Prompt Payment for Construction Work

Summary#

These are proposed federal regulations called the Federal Prompt Payment for Construction Work Regulations (Criteria, Time Limits, Interest and Circumstances). They spell out how the Federal Prompt Payment for Construction Work Act would work in practice for payment timing, interest on late payments, and some rules for adjudicators on federal construction projects. The proposal was published on February 25, 2023 and people could comment within 30 days of that date.

What it does#

• Sets the tests for when a province’s own prompt-payment law can be treated as “equivalent” to the federal law. To qualify, a provincial law must have rules similar to the federal ones on invoices, payment timing, notices of non‑payment, adjudication timing, and binding decisions.
• Lists the days that do not count toward payment and adjudication deadlines:
  • holidays (as defined in the Interpretation Act),
  • Saturdays,
  • the nine-day period from December 24 to January 1, and
  • any construction holiday officially recognized by a province.
• Explains how interest on late payments is calculated: simple interest equal to the average bank rate plus 3% per year, applied from the payment due date until payment is received.
• Describes situations where an adjudicator does not have to decide a dispute, for example:
  • the dispute was consolidated and another adjudicator will handle it,
  • the parties all agreed to revoke the adjudicator’s appointment,
  • the adjudicator has a conflict of interest, or
  • the Adjudicator Authority determines the adjudicator is no longer able to do the job.
• Says the regulations would come into force on the same day section 387 of the Budget Implementation Act, 2019 comes into force (or on registration if registered later).

Who's affected#

• Contractors and subcontractors working on federal construction projects on federal property. The rules apply only when a federal department or agency is the contracting authority.
• Small and medium construction firms, which the government highlights as a main reason for the change. The construction sector represents about 7.5% of Canada’s GDP and employs roughly 1.5 million people.
• Provinces that already have prompt-payment laws (for example, Ontario, Saskatchewan, Alberta) could be formally designated as equivalent, which would change which rules apply to federal projects in those provinces.
• Public Services and Procurement Canada will manage parts of the system, including hiring an Adjudicator Authority to train, certify and list adjudicators.

Why it matters#

• It aims to speed up payments down the contracting chain so subcontractors get paid faster. That can ease cash-flow problems, especially for small firms that otherwise face costly, slow court proceedings.
• Clear rules on excluded days and on how interest is calculated reduce uncertainty about how much is owed and when.
• A national adjudication process (fast, lower-cost dispute resolution) could cut the time and money spent fighting payment disputes and help projects keep moving.
• These are proposed regulations (not yet law). Stakeholders had a short public comment window after publication, and the rules would only take effect once the related parts of the Budget Implementation Act, 2019 are brought into force.