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Getting paid in construction

Improving cash flow requires prompt payment and faster permit approvals
Thursday, March 9, 2023
by Cheryl Mah

In the construction industry, there is no shortage of challenges. One of the most significant is managing cash flow due to delayed payment and non-payment. In B.C., the lack of prompt payment legislation and permitting approval times are major obstacles for the steady, positive cash flow required for a healthy industry and economy.

Prompt payment legislation, permitting delays and supplementary conditions were three pressing issues discussed during a construction keynote in Vancouver.

David Volk, partner at Jenkins Marzban Logan, explained supplementary conditions are amendments, revisions or changes to standard form construction contracts. While they are often used to reflect the project and client’s unique needs, the conditions do add complexity and there is no case law, he said.

Pay-when-paid clauses are increasingly common in today’s supplementary conditions. “General contractors are adopting them across the board because they don’t want to carry the cash flow issue – managing the subcontractor’s payments or delay claims,” said Volk.

According to Katy Fairley, “cash flow is the number one hot button topic” in construction.

“One of the main items that we see modified in supplementary conditions are the payment terms,” she said, emphasizing she has no sympathy for owners who can’t pay their bills on time because “it’s not up to contractors to finance construction work.”

“At BCCA, there’s no more important topic than bringing prompt payment legislation to B.C. to assist with cash flow,” said Fairley, who is the association’s industry standard practices consultant.

“What we’ve seen across Canada and other jurisdictions is that it can work. B.C. is behind the times in this topic. B.C. is unique and stands out for the failure to have this sort of legislation.”

While there is no current progress on prompt payment legislation, Fairley said all the construction associations continue to push very strongly on the issue. “Prompt payment is going to be that first great step to helping resolve cash flow for contractors.”

Permitting delays also impact cash flow and is a longstanding headache for getting projects off the ground in B.C. The extreme backlog of permitting adds risk, complexity and instability to the industry.

Scott Kennedy, principal of Cornerstone Architecture, stressed there are numerous problems with the administration of the permitting processes at municipalities. And that the current economic and market environment is just adding to them. “Permitting times are taking projects that were profitable and making them unprofitable.”

“I want to see a client focused municipal approval system – not a bureaucracy approval system. They must be facilitators and not gate keepers,” he advocated, adding the delays especially impact high performance buildings. “All these different departments need to be on the same page instead of working in all these silos. It has to be a more collaborative environment.”

Tim Ryce, chief building official for the City of North Vancouver, agreed there are permitting problems and their municipality has taken steps to implement solutions.

He discussed several updates and changes at the city to improve permitting delays including creating a unified service centre – a one-stop shop – to streamline communications and operations in the building division along with a fully digital permitting process.

The industry can help in the process by making sure applications are completed properly.

“We have major gaps in application completeness and inspection failures,” noted Ryce. “Let’s work together and have full and complete designs and applications coming in. If the process worked perfectly, there would be no need for administration. Give me a perfect application. Revisions are terrible which costs construction delays.”


Cheryl Mah is managing editor of Construction Business.

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