Prompt Payment Ontario
Vol. 1
Introduction
Prompt Payment is 33 member organizations strong and growing and in order to keep everyone informed and up to date we will sending out a regular newsletter to the member organizations. The PPO News will contain updates on what is happening in Ontario with the CLA review, any actions taken by PPO and news of what is happening elsewhere in Canada and the world in regards to prompt payment. The request to the member associations is that you distribute the newsletters to your own individual members. Also if you come across any articles or information that you would like to share please forward them to sskivsky@canadamasonrycentre.com.
Ontario CLA Review.
To remind everyone as to the background of the CLA review, after the committee hearing on Bills 69, before finishing the clause by clause review, on March 28th, 2014 the government announced that it would hold a review of the Construction Lien Act. The independent review would look at concerns raised by the construction industry during the Bill 69 hearings and would include the following:
- reducing the financial risks companies face when they are not paid for services on time
- making sure payment risk is distributed fairly among all industry participants
- finding ways to ensure that companies pay for services and supplies on time.
The review was to begin in the spring of 2014. The full announcement from last year, and the terms of reference will be available on the PPO website (which will be launched by the end of February)
The announcement of who will chair this review is scheduled to come out this week and as soon as it is made PPO will send a special update to its members.
National Trade Contractors Coalition of Canada (NTCCC) and Federal Prompt Payment legislation:
The NTCCC has be lobbying the Federal Government for Prompt Payment Legislation that would apply to all Federal construction projects. There have been meetings and ongoing discussion with both MP’s and Senators, with Senator Plett from Manitoba championing this cause.
NTCCC Prompt Payment Summit
The NTCCC is in the process of organizing a Prompt Payment Summit on April 8th, 2015 in Ottawa. NTCCC will invite representatives involved in lobbying for prompt payment, from each province to attend. The purpose would be to learn from each group’s efforts and discuss how everyone can capitalize from the synergy of these individual provincial efforts. We will share further details as they become available.
PPO Meetings/Committees:
The PPO Executive (Cosmo Manella, Eryl Roberts, Hugh Laird, John Blair, Joe De Caria, Steve Coleman) met on February 6th, 2015. The Executive will have ongoing, regular meetings to keep the overall direction and actions of PPO on track. The Government Relations Committee will meet as soon as possible after the announcement of the CLA Review Chair. The full Committee of PPO will meet soon after the GR Committee meeting to discuss the recommendations from the GR committee and determine next actions.
Other News/Information:
- Article from the DCN on TCA’s Chair reaction to Prompt Payment concerns
Romeo Milano says serving as chairman for the Toronto Construction Association (TCA) in 2014 allowed him to learn about what’s at the forefront of industry members’ minds, with prompt payment taking the spotlight.
“Sitting in on all the committees, it really opens your eyes to what’s important to a lot of the members. It was very enlightening and rewarding at the same time,” he says, adding he intends to keep learning as he continues on as chair in 2015. “It’s (prompt payment) very very frustrating to members, because many of the members are subcontractors. That to me was a very loud and clear message. Now they (the provincial government) are talking about Lien Act reform to substitute for prompt payment and all the issues around that. Unfortunately, no matter how much we lobby or talk to the right people it doesn’t seem like we’re accelerating the process fast enough.”
TCA President and CEO John Mollenhauer also says while 2014 was a great year for the industry in terms of the volume of work, there were still issues surrounding process as well as cost.
“It’s still the most competitive construction market in Canada by a lot,” he says. “For a lot of the companies, it’s still a grind. At best margins are very skinny. I think that margins are out of sync with the high degree of risk associated with doing work in our industry. I’m dumbfounded that our industry doesn’t adjust to that. It’s more difficult now than ever to manage projects. We have more little costs. There are so many process-related changes. We are fraught with little things we have to do.”
Milano and Mollenhauer acknowledged the TCA’s challenges, accomplishments and milestones during the annual general meeting and Best of the Best Awards celebration, which took place on Jan. 21 at Woodbine Racetrack.
A principal and senior project manager at Safetech Environmental Ltd., a firm that provides environmental consulting services to institutional, commercial and industrial clients, one of Milano’s key goals as chairman for 2014 was to focus on health and safety.
“They all become passionate about something specific. In Romeo’s case it’s health and safety in our industry,” adds Mollenhauer. “He’s trying very hard to effect change. We’re all well aware in this game, it’s just a little bit at a time. Romeo has been a terrific chair.”
Reflecting on the year, Milano says he did see some improvements and has had meetings with Ontario’s Chief Prevention Officer George Gritziotis in an effort to collaborate and reduce workplace fatalities.
But there is still work to be done.
