service alberta-land titles prompt payment stakeholder … · 2020-07-13 · industry context...
TRANSCRIPT
Classification: Public
Service AlbertaJune 17th, 2020
Prompt PaymentIn the Construction Industry
Classification: Public
Welcome/ Opening Remarks
2
Time Allocated:
120 minutes
Agenda Topics Lead
5 minutes Welcome and Introductions Richard Schlachter
5 minutes Opening Remarks Brandy Cox
10 minutes Meeting Facilitation Scott Vaughan
90 minutes Session One - Information Sharing
Prompt Payment - Industry Context & Alberta’s Engagement
Process
Progress to Date
What We Heard
Questions
Next meetings:
June 24 Session Two - Breakout discussions
June 30 Session Three - Alignment discussions
Curtis Woollard
All Participants -
questions will be
recorded in Q/A
10 minutes Closing Remarks Department
Classification: Public
Purpose of Today’s Meeting – Session 1
Reaffirm the purpose/objectives and steps of the project
To communicate the results of the face to face sessions and the survey and
respond to questions you might have related to the information
Link this Session 1 (What was Heard/Survey information) to the work
required in upcoming Sessions 2 and 3
Classification: Public
Purpose of Sessions 2 & 3
Session 2 – June 24 Present topic areas with corresponding discussion statements with (via infographics)
Discuss the topic areas with discussion statements (via break-out groups), gather
feedback, find out which ones you are comfortable with and which ones you are not as
comfortable with and need more work/discussion (those will move on to session 3)
Session 3 – June 30 Discuss and further refine the identified “need more work - less comfortable” topic
areas/discussion statements in break-out groups.
Classification: Public
Questions
There will be a question and answer opportunity at the end of Curtis’s
presentation today.
You can ask your question by utilizing the Q/A feature on your screen
If we unable to answer your question this morning we will make sure that it
is answered offline for you
Classification: Public
Industry ContextPayment Issues in the Construction Industry
Classification: Public
Industry Context - Delayed Payment
7
• Current payment processes are not working for many.
• Business viability is being impacted with COVID-19
heightening this problem.
• Representative construction industry organizations
have communicated that timeliness of payment is a
significant problem.
• The payment cycle has risen to over 70 days
throughout the industry and is even higher in the oil
and gas sector.
Classification: Public
Classification: Public
Industry Context – The Builders Lien Act
9
• In addition to conventional collection steps through
the Courts, unpaid suppliers of work or materials
may file a lien within specified timelines against the
property pursuant to the Builders Lien Act.
• There is no need to have a contract with the owner
of the land. The right arises from having added
valuable work or materials to the land.
Classification: Public
Industry Context – The Builders Lien Act
10
• In Alberta, a supplier may file a lien within 45 days of
completion of work on the project.
• Other jurisdictions lien periods are as follows:
Province Days to File a Lien
BC 45 days
Alberta 45 days
Saskatchewan 40 days
Manitoba 40 days
Ontario 60 days
Nova Scotia 60 days
New Brunswick 60 days
Classification: Public
Industry Context – The Builders Lien Act
11
• The Alberta Land Titles Office receives all liens for
registration against titled land.
• In 2019:
4,237 liens were registered.
535 liens were protected by lawsuits initiated through
the Courts.
Total value of the liens was $786 million.
Median value of a lien was $15,311.
Classification: Public
Industry Context – The Builders Lien Act
12
• The Builders Lien Act was passed in the early
1980’s with only one amendment to date.
• In 2001, the Act was amended to provide a special
lien period of 90 days the oil and gas sector.
• Today, that sector reports average payments over
100 days, leading to calls to further increase the lien
period.
Classification: Public
Ontario Lien Period
60 days
Alberta Lien Period
45 days
Classification: Public
Industry Context – The Builders Lien Act
14
• Given the length of the payment cycle and the amounts
claimed, two fundamental problems with the Builders
Lien Act have been revealed:
1. Lien rights are frequently lost because the time to
file a lien expires prior to awareness of a payment
dispute.
