Alberta prompt payment exemption raises concerns

Key Takeaways:

• Prompt payment has been implemented in Alberta, except if you are working on Dow Chemical’s multi-billion-dollar project in Fort Saskatchewan.
• Records show the company lobbied the province to be exempt from prompt payment legislation and the exemption was granted.
• The Calgary Construction Association says that all stakeholders, regardless of size or stature, should be held to the same standards and urged the province to reconsider exemptions.
• Alberta officials say they have been transparent about possible exemptions which are intended to attract large projects that drive investment.

The Whole Story:

The Calgary Construction Association (CCA) is raising concerns about recent exemptions granted by the Government of Alberta under the Prompt Payment for Construction Work Act (PPCLA). 

The association released a statement saying it believes the exemptions undermine the fundamental principles of fairness and transparency embedded in the legislation and urged officials to reconsider the approach.

According to government documents, the exemption applies to Dow Chemical Canada in relation to its $11.5-billion petrochemical complex planned for Fort Saskatchewan, the Path2Zero Expansion Project. Dow announced last month it would be moving ahead with the project and construction is expected to start in 2024.

Records show Dow Chemical is a registered lobbyist in the province and its activities included discussion around the 28 day payment requirements and their applicability towards multi-billion dollar, multi-year projects and how “payment terms need to be extended past 28 days”.

Enacted in 2022, the PPCLA was introduced to foster fairness and transparency in payment practices within the construction industry – notably, requiring owners to pay contractors within 28 days of receiving proper invoices.

The association says the granting of exemptions threatens the core objectives of the legislation. The CCA stated that all stakeholders, regardless of size or stature, should be held to the same standards to maintain the integrity of the construction sector.

“The PPCLA was put into place in 2022 to provide fairness and accountability in the industry. We are deeply concerned that the ink hasn’t even dried on the legislation, and exemptions have already been granted,” said Bill Black, president, and COO of the CCA. “Granting exemptions to large corporations creates an imbalanced landscape, favouring giants over smaller players,” said Black. “These exemptions undermine the fundamental principles of fairness and equity that the PPCLA aims to promote, creating an uneven playing field for all involved parties.”

The CCA stated that the “erosion of trust and relationships within the construction industry” is a significant concern, adding that granting exemptions based on investment dollars to the province sends a damaging message that fairness can be compromised, eroding trust between contractors, subcontractors and suppliers. 

The CCA also expressed concern that the exemptions may also discourage compliance with industry regulations. They argued that granting exemptions sets a dangerous precedent, suggesting that compliance is optional. They believe this not only undermines the purpose of the legislation but also poses a risk to the industry’s overall integrity.

SiteNews reached out to the province and a spokesperson for Service Alberta and Red Tape Reduction explained that Alberta, like many other jurisdictions, has prompt payment rules in place to ensure contractors get paid on time. They argued that they have always been transparent about the possibility of exemptions.

“After testing ideas with industry, we built some flexibility into the Prompt Payment and Construction Lien Act in limited circumstances, while maintaining the underlying policy intent of prompt payment,” said the spokesperson. “Once proper invoices are given, all legislated payment timelines and protections still apply. We have met several times with key organizations representing the construction industry and have been transparent about the intent to create flexibility.”

The spokesperson added that Alberta’s government has been supportive of the Path2Zero project from the start, but noted this is not a Dow-specific regulation.

“The criteria for an exemption, including a minimum $5 billion project cost, are set out in regulation,” they said. “If other projects come forward, and we hope they do, they may be considered. We want to attract large projects that drive investment, create jobs and generate economic spin-offs for our province. We are committed to taking a balanced approach to ensure we have the right legislation and regulations in place to support economic growth while also ensuring the appropriate protections are in place.”

The CCA believes the exemption could hurt the industry’s reputation.

“The construction industry’s reputation is built on fair and prompt payment practices. Exemptions under the PPCLA risk tarnishing this reputation, leading to disputes, legal battles, and damaged professional relationships,” said Black. “Timely payments are vital for maintaining healthy business relationships, and exemptions can jeopardize the industry’s image.”

The CCA said prompt payment isn’t just a legal requirement; it is a “moral imperative” promoting ethical business practices. Their view is that granting exemptions to companies sends the wrong message about the importance of integrity and ethical conduct in the construction industry.

The CCA urged a reevaluation of the exemptions granted under the PPCLA to ensure that the construction industry remains a fair, transparent, and trustworthy environment for all stakeholders. Moreover, the CCA called on the Government of Alberta to lead by example and have the PPCLA apply to all Alberta projects which are publicly funded.