Thank you for this opportunity to address you today. As Mr. Chair said, I am the president of the Canadian Construction Association and we are the national voice for construction in Canada representing 20,000 members across the country and informed through an integrated partnership with 63 partner associations at the provincial and local levels. We have four sectors with whom we consult to ensure we have broad representation. Those are from the general contractors, trade contractors, civil contractors, and manufacturers and suppliers. We employ close to 1.5 million Canadians and that generates about $138 billion annually to the national economy.
What's really important to note is that about 60% of the industry is small businesses. I'll talk a bit about why this important. The benefits of timely payment throughout the chain on federal construction projects enables small, medium and large enterprises to pay their workers on time, to grow their businesses and to create the construction capacity we need to continue to build Canada. This industry has been asking for this legislation for some time, and it's essential to help keep the industry strong and growing.
Construction is a complex process with multiple firms involved sometimes over several years and at different stages; change orders are frequent; milestones may be put in place, all of which can lead to disputes by owners or contractors as to whether the work has been done or whether it's been done to spec. As you can imagine, this can lead to payments that can drag out over many months, which can make it especially difficult for the smaller businesses to manage their cash flow and to stay afloat over a project's duration.
The Government of Canada itself has been an excellent role model for good practices in administering contracts and making payments on time. In April 2016, CCA asked the government to work with industry to provide leadership to ensure that timely payment by the government is cascaded down the payment chain to subcontractors and suppliers.
We'd also like to acknowledge the efforts made by PSPC and Defence Construction Canada, in particular, which have engaged with the industry on this part of the bill. This process of stakeholder engagement and expert review, and recommendations provided to PSPC by Reynolds and Vogel, provided a very clear road map to developing legislation that the entire industry could support.
We'd also like to acknowledge the extraordinary effort on the part of PSPC and the justice department to bring this bill to its current status. We appreciate that if the bill is passed, the government will continue to move with urgency to create the many regulations required to give effect to the new act.
CCA supports effective legislation. We are concerned, however, about a dozen or so of the operational details of the legislation, and I'd like to highlight three substantive issues where the bill is silent and may be beyond the scope of regulation.
One example is the term “adjudication”. It's not defined in the bill and therefore it's open to interpretation. The Singleton Reynolds report provided a lot of context and recommendations around how this term should be defined in the proposed act. In this context, it's a very specific concept that leads to interim decisions that are binding on the parties for a specific period of time or until the occurrence of a specific event. The proposed act should clearly provide for the interim binding nature of adjudication, with only the operational details to be regulated.
Another example is the concept of immunity from suit for those persons acting in good faith as adjudicators under the proposed act. This concept is missing in the current bill. While there may be contractual approaches to the issue, without clear immunity from suit, we are concerned that the adjudication scheme will not be effective. If it's not effective, then the bill may not be effective for the industry.
Finally, the bill does not prohibit parties from making approval of the invoice a condition of the proper invoice. Under the proposed act, submission of the proper invoice starts the clock on all prompt payment timelines for all payment tiers. Instead, the process of reviewing and approving the construction work related to an invoice should be within the prompt payment time and after the clock has started. This prohibition on prior approval is the key element that prevents the parties from drawing out or gaming the system and should be clearly expressed in the bill.
Finally, the influence of this legislation is expected to extend beyond federal construction projects. As referenced in the report, the alignment with the federal and provincial legislation would be very helpful to our members who work at all levels of governments.
Thank you for the opportunity to speak briefly to this important legislation. We look forward to the opportunity to contribute, along with our other industry stakeholders, to the next important step in creating regulations necessary to implement this part of the bill.