“We’re hoping to get the message out to frontline workers,” he says, adding the Ministry of Labour has made strides with its online work and making the message apparent. “It’s very visible. But sadly to say we still had 20 deaths in 2014. That’s disheartening and discouraging. We just have to work harder. I think the building blocks are there. The work’s been done, it’s just getting that message to the workers.”
Previously, the Daily Commercial News reported that Milano began his career with the TCA in the early ’90s sitting on the education and career committee. From there, he helped start and sat on the environment committee, eventually serving as the committee’s chair for several years before becoming chairman of the board.
Milano says one of the challenges for the TCA specifically this year is maintaining and increasing membership. While there have been successes in creating a presence online through social media, rebranding and engaging youth, more needs to be done.
“There’s a lot of competition dollars. Every year there seems to be more and more associations popping up,” he says. “The TCA represents all walks of life in construction. I think that’s why we have a stronger voice because we can relate all of those messages as one voice, as opposed to self-serving only for one particular group. The challenge is to be able to let members know that there is value in staying on as a TCA member.”
- Article from the UK on Carillion and what happens when you don’t pay your subs on time
http://www.ft.com/cms/s/0/b90c2286-b331-11e2-b5a5-00144feabdc0.html#ixzz3R0C2owfM
Carillion attacked over subcontractor payments
Financial Times March 3rd, 2014
By Gill Plimmer
The government is being asked to exclude Carillion from any future construction and private finance initiative contracts on the grounds of its allegedly poor record on payments to subcontractors.
Carillion, which is helping to build the new Crossrail train line, is one of the government’s biggest contractors and on Thursday announced that it had been appointed preferred bidder for the £335m Royal Liverpool hospital public-private partnership project.
But the FTSE 250 Company has come under fire after it extended payment times on some contracts to 120 days. Encouraging prompt payments to smaller businesses has been a target for the government, which has said that contractors should pay invoices to subcontractors within 30 days of their due date.
Rudi Klein, the chief executive of the Specialist Engineers Contracting Group, said a 120-day payment policy was “unacceptable”. “Companies who don’t comply with government policy on payments through their supply chain should be excluded from public sector work.
“We also think the government should bar public sector bodies – whether dealing directly or through PFI deals – from hiring companies with poor payment records such as Carillion. The whole point was to get money into the supply chain.”
He added that his organisation has received more complaints from members about Carillion than any other company.
Carillion said it had introduced the so-called Early Payment Facility in support of the government’s supply chain initiative. John Denning, director of group corporate affairs, said the move was voluntary and allowed subcontractors to be directly paid by the bank, giving them more control over the payment day.
But Suzannah Nichol, chief executive of the National Specialist Contractors Council, remained dissatisfied. She said she had written to Michael Fallon, business minister, urging him to take action. “We believe that the implementation of 120-day payment terms by tier one contractors is ‘grossly unfair’,” she said.
The row comes amid growing pressure on the construction industry. Balfour Beatty, the UK’s second biggest builder by sales, last week issued its second profit warning in six months.
Construction remains the weakest sector of the UK economy, with recent Office for National Statistics figures showing that construction spending fell 8.4 per cent in the year to the end of March and is down 18.9 per cent from its peak five years ago.
Richard Walker, managing director of Bosa Contracts Limited, a subcontractor for several of the big companies, said: “I think it’s disgraceful. The government should put its money where its mouth is and exclude any contractors that don’t sign up to the 30-day payment terms.
“Margins are already the worst I’ve ever known them. There are a lot of companies going bust already.”
Richard Bailey, managing director of Bam Construction, a rival builder, said: “We want [our subcontractors] to be here in one, two or five years’ time. It is not responsible or ethical to have 120-day payment terms. I wonder what [those contractors paying on extended terms] would feel like if clients were imposing that upon them.”
However, Mr Denning insisted: “Under this facility no supplier who chooses to adopt it is paid any later than they are under their existing terms, and most suppliers are paid earlier, at no cost to themselves.
“Under Carillion’s new early payment facility, suppliers can present Carillion-approved invoices to Carillion’s partner bank and request payment from the bank on a date of their choosing.
The bank is happy to make the payment to the supplier because the bank knows Carillion will honour that liability with the bank. The 120-day payment term does not determine when Carillion pays the supplier but is the period within which Carillion has to settle with the bank.”
- Summary of U.S. Prompt Payment legislation. There have been many references made to other jurisdictions that have prompt payment legislation and we will be sharing some of the highlights and overviews from these various states and countries to put what we are working to achieve in Ontario, in a global framework.
o 49 states (NH is the only hold out) have Public Sector prompt payment legislation; 31 and counting have Private Sector prompt payment legislation
o The attached file is a summary of key aspects and timelines in each state’s legislation