The province of Alberta hasn’t exactly been a beacon of reasonable public policy proposals lately. Still, the recent passage of the Prompt Payment and Construction Lien Act is not only sensible but long overdue.

After nearly a decade of advocacy by the construction industry, the Alberta government has finally recognized that construction companies, their employees, and their subcontractors deserve to be paid promptly rather than waiting months for a cheque to arrive in the mail. 

Contractors should receive payments

The act, which took effect at the end of August this year, ended the “wild west” mentality of contractors getting paid seemingly according to the whims of whoever controlled a project’s purse strings, according to Service Alberta Minister Nate Glubish.

According to the CBC, Glubish highlighted how wait times to get paid for some contractors and subcontractors had ballooned from about six weeks to up to three months in some cases.

Glubish expressed cautious optimism about the prompt payment legislation, praising it as a “clear set of rules” that everyone will have to play by, lest they face a new adjudication process that’s said to be easier and more streamlined than traditional builder’s lien litigation through the courts.  

Ironically, the act doesn’t apply to “everyone,” as Glubish boasted. The president of the Calgary Construction Association, Bill Black, highlighted how the act has a “tremendous gap” when not applied to provincial government construction projects.

Should contractors be paid upfront?

This exemption for public projects is problematic since it’s a clear case of a government telling the private sector, “Do as we say, not as we do.” But for his part, Glubish fired back that the Public Works Act applies to public construction projects, while a government spokesperson touted a “proven track record” of paying up within 30 days. 

Despite the shortcomings, Black praised the new legislation because it addresses a huge and long-standing issue in the construction industry: small businesses often wait weeks and months to get paid for their labour—and capital-intensive work. 

Contractors and subcontractors will no longer have to wait by their mailboxes for weeks on end in hopes of getting paid since the new legislation requires the owners of projects to pay up within 28 calendar days upon receipt of a “proper invoice.”

The act compels contractors to pay subcontractors within a week of receiving payment. The “calendar days” provision in the act is also an important distinction from so-called “business days.” 

Contractor’s Payment Guide

Had that language been omitted from the act, it would’ve allowed owners to tack on weekends and holidays to wait times to send out payments. As anyone in the construction business will tell you, they don’t keep banker’s hours, and business days end in the letter “y.”

The new prompt payment regime in Alberta addresses a significant challenge in the construction industry caused by the uncertainty of waiting to get paid.

Not to mention how construction companies were under intense pressure during the COVID-19 pandemic as an “essential” service, the industry is already subject to a host of market forces that threaten bottom lines day by day. 

Supply chain issues, global commodity prices, increasing labour costs, and convoluted building codes are just a few of the macroeconomic and microeconomic issues faced by an industry that builds our homes, cities, and essential infrastructure.

Ensuring that the people driving this engine are paid in a reasonable time is the least governments can do to ease their burden. 

Prompt Payment and Construction Lien Act

Thankfully, policymakers across the country have seemingly awoken to these issues. The Federal Government in Ottawa passed the Federal Prompt Payment for Construction Work Act, though it’s unclear when it will take effect.

Provincial governments in Ontario, Quebec, Manitoba, New Brunswick, Nova Scotia, British Columbia, and Saskatchewan have all begun to explore putting their prompt payment regimes in place, though only Ontario’s is currently in force.  

Not everyone in the industry is happy about the prospect of prompt payment legislation, warning of its potential to add costs and extra red tape to an already robust builder’s lien system that’s served the industry well enough for several decades.

The CEO of the Canadian Home Builders’ Association of British Columbia, Neil Moody, outlined his organization’s opposition to prompt payment legislation being explored in the province. 

Payment and Construction Lien Conclusion

Moody told Business in Vancouver that new legislation would add costs and delay residential construction projects in a province beset by a housing crisis.

He said it would be not only “unnecessary and costly” but also “redundant [and] confusing” for residential construction companies who would likely have to hire more people to comply with a prompt payment regime. 

But regardless of concerns about increased red tape, it’s hard to argue against paying people promptly for their work.

As long as governments can ensure that any added costs are negligible, the price of added accountability and subtracted uncertainty for those in the construction industry seems certainly worth it.