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Prompt Payment Ontario makes policy U-turn

1 800 Government

by Richard Gilbert

Prompt Payment Ontario (PPO) has made a policy U-turn to agree that prompt payment issues should be considered under the Construction Lien Act review, but there is double vision in the industry in terms of creating new legislation.
Prompt Payment Ontario makes policy U-turn

"We are satisfied after meeting with Bruce Reynolds and his staff that the prompt payment issue, the dispute resolution issue and the fair distribution of risk issue are front and centre in the review," said Eryl Roberts, president of PPO.

"The range of recommendations could go as far in our direction as there being no Lien Act at all. They are already starting to think of a world without the Lien Act, only a payment act."

The Ontario government selected Bruce Reynolds on Feb. 11 to conduct a review of the Construction Lien Act, which will focus on issues related to prompt payment and effective dispute resolution. The Attorney General of Ontario announced in late March 2014 that it would review the Construction Liens Act under an independent party.

Reynolds is an expert in construction law and a senior partner at Borden Ladner Gervais LLP, which represents various participants in the construction industry, including owners, general contractors and subcontractors.

PPO was launched in October 2014 to push the government to delink the issue of prompt payment from the review. However, after Reynolds was appointed PPO made a significant policy change.

The Ontario General Contractors Association (OGCA) has been a strong supporter of the Construction Lien Act review since it was announced in March 2014.

The organization has always agreed with the government's positon that prompt payment issues should be included in this review and not be separated.

"The fact it is called the Lien Act is just a title. It is a payment act, which is built around the core contracts and processes we use in the industry. So is prompt payment. It is built around the same core of contracts, agreements and processes," said Clive Thurston, OGCA president.

"This is why the government, Bruce Reynolds and the OGCA believe that if you are going to modernize the payment act, you only need one (piece of legislation)."

As a result of PPO's change in policy position, there may appear to be a consensus in Ontario construction about the need to modernize payment legislation through the Construction Lien Act review.

However, there are different visions about how this new legislation will be created.

The split in the industry originates in the payment chain for traditional construction projects, which have two separate choke points between the owner and the general contractor and the general contractor and the trades.

"Since the OGCA backed off the consensus with us over Bill 69, the PPO is going to focus on the relationship between the general contractor and the trades," said Roberts. "There is value in the Lien Act for the general contractors in the relationship with owners. But, our contract is with the general contractors, so that is where we have to focus our attention."

Thurston argues the prompt payment issue will not be resolved if the PPO refuses to recognize the importance of the owners in the construction payment pyramid.

"It's the owners that control the flow of the money. You can't solve one without solving the other," he said. "Whatever you make the generals do is irrelevant, if you don't make owners pay. You have to solve both bottlenecks at the same time and that is key. As far as we are concerned, that is the only way to address it."

Despite this differences in approach, Thurston is confident that the OGCA and PPO can work together to resolve the prompt payment issue.

One comment

  • # 1

    Jim Holmes

    The problem with The Construction Lien Act and PPO is that neither legislation offers any real protection to the true financial supporters of the construction industry, the material suppliers. Many subtrades operate with no bank facility and depend on their material suppliers to fund that portion of the business, until they get paid. Terms in the industry tend to be 60 days which puts most shipments outside of the 45 day limit of the Construction Lien Act. What the industry truly needs is a simple cost effective process where a lien is automatically registered on all projects until the last monies owed are paid.

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