2. The median value of filed liens reveal that the costs
of litigation are disproportionate to the value of the
amount claimed, thus making little economic sense
to pursue lien claims through the Courts.
Classification: Public
Industry Context – Prompt Payment
15
Calls for the implementation of ‘prompt payment’
have been seen throughout Canada.
• Ontario’s Construction Act came into force in 2019.
• Federal legislation concerning federal procurement
contracts has also been exacted.
• Currently, prompt payment initiatives are being pursued at
various stages throughout most provinces, including all four
western provinces.
Classification: Public
Industry Context – Prompt Payment
16
• Prompt payment generally includes the following
attributes:
1) Prompt Payment - Statutory provisions requiring
specified timelines for payment and corresponding
penalties for non-compliance.
2) Adjudication – Disputed invoices are dealt with through
arbitration using streamlined rules.
Classification: Public
Industry Context – Prompt Payment (Ontario)
17
ON’s Prompt Payment mandates the following payment guidelines:
28 35 42 490
Contractor delivers a proper invoice
(Assumes no notices of
non-payment are delivered)
Payment is due from the Owner within
28 days of proper invoice
Owner pays contractor in
full during the 28-day
period
(Assumes no notices of
non-payment are delivered)
Subcontractors pay Sub-
subcontractors within 7 days of
reciept of Contractor s pay
Contractor pays Subcontractors within 7 days of
receipt of Owner s payment
Sub-subcontractors pay Sub-sub-
subcontractors within 7 days of
receipt of Subcontractor s
receipt, etc
CALENDARDAYS
(7 DAYS)(7 DAYS)(7 DAYS)
Classification: Public
Industry Context – Prompt Payment (Ontario)
18
• In the event of a dispute, adjudication must be undertaken
through a delegated authority.
• The dispute process takes the following steps…
4 Days
Named Adjudicator accepted ?
YES
No Adjudicator
Determination/Decision
Adjudicator receives documentation and
initiates process(Review/Inquiry/
Hearing)
Proposed Adjudicator Named Adjudication Initiated
Compliance is required or risk of enforcement/suspension
NO
Adjudicator Appointed
Referral to Governing Authority to appoint an adjudicator
7 Days
Classification: Public
Industry Context – Prompt Payment Review
19
• It is necessary to undertake a comprehensive review
of the Builders Lien Act, Prompt Payment, and
associated issues within the industry in order to
effectively address payment elongation.
• Efforts to introduce stand alone legislation through
private members bills in Ontario, Manitoba, and
Saskatchewan did not proceed due to a lack of
harmonization with existing builders lien legislation.
Classification: Public
Progress to date…Where We’re at in the Process
Classification: Public
Progress to date…
21
• November 2019: a pre-engagement meeting was held with
stakeholders in to initiate a comprehensive review of the
Builders Lien Act and payment issues in the construction
industry.
• January 17 and 24: four in-person sessions were held in
Edmonton and Calgary with 71 attendees.
• February 20: an online survey was launched and due to
COVID-19, was extended to May 1, and completed by over
800 respondents.
Classification: Public
22
• In person session attendees included representatives
throughout the construction industry including:
Progress to date…
General Contractors
Developers/Owners
Suppliers
Trade Associations
Construction Companies/Associations
Universities
Oil and Gas
Municipalities and Public Works
Professional Associations
Government
Classification: Public
Progress to date…
23
• Both the in-person and online survey consultation
covered eight areas:
Prompt payment
Adjudication
Holdbacks
Modernizing Lien Provisions
Interprovincial Rule Harmonization
Transparency
Bonding
Trust Remedies
Classification: Public
Progress to date…
24
• The online survey was open to selected industry groups
and was sharable by those groups with their membership:
Survey Report Info
Stored Responses 894
Number of completed responses 539
Surveys sent out 1,209 (minimum)
Industry Stakeholder Responses 642
Public Sector Stakeholder Responses 45
Other/Prefer not to Say 56
Classification: Public
What We Heard…Overview of the Feedback Received in Person and Online
Classification: Public
What We Heard – Areas of Feedback
26
• The top three areas of feedback were:
• The three areas of least feedback were:
Area of Most Concern
Prompt Payment 65.67%
Holdbacks 52.36%
Modernizing Lien Provisions 52.03%
Areas of Least Concern
Bonding 35.15%
Interprovincial Rule Harmonization 27.46%
Reform of Trust Remedies 25.56%
Classification: Public
What We Heard…
Prompt Payment
Classification: Public
What We Heard - Prompt Payment
28
Prompt Payment was the area that received the highest selection
for completion in the survey.
