Municipality opposes
Prompt Payments Act

By Liz Dadson


Kincardine council

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The Ontario government's proposed Prompt Payments Act (Bill 69) is bad legislation and should be sent back to the drawing board.

That's the word from Kincardine council as it discussed the Act in committee-of-the-whole last night (March 12).

Bill 69 would impose significant limitations on municipalities, states a staff report to council. The Bill's three primary objectives are:

  • Prohibit all holdbacks on a construction project other than those required under the Construction Lien Act
  • Impose mandatory payment terms on construction parties, both in terms of timing and consequences of non-payment
  • Establish new financial disclosure obligations on construction parties

The Act attempts to address cash-flow problems faced by contractors relating to projects, but it, inadvertently, has unintended consequences that currently act as safeguards to the contracting party:

  • The Act would require statutory holdbacks to be paid within one day after the lien period ends, as well as prohibit any other holdbacks other than those permitted under the Construction Lien Act
  • The Act would prevent a payer from holding back funds for deficiencies at the end of the project when all progress payments have already been made, since the Act requires payment of the statutory holdback the day after the end of the lien period and prohibits all other holdbacks
  • The Act would not permit payments tied to contract or construction milestones
  • Deemed Acceptance of Invoices - all invoices submitted by payees would be deemed to be approved by the payer 10 days after the day the payee submits its invoice. This is a very short time period, especially if third-party engineers are required to certify payments or assess deficiencies
  • The Act would permit a payee to suspend work or terminate a contract or subcontract if the payee is not paid a progress payment to which the payee is entitled

Bill 69, therefore does not allow for a sufficient review period, which limits the municipality's ability to exercise prudent stewardship over public financial resources, states the staff report.

Staff recommends support of the Association of Municipalities of Ontario (AMO)'s recommended action for council to write a letter to the standing committee, the party leaders and the local MPPs.

A sample letter states that Bill 69 would have significant impacts on the municipality's ability to manage taxpayer funds prudently in construction and infrastructure contracts.

"In particular, Bill 69 will limit our ability to contract for the best payment arrangements to safeguard public funds in each construction project we manage," states the letter. "It imposes unrealistic and imprudent timelines for payment and to review work and certify payments; limits our ability to hold back reserves for warranty and maintenance; and does not reflect the complex nature of financial arrangements under large infrastructure projects."

The municipality would request that Bill 69 be amended to:

  • Reflect more realistic timelines for payments in infrastructure projects
  • Allow time for due diligence before accepting work and certifying payments
  • Allow payments to continue to be tied to project milestones
Mayor Larry Kraemer said  he had a discussion with Huron-Bruce MPP Lisa Thompson who is aware of Bill 69 and municipal concerns.


"This Act applies to the private sector as well," he said. "It's a horrible piece of Legislation. Yet, it received all-party approval for second reading. We should oppose it."

Deputy mayor Anne Eadie, policy chairperson for public works, also spoke against the Act. "I'm very alarmed about this. I appreciate that AMO has given us a heads-up about it. We need to send a strongly-worded letter and whatever else we can send."

"It astounds me that this made it to second reading," said councillor Candy Hewitt. "It eliminates local control of our contracts. It's a derogatory piece of Legislation. Send everything we can to everyone we can. Nobody benefits here except large businesses."

Kraemer said that when the Grey-Bruce Health Unit built its $17-million office building, it took 18 months to get all the deficiencies corrected. "We kept a holdback until it was fixed properly, and that was with a good contractor."

"We should send letters to the party leaders and to our MPP and ask why they supported this Act," said Eadie, "and we want a response within a few weeks."

Councillor Kenneth Craig suggested getting comment from Team Kincardine as well, which includes the Kincardine Business Improvement Area (BIA), the chamber of commerce and the Penetangore Regional Economic Development Corporation.

Committee-of-the-whole agreed to have staff draft a letter and bring it back for council approval at the March 19 meeting.

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Wednesday, March 12, 2014