Prompt payment now at the federal level
By Adam FreillConstruction Financing
New federal payment legislation prescribes timeframes to protect construction workers and companies working on major projects.
In a move aimed at addressing long-standing construction industry concerns, including the timeliness of payments and protecting construction jobs, federal prompt payment legislation came into force on December 9.
According to a release from Public Services and Procurement Canada, the government department says it collaborated with key construction industry stakeholders, as well as other government departments, to the Federal Prompt Payment for Construction Work Act. Under the terms of the legislation, the federal government will have 28 calendar days to pay after a contractor submits a proper invoice. The contractor will then have seven days to pay its subcontractors, and 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, which the government says will allow important federal infrastructure projects, such as work on buildings and bridges, to be completed.
“The construction industry is a critical part of the Canadian economy. We reached a major milestone in ensuring that subcontractors who work on federal government contracts get paid on time,” stated Jean-Yves Duclos, Minister of Public Services and Procurement. “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.”
In a statement, the Canadian Institute of Quantity Surveyors (CIQS), which addressed the issue during its recent meetings at Parliament Hill, said it welcomed the legislation. “This legislation is a crucial step towards fostering a fair and transparent construction industry. The new regulations will address long-standing challenges related to delayed payments, providing much-needed relief to contractors, sub-contractors, and suppliers across the country,” said the organization in its comments. “We believe that this positive step will have a lasting impact on the construction sector, benefitting all stakeholders involved.”
The Act allows for the designation of provinces and territories that have enacted a reasonably similar prompt payment and adjudication regime. Any federal construction work in those designated provinces will, by default, be under the prompt payment regime of the province. At this time, Ontario, Saskatchewan and Alberta are the only provinces with fully implemented prompt payment regimes, and have been designated on the in-force date.
All existing construction contracts will have 1 year to comply with the Act. Canada’s construction industry employs an estimated 1.5 million people, making it an important driver of the nation’s economy.