Mr. X-Files: Who Makes Sure the People Who Build Our Communities Get Paid?

Mr. X-Files: Who Makes Sure the People Who Build Our Communities Get Paid? By Mr. ‘X’ ~ John Mutton, Former Mayor of Clarington CENTRAL EXCLUSIVE The importance of payment surety in public construction. When your municipality builds. When your municipality builds a new fire hall, community centre, arena, public works facility or police station, most people see the name of the general contractor on the construction sign. What they don't see are all the businesses behind that contractor. The electricians. The plumbers. The concrete contractors. The HVAC companies. The drywall crews. The excavators. The roofers. The equipment suppliers. And very often, those businesses aren't giant national corporations. They're businesses from our own communities. They employ our neighbours. Their employees coach local hockey teams, shop in our stores, pay property taxes and raise their families here. Yet there is a vulnerability in the way public construction works that taxpayers rarely hear about. The municipality may pay its general contractor in full - but that doesn't necessarily mean everybody further down the construction chain has been paid. That's where payment surety becomes so important. A Labour and Material Payment Bond is essentially financial protection for eligible subcontractors and suppliers working beneath a bonded contractor. If the contractor fails to pay qualifying amounts owed, the bond can provide another avenue through which an eligible claimant may seek payment, subject to the particular bond's terms, notice requirements and deadlines. Think about why that matters. A $50,000 or $100,000 unpaid invoice may be an accounting problem for a huge corporation. For a family-owned electrical, concrete or mechanical contractor, it can be devastating. Payroll still has to be made. Suppliers still need to be paid. Equipment leases don't disappear. WSIB, insurance, fuel and taxes continue coming due. The employees already did the work. And the public facility is already benefiting from it. Public construction should come with public responsibility Municipalities rightly spend enormous amounts of time protecting taxpayers when they procure construction. We require insurance. We require health and safety compliance. We require performance security where appropriate. We scrutinize bids. But procurement shouldn't stop protecting the public interest the moment the municipality pays the prime contractor. There is another public interest involved: making sure the businesses and skilled tradespeople who actually delivered the project aren't left holding the bag. Payment surety is one important tool for doing that. It also protects the integrity of the procurement system itself. Responsible contractors price work expecting to pay their subcontractors. If companies could obtain public work, receive public money and then simply leave legitimate subcontract accounts unpaid without meaningful protection for those businesses, responsible contractors would be placed at a competitive disadvantage. That's not a procurement system municipalities should want. Maybe taxpayers should start asking another question. When council approves a multimillion-dollar construction contract, councillors routinely ask: How much does it cost? Who won the tender? When will construction begin? When will it be completed? Perhaps there should be another question: What protection is in place to make sure the subcontractors and suppliers who build this project actually get paid? And municipalities should be able to answer it. That doesn't mean every payment dispute is the municipality's fault. It isn't. Nor does a payment bond automatically mean every disputed invoice will be paid. Bond coverage depends upon the contract, the claimant, the work performed and the requirements of the particular bond. But government procurement can establish safeguards before anybody ever steps onto the job site. For significant public construction, payment protection shouldn't be treated as obscure paperwork sitting somewhere in a procurement file. It should be part of responsible public contracting. Because behind every subcontract isn't just another corporation. There are employees. There are apprentices learning skilled trades. There are suppliers extending credit. There are families depending upon those paycheques. And there are local entrepreneurs putting their own capital and reputations on the line to build the infrastructure the rest of us use every day. We spend a lot of time talking about buying local. Maybe we should spend a little more time making sure that when local businesses help build our communities, they get paid. If local businesses help build our communities, they should get paid.