Prompt Payment Adjudication for Federal Construction

Summary#

This is a proposed set of rules published February 25, 2023 called the Federal Prompt Payment for Construction Work Regulations (Dispute Resolution). It would set out a fast process for handling payment disputes on federal construction projects, including who can be an adjudicator and how quickly decisions must be made. There is a public comment period of 30 days after publication.

What it does#

• Defines what must be on a "proper invoice" (for example: contractor name and contact, invoice date, contract number, period covered, description of work, amount, and payment details).
• Creates the role and duties of the Adjudicator Authority. That body would train and certify adjudicators, keep a public roster, set fees, run a complaints process, and appoint adjudicators when parties cannot agree.
• Sets who can be an adjudicator. An individual must have at least 10 years of relevant construction experience, not be an undischarged bankrupt, have the required security clearance, and not have been convicted of an indictable offence.
• Lays out step-by-step timing for a dispute:
  • Parties have 4 working days to agree on an adjudicator after a Notice of Adjudication is served.
  • If they cannot agree, the Adjudicator Authority must appoint one within 5 working days.
  • The claimant must send the adjudicator key documents within 5 working days of the adjudicator’s consent.
  • The respondent has 20 working days to reply with its evidence.
  • The adjudicator must make a decision within 20 working days after receiving the response. The adjudicator can extend that by up to 5 working days, or longer with everyone’s consent.
  • A certified copy of the decision must be provided within 5 working days of the decision.
  • Amounts ordered to be paid under the decision must be paid within 10 days of receiving the certified copy (this payment timing is part of the overall prompt payment regime tied to the Act).
• Describes adjudicator powers: request documents, question parties, visit sites or order tests with consent, appoint experts with consent, and continue without a party who refuses to participate.
• Limits each adjudication to one issue, but allows related matters to be consolidated. Documents must be sent electronically.
• Allows small corrections to a decision within 5 working days.

Who's affected#

• Contractors and subcontractors working on construction contracts issued by federal departments, agencies, or Crown corporations on federal property.
• Small and medium construction firms in particular. The construction sector employs about 1.5 million people and, according to the source, over 99% of firms are micro, small or medium-sized; about 61% of construction businesses have 4 employees or fewer.
• The Public Services and Procurement Canada team that will contract for and manage the Adjudicator Authority.
• People who might serve as adjudicators (they would need the required experience and certification).
• Provincial governments only to the extent that the Act allows the federal government to recognize a province’s similar prompt payment law instead of the federal one.

Why it matters#

• Faster, cheaper dispute handling: adjudication is meant to be much quicker and less costly than going to court. That can help smaller firms recover money they are owed without long legal battles.
• Improves cash flow down the contracting chain. Timely payment helps subcontractors stay in business, hire workers, and invest in tools and apprenticeships.
• Keeps projects moving. Quick decisions reduce the chance that payment disputes will delay construction work.
• Lowers risk and potential costs for the federal government by encouraging consistent payment practices on federal projects.
• This is a proposed regulation and not yet in force. The full regime also depends on setting up the Adjudicator Authority and a separate decision about when the law will formally start to apply.