Prompt Payment Scope:
Prompt Payment should apply to all construction projects.
Exemptions should not be available to achieve uniformity.
All projects/people should benefit from prompt payment.
Legislation should provide consistency with universal rules.
Classification: Public
What We Heard - Prompt Payment
29
A Proper Invoice should:
initiate the prompt payment process;
include Contractor’s name address, date and period of services,
amount payable and where payment should be sent; and
also include the GST #, purchase order, change orders.
Prompt Payment Considerations:
Payment should be due within a 28-30 day window.
Interest payments should be stipulated as part of prompt payment.
Many responses believe “Pay when Paid” clauses need to be
eliminated and legislation should be used to do so.
Classification: Public
What We Heard - Prompt Payment
30
Prompt Payment Common Concerns:
Proper Invoice may be too complicated or difficult to compete.
Timelines may not be compatible with financing and draw
processes.
Additional administrative burdens may lead to higher costs to
businesses.
The implementation of strict rules impact on the freedom of
contract of the parties.
Classification: Public
What We Heard…
Adjudication
Classification: Public
Adjudication Governance and Training:
Support for an arm’s length government controlled agency,
board or commission to oversee all aspects of adjudication.
A Government of Alberta ministry was the alternate choice for
adjudication governance and oversight.
Respondents believe the dispute process should be
capable of being initiated by any party involved with
contract.
Experience in construction industry is required to qualify as
adjudicator.
What We Heard - Adjudication
Classification: Public
Adjudication Considerations:
Parties mutually decide on adjudicator within 4 business days.
If unable to agree on adjudicator, one is appointed within an
additional 4 days.
Appointed adjudicator must receive documents within 7 days
and make their decision within 7 days.
From appointment to decision would be a maximum 22 days.
Adjudicator’s decision should be binding on the parties.
What We Heard - Adjudication
Classification: Public
Adjudication Common Concerns:
Maintaining the impartiality of the adjudicator was raised as a
common issue. Many individuals within the construction industry
are known to each other, which could create conflicts of interest
for adjudicators that would need to be carefully managed.
A concern was raised with respect to controlling costs to the
industry, which is an impediment to using the Courts in the
current system (payment for adjudicators, recertification and
professional development costs, delays in contract (penalties)).
What We Heard - Adjudication
Classification: Public
What We Heard…
Holdbacks
Classification: Public
Holdbacks were the second highest area selected for completion in
the survey.
Holdbacks Considerations:
What We Heard - Holdbacks
A majority of responses concurred that the current 10%
holdback is sufficient and should remain unchanged.
Guidelines for the relationship between deficiency holdbacks
and holdbacks for liens would be beneficial as the use of
such holdbacks creates confusion.
A majority of respondents indicated they do not distinguish or
use the minor or major lien funds for holdbacks differently.
Support for the annual or progressive release of holdbacks
was high throughout the industry.
Classification: Public
Holdbacks Common Concerns:
The most common concern was the use of lien holdback
money for deficiencies.
The amount of the holdback is often higher than the value of
deficiencies but the total amount is nevertheless retained.
What We Heard - Holdbacks
Classification: Public
What We Heard…
Modernizing Lien Provisions
Classification: Public
Modernizing Liens Considerations:
There should be periodic review of the minimum lien amounts to assist with deterring frivolous liens (currently at $300.00).
