Federal Prompt Payment Adjudication Rules

Summary#

The final regulation Federal Prompt Payment for Construction Work Regulations (Dispute Resolution) (SOR/2023-271) sets out how payment disputes on federal construction contracts are decided. It was published in the Canada Gazette on December 20, 2023 (registered December 8, 2023) and creates rules for adjudication, who can be an adjudicator, and time limits for decisions.

What it does#

• Defines what must be in a “proper invoice” (contact details, invoice date, contract number, description of work, amount and payment terms).
• Specifies what a notice of non-payment must include, including the portion that is not in dispute.
• Creates an independent adjudication process and a national Adjudicator Authority with responsibilities to:
  • train and certify adjudicators;
  • keep a public list of adjudicators and set a fee schedule;
  • set a code of conduct and handle complaints.
• Sets eligibility rules for adjudicators: they must be accredited, have at least 10 years of construction experience, not have certain criminal convictions, not be an undischarged bankrupt, and hold required security clearance.
• Describes adjudicator powers: run hearings, request documents, question parties, visit sites with consent, appoint experts with consent, and make a written decision.
• Lays out timing and steps for an adjudication:
  • parties must ask an adjudicator within 4 days after a notice of adjudication is received;
  • if parties can’t agree, the Adjudicator Authority has 5 days to appoint one;
  • the responding party has 20 days to provide its written response;
  • the adjudicator must make a determination within 20 days after receiving the response (can extend by 5 days or longer with consent);
  • the adjudicator must provide a certified copy of the decision within 5 days;
  • the source states that amounts owing must be paid within 10 days of receiving the certified copy of the decision.

Who's affected#

• Contractors and subcontractors working on construction contracts issued by the federal government, its departments, agencies, or Crown corporations on federal property.
• Small and medium construction firms in particular, since many in the industry are small businesses and often work as subcontractors.
• The organization selected as the Adjudicator Authority and the pool of certified adjudicators.
• Federal procurement offices that will use the revised standard government construction contract to reflect these rules.
• It is unclear from this document exactly how or when provincial prompt-payment laws might substitute for this federal regime in a given province; the Act allows designations where a province’s rules are considered equivalent.

Why it matters#

• It gives contractors and subcontractors a faster, lower-cost way to settle payment disputes than going to court. Decisions come on a tight timetable, so payments can flow sooner down the supply chain.
• This can particularly help small firms that lack the resources to pursue slow, expensive litigation.
• By specifying who can be an adjudicator and how they are managed, the rules aim to make the dispute process consistent and predictable across federal construction projects.
• Faster dispute resolution can reduce project delays, lower legal costs, and improve cash flow for businesses working on federal jobs.