Posted October 15, 2019

The City of Brampton announced earlier this year that it will expand the project threshold under which contractors will be required to be certified under the Certificate of Recognition (COR) program.

Brampton’s COR requirement has been in place since January 2019 on construction projects valued at over $25 million. Beginning January 2020, that requirement will be expanded to include projects valued at more than $10 million.

In a release, the city called the expanded scope “a reaffirmation of its ongoing commitment to health and safety for contractors, employees and residents.”

The Ontario government has announced a new way of approaching infrastructure construction.

On October 15, Infrastructure Minster Laurie Scott indicated that the province will now accept infrastructure-development proposals from the private sector. Unsolicited proposals (USPs) are proposal to the government that were not otherwise requested through existing procurement channels.

Through this new-to-the-province approach, private-sector ideas with the potential to improve public infrastructure and related services will be considered using a consistent and fair process.

"An unsolicited proposal framework is a leading global practice to leverage the expertise of the private sector to develop innovative infrastructure solutions to benefit the people of Ontario and make government open for business," said Scott. "It provides a clear path for industry to share proposals we might otherwise not have developed on our own."

Other Canadian and international jurisdictions—including Toronto, Nova Scotia, the United Kingdom, United States and Australia—have established USP processes and guidelines to promote private-sector participation and innovation.

"We will always work hard for the people, but we must acknowledge that government doesn't always have all the answers," added Scott. "Our new USP framework will ensure we are listening to the people and businesses that build and operate infrastructure in Ontario to find the best ideas and make them a reality."

Open to all proposals

The program is open for all infrastructure proposals. There are no limitations on the project size, asset class, delivery model or type of proposal that can be submitted. The province has indicated it is particularly interested in proposals relating to core types of infrastructure, including transit projects (such as new transit infrastructure, station improvements and transit-oriented development opportunities), health care facilities, highways, energy projects, law enforcement facilities and housing.

It is also interested in innovative proposals that relate to any other type of infrastructure (including “digital infrastructure,” such as the province’s broadband and cellular communications networks).

In evaluating each, the government will focus on those projects that provide the greatest benefit to the people of Ontario, are feasible from a technical and commercial perspective, align with the government's priorities, and provide the greatest value for money for any investment of public dollars.

The USP approach allows the government to receive and consider ideas it may not have generated on its own. Innovative ideas from the private sector can bring significant benefits to the people of Ontario through the construction of new infrastructure or improvement of existing assets.

“The engineering and contractor sectors are involved with infrastructure projects around the world and have ideas for incorporating more innovative approaches,” said Andy Manahan, executive director of the Residential and Civil Construction Alliance of Ontario. “These ideas cannot be effectively generated through traditional procurement processes. Encouraging unsolicited bids will therefore have significant positive implications for infrastructure delivery throughout the province.”

Assessing and awarding projects

Under the framework, submitted infrastructure projects will be assessed using such criteria as whether the proposal aligns with government priorities, whether it demonstrates a clear benefit to the people of Ontario, whether it is commercially, financially and technically viable, and, should government funding be required, the proposal demonstrates value for money.

Participants can submit proposals through the government’s new online portal. A web form will ask for high-level information so government can understand and evaluate whether the project should be advanced for further evaluation.

If a proposal is selected to move to the second stage of evaluation, additional information will be required from the participants, including a business case. If after evaluation, the government elects to proceed with a proposal, it will design a transaction and procurement structure that is best suited to delivering the project and protecting the public interest. In most cases, procurements will be competitively tendered.

Statistics Canada reported today that the value of building permits issued across the country rose by 6.1 percent in August to $9.1 billion. The increase was largely due to greater demand for multi-family and industrial permits. Seven provinces reported gains, and Quebec accounted for more than one-third of the total national increase.

The value of permits for single-family dwellings rose 3.2 percent to $2.4 billion nationally, led by Ontario. Of note, St. Catharines–Niagara issued a record high of $102 million in single-family permits, up $58 million from July. These gains were largely attributable to several developers filing additional permits prior to an upcoming increase in development costs in the region. Meanwhile, the value of permits for multi-family dwellings rose in every province, except Nova Scotia, increasing 18.8 percent to $3.3 billion.

