On-Site Magazine

Ottawa’s new prompt payment rules become law, firming up pay schedule for federal construction jobs

The rules are expected to benefit both general contractors and subcontractors, which can face cash flow problems if they aren't paid quickly enough for work on major projects

June 24, 2019   David Kennedy
Construction
Infrastructure
Law

The new prompt payment rules apply to federal government construction contracts. Both general contractors and subcontractors should benefit from the strict timelines

OTTAWA—A long-awaited bill that sets out strict timelines for paying general contractors and subcontractors working on federal construction projects has been signed into law.

Late last week, Governor General Julie Payette granted royal assent to a wide-reaching budget implementation bill known as C-97. With rules for paying construction contractors in a timely manner tucked into the final section of the bill, C-97 establishes the federal government’s first prompt payment legislation. The new regulations had cleared the Senate a day earlier.

Industry groups have been pushing for a set of rules governing prompt construction payouts for years and the Liberal government committed to putting a federal prompt payment regime in place in last year’s Fall Economic Statement.

The National Trade Contractors Coalition of Canada (NTCCC), which is made up of numerous national trade groups including the Mechanical Contractors Association of Canada and the Canadian Electrical Contractors Association, applauded the government for following through on the promise.

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“We have been working on this issue for well over a decade and are very happy today,” Sandra Skivsky, chair of the NTCCC, said in a release. “Prompt payment is crucial to the efficiency of all construction work throughout the sector, on jobs big and small.”

Known officially as the Federal Prompt Payment for Construction Work Act, the rules apply only to federal government construction contracts.

In most cases, the new requirements mirror the prompt payment legislation recently passed in Ontario that will come into force Oct. 1. Like the Ontario regulations, the owner — or the federal government in this case — will have 28 days to pay after the contractor submits a “proper” invoice. The general contractor will then have seven days to pay its subcontractors, subcontractors will have another seven days to pay their sub-subcontractors, and so on down the contracting chain.

For invoices that are less straightforward, the federal rules also establish an adjudication mechanism to handle disputes, again falling in line with the Ontario regulations.


Related: Read a more detailed breakdown of the Ontario prompt payment legislation that closely resembles the new federal rules


By imposing a strict timetable on when payments must be made, the rules are expected to benefit both general contractors and subcontractors, which can face cash flow problems if they aren’t paid quickly enough for work on major projects.

The rules will come in effect next June after a one-year transitional period. Contracts signed before that will not be subject to the new rules.

 


The federal bill spells out the new legislation in full.