Considering the burden that routine payment delays impose upon contractors and subcontractors, the construction industry has waited a long time for a fix.

The first attempt to pass prompt payment legislation was made in 2011 when then MPP Dave Levac introduced Bill 211 into the legislature. It was not until December 2017 that the Legislative Assembly of Ontario passed Bill 142 and prompt payment became the law of the land.

Next, the Liberal government delayed the implementation of prompt payment to give the industry and its customers time to adjust to the new rules. The transition provisions of the Construction Act provide that prompt payment does not apply to a contract or subcontract if 1) the contract with the owner was entered into before October 1, 2019, or 2) a procurement process for the improvement that is the subject of the contract with the owner was commenced before October 1, 2019. So here we are in early 2020, and prompt payment still does not apply to most contracts and subcontracts.

Depending on the interpretation of the term ‘procurement process’ as it is used in the transition provisions, the industry may have to wait even longer before they get prompt payment. The term ‘procurement process’ is open to broad or narrow interpretations. A broad interpretation of ‘procurement process’ would further delay the onset of prompt payment. In my view, judges and adjudicators should prefer a narrow interpretation of the term ‘procurement process’.

Subsection 1(4) of the Construction Act tells us when a procurement process is commenced:

1(4) For the purposes of this Act, a procurement process is commenced on the earliest of the making of,

1. a request for qualifications;
2. a request for quotation;
3. a request for proposals; or
4. a call for tenders.

Subsection 1(4) is rife with ambiguities. Is subsection 1(4) intended as a definition of the term ‘procurement process’? For example, is subsection 1(4) telling us that every request for qualification is part of a procurement process? Or, is it the case that some requests for qualification are part of a procurement process and some are not, and the first step in the analysis should be whether the parties are involved in a procurement process at all?

Unfortunately, the term ‘procurement process’ is itself ambiguous. On the one hand, it may refer to a competitive bidding process of the contract ‘A’/contract ‘B’ variety. At the risk of oversimplifying, in a contract ‘A’/contract ‘B’ competitive bidding process the price submitted by a bidder is irrevocable for the period of time fixed in the invitation to bidders. On the other hand, a ‘procurement process’ may simply refer to the usual communications between the parties that precede the formation of every contract.

Advocates of a broad definition of ‘procurement process’ will point out that the term ‘request for quotation’ is not often used in connection with competitive bidding. While that is true, a ‘request for quotation’ can be used to start a competitive bidding process and is, in fact, used in that sense by the provincial government itself in its publication entitled Broader Public Sector Procurement Directive - Implementation Guidebook.

If the words themselves do not provide clear guidance to the meaning of ‘procurement process’, then we must look elsewhere.

Section 64(1) of the Legislation Act tells us that legislation should be interpreted as being remedial and should be interpreted in such a way to promote its objective. It begs the question: what is the purpose of having an exception for contracts arising from a procurement process?

On the one hand, it is hard to see what objective a broad interpretation of ‘procurement process’ would advance. Outside a competitive bidding process, what reason could there be for having two different sets of rules apply to two contracts formed on October 30, 2019, if in one case the owner published a request for qualifications on September 1, 2019?

On the other hand, a narrow definition of ‘procurement process’ is consistent with the view that one purpose of the transition provisions is to ensure that a party that is about to commit itself to a contract knows the rules that will govern that contract. Outside of a competitive bidding process, the point of no return for a party is the point at which they enter into the contract. However, the point of no return for a bidder in a competitive bid process is the point at which it submits its bid.

Consider a scenario where an owner published a call for tenders on August 1, 2019, and the tender process closed on August 15, 2019. Assume that bids were irrevocable for 60 days. If prompt payment was tied to the date that contract B was entered into, then bidders would not know at the time that they submitted their bid whether the contract would be subject to prompt payment or not. If the purpose of a transition provision is to ensure that a party knows what rules apply before they commit to the contract, then it makes sense to treat contracts resulting from a competitive bidding process differently from other contracts.

The lack of a compelling rationale for a broad interpretation of ‘procurement process’ suggests that the narrow interpretation is the correct one. Furthermore, adopting a narrow interpretation of ‘procurement process’ will tend to promote the remedial purpose of prompt payment to reduce or eliminate routine payment delays in the construction industry. And, for goodness sakes, the construction industry has waited long enough.

Ted Dreyer is a lawyer and adjudicator at Madorin, Snyder LLP in Kitchener. This article should not be relied on as legal advice.