New federal prompt payment legislation came into effect on December 9, 2023. The legislation addresses long-standing construction industry concerns, including the timeliness of payments, protecting vital construction jobs and making it easier to do business with the Government of Canada.
Public Services and Procurement Canada collaborated with key construction industry stakeholders, as well as other government departments, to develop federal prompt payment legislation, which led 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 the contractor submits a proper invoice. The 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 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. It is the predictable and timely payment of contractors and subcontractors (and sub-subcontractors) that allows 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. 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,” said Jean-Yves Duclos, minster of public services and procurement.
All existing construction contracts will have one year, as of December 9, 2023, to comply with the Federal Prompt Payment for Construction Work Act.
At this time, Ontario, Saskatchewan and Alberta are the only provinces with fully implemented prompt payment regimes.