Lien amounts that fall under the jurisdiction of the Provincial Court should be able to be adjudicated there.
The lien period should be harmonized with prompt payment provisions.
The lien period should be increased. The vast majority of respondents favored a longer lien period of some duration.
What We Heard – Modernizing Lien Provisions
Classification: Public
Industry Stakeholder Specific Findings BLA-Filing Period
20%24%
11%
28%
11%
2%4%
45 60 60/90 90 120 Don'tKnow
Other
General Contractor46 Responses
11%
16%
12%
36%
19%
1%5%
45 60 60/90 90 120 Don'tKnow
Other
Trade Contractor207 Responses
2%
13%19%
53%
7%2% 4%
45 60 60/90 90 120 Don'tKnow
Other
Supplier53 Responses
47%
15%
8%
15% 15%
45 60 60/90 90 120
Developer/Owner13 Responses
23%
31%
8%
31%
7%
45 60 60/90 90 Other
Representative Org/Association
13 Response
28%
8%
16%
33%
8%
3% 3%
45 60 60/90 90 120 Don'tKnow
Other
Professional/Consulting
36 Responses
9%
32%
4%
36%
9% 9%
45 60 60/60 90 120 Don'tKnow
Public Sector22 Responses
4%
14%
23%
28%
14%
18%
45 60 60/90 90 120 Other
Other22 Responses
Classification: Public
Modernizing Lien Provisions Common Concerns:
What We Heard – Modernizing Lien Provisions
The 45 days to file period is too short and the filing of a lien
can damage a business relationship.
Extending the lien period may, over the long run, elongate
the payment cycle beyond an extended lien period.
The filing of frivolous/vexatious liens should be addressed
as this can impact project financing.
Upon filing a lien, the 180 day period to commence an
action should be reviewed as it is long.
Classification: Public
What We Heard…
Transparency
Classification: Public
Over half of the respondents report being impacted either very
frequently (33%) or somewhat frequently (36%) by the lack of
transparency.
The current provisions of the Act do confer rights to demand
information, but their use is limited because of the impact on business
relationships.
Insufficient transparency with respect to the payment certification
process.
73% of respondents claimed their biggest challenge is transparency
with the Commercial Industry.
What We Heard – Transparency
Transparency Common Concerns:
Classification: Public
What We Heard…
Bonding
Classification: Public
Bonding was the third lowest area selected for response in the
survey.
What We Heard - Bonding
Bonding Considerations:
Bonding should be decided by owner/general contractor.
Many respondents felt that public projects should be bonded.
Value of contract/project should determine whether bond is
required ($500,000 was the most common suggested threshold).
Risk and duration should be considered in necessity to bond.
Bonds should not affect ability to adjudicate or file liens.
Classification: Public
Bonding Common Concerns:
Bonding is not currently legislated in Alberta and should be
left to the parties in contracts to decide.
Bonding increases overall project costs, especially on
smaller projects and may exclude some firms/ individuals
from bidding.
What We Heard - Bonding
Classification: Public
What We Heard…
Trust Remedies
Classification: Public
If trust remedies remain in legislation they need to be
strengthened with more accountability and consequences.
Knowledge of trust remedies is limited in the industry. The current
legislation requires more clarity for better understanding among
industry.
What We Heard – Trust Remedies
Trust Remedies Considerations:
Trust Remedies received the fewest selections for response in the
survey.
Classification: Public
Trust Remedies Common Concerns:
Trust remedies are poorly understood and utilized within the
industry.
If there is to be an imposition of new rules, there is a concern
that it will add to ‘red tape’ and complicate matters.
What We Heard – Trust Remedies
Classification: Public
Questionsquestions recorded in Q/A
Classification: Public
Analysis availableEmail your request to [email protected] for:
• Online Survey Results
• Survey Respondent Summary
• Engagement Meetings Summary
Classification: Public
Next Meetings…June 24 Session Two Breakout discussions
June 30 Session Three Alignment discussions
Contact: [email protected]