: Public Services and Procurement Canada has surveyed the 13 provinces and territories and Defence Construction Canada to gather data on current contractual practices. Discussions with provincial and territorial counterparts and the gathering of data will help identify opportunities for alignment among federal and provincial/territorial initiatives.

Related links

More information

For more information on the government-industry working group:

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