Federal Prompt Payment for Construction Act

Summary#

This Order — Order Fixing the Day After the Day on Which this Order is Made as the Day on Which Division 26 of Part 4 of the Budget Implementation Act, 2019, No. 1 Comes into Force: SI/2023-77 — sets when a part of the Budget Implementation Act, 2019, No. 1 will take effect. That Division brings the Federal Prompt Payment for Construction Work Act into force so that new payment timing and adjudication rules apply to federal construction work on federal property. The Order was registered on December 20, 2023 (the Order itself is dated December 8, 2023).

What it does#

• Fixes the coming-into-force day for Division 26 of Part 4 of the Budget Implementation Act, 2019, No. 1 as “the day after the day on which this Order is made.”
• Brings the Federal Prompt Payment for Construction Work Act into effect. Key practical rules in that Act:
  • The federal government must pay a contractor within 28 days of receiving a proper invoice.
  • Contractors must pay their subcontractors within 7 days, and those subcontractors must pay their subcontractors within 7 days, continuing down the chain.
  • Introduces an adjudication process to resolve payment disputes more quickly.
• Notes and related actions already in place or required for the system to work:
  • The Act’s Regulations come into force as set by the related coming-into-force order.
  • A Federal Adjudicator Authority has been created under contract by Public Services and Procurement Canada.
  • The standard Government of Canada construction contract has been updated to match the Act’s timelines and to add adjudication.
• Transitional rule: existing federal construction contracts that were underway when the Act and Regulations came into force and that will finish more than one year later have one year to adjust to the new rules.

Who's affected#

• Contractors and subcontractors who work on federal construction projects on federal property.
• Small and medium enterprises (SMEs), including Indigenous firms, that are part of federal construction supply chains.
• Federal departments and agencies that commission construction work, particularly Public Services and Procurement Canada.
• Parties in provinces where the federal regime does not automatically apply; some provinces are designated as having similar regimes so provincial rules will apply there by default — currently Ontario, Saskatchewan, and Alberta are listed as designated.
• If it’s unclear who is affected in a specific case (for example, projects partly on federal land or mixed funding), the notice does not provide detailed examples.

Why it matters#

• It aims to speed up payments down the construction chain, so subcontractors and smaller firms get paid reliably and faster.
• Faster payments reduce the risk of work stoppages, long disputes, or firms running into cash-flow problems that can delay federal projects.
• A faster adjudication option should make payment disputes quicker to resolve than going to court.
• The change can improve business stability for SMEs and Indigenous firms, which can mean better ability to hire apprentices, invest in equipment, and take on more work.