Prompt payment in effect for federal government contracts

Key Takeaways:

• Under the terms of the legislation, the federal government will have 28 calendar days to pay after the contractor submits a proper invoice.
• The legislation came about due to industry stakeholders raising the issue with government officials back in 2016.
• 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. 
• All existing construction contracts will have one year, as of Dec. 9, 2023, to comply.

The Whole Story:

The federal government is now legally required to pay its construction bills on time. 

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 genesis of the change goes all the way back to 2016 when industry stakeholders raised the long-standing issue of payment delays along the contracting chain.

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.

Jean-Yves Duclos, Minister of Public Services and Procurement

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. 

Officials stated that 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. They added that 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.

All existing construction contracts will have one year, as of Dec. 9, 2023, to comply with the Federal Prompt Payment for Construction Work Act.