Thank you, Mr. Chair and honourable members of the committee.

Our comments today are in relation to division 26, part 4, which deals with prompt payment in the construction industry.

I'm Steve Ness. The Surety Association represents the firms that guarantee the performance and payment obligations of project contractors. We protect taxpayers, as well as subcontractors and suppliers, from losses that arise from contractor failure. As the people who are called in to clean up the mess when a contractor becomes insolvent, we are strong and vocal supporters of any measure that brings about prompt payment in the construction industry, and we applaud the government for this initiative.

Our friends at GCAC mentioned the report by Reynolds and Vogel. It's 53 recommendations formed the basis of this legislation. It's a very good report, but there was one key area that was not addressed in that report: the impact of project contractor insolvency on the payments of subcontractors and suppliers down the chain. The reason it wasn't addressed is that the authors just didn't have the time to explore it thoroughly. One of the recommendations in that report was that further consultations be undertaken to find a way to address that risk. Of course, with the upcoming election, time was tight for the government as well, and there simply wasn't enough of it to undertake those consultations.

This measure, as it stands, includes nothing, no provisions, to address that risk of insolvency and to address how to complete the project and pay the bills. We're here today to propose a solution. The authors of the report, by the way, did recognize the importance of addressing the insolvency risk. I'll quote directly from that report. If a project contractor “becomes insolvent, there is significant risk that those further down the construction pyramid...will not be paid.”

For our part, we submit to this committee today that there can be no prompt payment without first ensuring certainty of payment, and that the insolvency of a project contractor is the most serious impediment to that payment certainty. In other words, if there ain't no money to pay ya, it doesn't matter how prompt the payment requirements are.

In our written brief, which I think all of you have, we talk about the role of surety bonds in addressing that insolvency risk. We set out the reasons why the bonds are the best and really, we would argue, the only remedy that effectively addresses that risk. By the way, I should point out here that with all this talk about insolvency, it's real. It's not hypothetical. It's not remote. In 2018, our industry paid out more than half a billion dollars in losses arising from construction insolvencies, and that included the largest single contractor loss in our industry's history.

In Ontario, which is the only province to date that has enacted similar legislation, they recognize this, and the Ontario measure includes mandatory performance and payment bonds on all public work.

What we're recommending today is that the legislation be tweaked to add a one sentence placeholder to proposed section 23 that would enable the Governor-in-Council to prescribe regulations that address that risk of insolvency through performance and payment bonds. We're not proposing a hard amendment to the legislation to make surety bonds mandatory, as they did in Ontario. We are only proposing that the government be provided with the flexibility to address that real risk at a later date within the framework of the act. It will also provide the time for that additional consultation and consideration. Again, this would be in keeping with the recommendation of the Reynolds report.

Why is it important? Well, this will allow the government to finish the job and allow subcontractors and suppliers to enjoy both the certainty as well as the promptness of payment. Looking down the road, should the government choose to bring in regulations around that, it will also mean that there will be consistency with other measures, notably Ontario's which does include that right now, and consistency across the country, we believe, is important. It will also, in addition to protecting the subcontractors and suppliers, protect the taxpayers. It will see that the projects are completed without any additional cost to government.

It is consistent with existing federal policy. For PSPC, Defence Construction Canada and all the big users of construction services, most of the work that they contract right now is already done under bonds as best practice and recognized as best practice.

Finally, it's in keeping with the stated purpose of the act as set out in part 4.

With that, I'll wrap it up, Mr. Chair.

Thank you to the members of the committee, and I welcome any questions you may have.

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