Calgary Construction Association takes aim at ‘unfair’ exemption by government for prompt payments for contractors

The Calgary Construction Association (CCA) is frustrated by an exemption granted by the Government of Alberta to the provinces’ Prompt Payment for Construction Work Act, which requires payment to contractors within 31 days.

The government granted an exemption to Dow Chemicals Canada, under an order in council that was passed in September of this year, for their $11 billion—$8.9 billion ($6.5 billion USD) exempting government incentives and subsidies—Path2Zero Expansion Project in Fort Saskatchewan.

The exemption, said CCA President and Chief Operating Officer Bill Black, threatens the transparency and fairness of payment practices in the construction industry—it is, in a word, he said, “unfair.”

“The industry spent more than 10 years lobbying for prompt pay legislation because the pattern of payment for our industry has gotten progressively worse over the last 10 or 20 years,” he said.

“Just to put it in context, the average trade contractor, the ones who are doing the on-the-ground work, most of the time they have to pay their field workers, their hourly tradespeople, and there’s their office staff, every two weeks. Most suppliers of materials want to be paid in 30 days. So every 15 days, you’re paying your labour, every 30 days, you’re paying for your materials—and it was not unusual to wait 120 days to get paid for the work.”

He said that there shouldn’t be any exemptions carved out for big companies, who will ultimately be asking small and medium-sized local construction firms to shoulder the costs of delayed payments.

“Small, independent businesses should not have to wait 120 days to be paid by big guys that can afford to pay them,” Black said.

“It’s just because big corporations like to think they can dictate terms. Frankly, our industry has been soft enough to accept it because we seem to want the work more than we want the payment. But the reality is, I do not know of any legitimate reason why an organization would not want to pay people in a fair timeframe other than their selfish desire to pay people when they feel like it.”

The reason why this exemption should matter to Calgarians, said Black, is that everyone knows someone who is employed by the construction industry.

“The reality is it affects people in Calgary, because some of the organizations that could work on that project may either have a head office or a branch office here. Some of the people who will be hired to do the work will be Calgarians. If their companies go under, they’re now unemployed,” Black said.

“Some of the people who supply products and materials may be Calgary-based and they’re shipping up to Fort Saskatchewan. Anything that weakens the integrity and the influence of the construction industry at large to be recognized and respected, will have a halo effect, a negative halo effect on others in the industry.”

A delay in payment to contractors in the city, he said, would have tangible effects on their ability to bid on other projects, get loans and lines of credits from banks, and hire labour to work on Calgary projects.

“That could mean that in the period that you wait, you may not qualify for the bonding needed to bid another project… but even if they want to bid, their insurance and banking alone could say no,” Black said.

“The construction business only survives on one thing, and it’s cash flow. It’s not work, it’s cash flow. You do work to drive cash flow, and if that cash flow stops, you can go under in a frighteningly fast amount of time.”

Dow Chemicals lobbied for exemption and was given one by the government

According to regulatory documents filed by Dow Chemicals Canada, they lobbied the Alberta Government in the six months before July 21, 2023 for an exemption to the payment period under the act.

Those documents filed to the Alberta Lobbyist Registry stated that there was “discussion around the 28-day payment requirements and their applicability towards multi-billion dollar, multi-year projects. Payment terms need to be extended past 28 days.”

The order in council provided an exemption for entities that had agreed to undertake an improvement of more than $5 billion, contribute to the significant job growth in Alberta, and demonstrate the commercialization of technologies that assist in the environmentally sustainable development of oil or natural gas resources, or the use of technologies that reduce the emission of greenhouse gases in industrial applications.

The regulation exempting Dow Chemicals Canada’s Path2Zero Expansion Project, the sole project that meets those requirements currently in Alberta, expires in 2033.

Dow Chemicals Canada or the Government of Alberta did not respond to questions posed by LWC regarding why the exemption was granted, and whether that exemption came about as a result of lobbying activity.

In a press release sent by Dow on the project on Nov. 28, the project was expected to deliver over $1 billion in earnings before interests, amortization, and taxes (EBITA).

Minister of Jobs, Economy and Trade Matt Jones has previously touted the ability of the project to generate more than 6,000 peak construction jobs.

Minister Jones, in a joint statement with Premier Danielle Smith, said that the Alberta government would be funding the project with a 12 per cent, $1.8 billion grant through the Alberta Petrochemicals Incentive Program (APIP).

Decision flies under the radar

During the press conference regarding the announcement of the Path2Zero Expansion Project on Nov. 29, questions were asked about what incentives were being given to Dow Chemicals Canada regarding the project.

In a response given to reporters by Premier Smith, she touted the APIP grant but did not mention the exemption under the legislation.

Black said that given the technical nature of the exemption, he wasn’t surprised that it wasn’t mentioned or picked up sooner by the public.

“It’s all about the shiny object of the big deal, ‘look, what we did, look what we negotiated.’ It’s something only business owners in the industry would recognize. It’s too specialized, it’s too narrow. Even though we’re a good 10% or more of GDP in the province,” he said.

“It’s just bad business practice. It didn’t really need to happen because quite honestly, based on all the other circumstances that there were that made Alberta a relevant location for this development… there’s no way having to pay contractors on time was a deal killer.”

He said that the exemption even existing is a worry for the industry, as he has no doubts that other projects will push for their own exemptions.

“I mean, at the end of the day exceptions have a habit of becoming precedents. It’s why zero tolerance should have been implemented,” Black said.

A better model said Black, would have been to adopt the Ontario prompt payment legislation.

“Ontario didn’t grant any exceptions when they passed the legislation. Believe me, there were all kinds of people lining up in Ontario demanding an exception. Their provincial government said ‘no, we’re not passing legislation and making exceptions. So here’s a box of Kleenex, cry and get over it,’” Black said.

“They were strong enough to stand by it. Sadly, this erodes trust and confidence and adds tension in the relationship between industry and the province [of Alberta] as well. That’s not good for Albertans.”

That trust he said, should be that every project whether they are undertaken by the government or by private industry, will pay their contractors fairly and in short order.

Dow Chemical Canada semi-annual lobbyist renewal

Order in Council 180/2023