Feds enact prompt payment law
Long-awaited federal prompt payment legislation will soon come into effect.
Public Services and Procurement Minister Jean-Yves Duclos announced on December 12 that new legislation addressing the timeliness of payments within the construction pyramid came into force on December 9.
All existing construction contracts will have one year to comply with the terms of the Federal Prompt Payment for Construction Work Act.
"The construction industry is a critical part of the Canadian economy,” Duclos said. “We reached a major milestone in ensuring that subcontractors who work on federal government contracts get paid on time. The coming into force of this legislation will alleviate payment delays and enhance financial stability for small and medium-sized construction companies, helping to support the more than 1.5 million workers of the industry during these difficult times for all Canadians."
Public Services and Procurement Canada has been working with industry groups and other government departments since 2016 to develop the terms of the legislation. Under the new act, the federal government will have 28 calendar days to pay after the contractor submits a proper invoice. The contractor will then have seven days to pay its subcontractors, subcontractors will have another seven days to pay their sub-subcontractors, and so on down the contracting payment chain.
The federal prompt payment legislation aims to ensure that each party in the construction chain receives timely payment for the construction work provided for a project. It is the predictable and timely payment of contractors and subcontractors (and sub-subcontractors) that allows important federal infrastructure projects, such as work on buildings and bridges, to be completed.
At the provincial level, only Ontario, Saskatchewan and Alberta have fully implemented prompt payment regimes. The new federal act harmonizes with those, meaning that any federal construction work in those provinces will fall under the province’s own prompt-payment regime.
The Government of Canada says it pays 90% of its invoices in accordance with the previous mandatory 30-day payment period. It also recognizes, however, that delays can occur down the payment chain.
Earlier this year the federal government awarded a contract to ADR Chambers Inc. to provide adjudication services and oversee the adjudication process.