Industrial permits were the only component in the non-residential sector to increase in value, rising 18.9 percent to $675 million. The increase was largely due to a high-value permit for a bio-pharmaceutical company in Toronto.

The value of commercial permits declined 5.9 percent to $1.9 billion, following gains in July. Quebec showed some strength in the commercial component (+$73 million) despite the national decrease.

Five provinces reported declines in the value of institutional permits, down 10.7 percent to $651 million.

Here in Ontario, permit totals rose by 4.9 percent to $3.7 billion for the month. The value of residential permits grew by 6.1 percent to $2.4 billion, and the value of non-residential permits rose by 2.7 percent to $1.3 billion.

Published October 9, 2019

Construction is mostly a relationship-based industry, as opposed to a transactional one. Many general contractors have multiple projects with the same owners and have worked with specific trade contractors numerous times over the years. When considering how prompt payment and adjudication will affect the relationships in the construction payment chain, there is no easy answer.

So, how might the new framework, which covers payment terms and access to timely adjudication, impact those relationships? Well, if everyone in the payment chain is doing what they should have been doing in the first place – paying promptly – this legislation should not impact them at all.

During the consultation process for Bill 142, The Construction Act, some stakeholders said they did not want this legislation because they had no payment issues. These stakeholders need not have worried because they will be able to proceed as they have always done (with no payment issues) and not be affected at all. On the other hand, those whose payment terms (or non-payment, as the case may be) are creating an issue for their payees due to lateness, are likely in for some uncomfortable moments when they have to defend their payment practices to an objective third-party – an adjudicator.

Late payment in the construction industry has evolved, over decades, to become the cultural norm. Payment terms have been slowly dragged out averaging over 70 days, with a good percentage hitting 90-plus days. This includes both regular work-in-progress payments, as well as delays in paying the statutory holdbacks, change orders and considerations. It would stand to reason that accounts payable processes, internal to the payers in the construction payment chain, evolved in line with slow and late payments. Prompt payment legislation will have a considerable impact on those companies who pay outside of the prescribed timelines as a norm.

Let’s say an owner pays its contractor every 45 to 60 days. They now have 28 days from receipt of the proper invoice, which means their certifier must check the work in less than 14 days so that the owner has the option of delivering a notice of non-payment if there are deficiencies or other reasons for non-, or partial-payment. Those reasons must also be specified in that notice, otherwise, the owner must pay the invoice as presented.

If there is a notice of non- or partial-payment issued by the owner, the general contractor then has seven days after receipt of that notice to notify the trade contractors, who then have seven days to notify their subs. There is a 21-day period for the general contractor and owner to sort out the non-payment issues and then the GC must start an adjudication to preserve their “paid when” rights. If the GC does not trigger an adjudication, any one of the trades impacted by this particular invoice, who has not been paid, can trigger an adjudication with the general contractor.

If the owner pays on time and the issue of payment arises between the general contractor and the trade contractor, the owner may end up being surprised about why there is a notice of adjudication on their project. One thing to keep in mind is that there are a number of items that may be adjudicated during a project, including change orders, set-offs, payment of holdback and others. Change orders for one have been the cause of many late (or very late) payment issues. The delay is often in getting them approved after they have been completed. Now, even without approval, those change orders can be adjudicated.

This will not only impact relationships, but it will re-engineer the process of making payments for all the stakeholders. No one really wants to stop the progress of a construction project, but in order to mitigate damages, the payment and notification timelines must be adhered to.

In the short-term, there will be some pain, both from having to change internal processes for tracking payment and notification timelines. It’s also an opportunity, as all parts of the payment chain come to the realization that this is a catalyst for a cultural shift for the construction industry.

Sandra Skivsky is the Chair with National Trade Contractors Coalition of Canada and the Director of Marketing and Business Development for the Canada Masonry Centre.