Federal construction projects will soon be subject to a prompt payment regime and trade contractors are lauding the move.
Canada’s first federal prompt payment act received royal assent June 21 in Ottawa and lays the foundation to ensure cash flows down the construction chain quickly on projects procured by the federal government, said Sandra Skivsky, chair of the National Trade Contractors Coalition of Canada (NTCCC).
“Federally, it sets a standard. We are one of the few countries in the world that didn’t have a prompt payment regime. As other provinces and territories look towards establishing something, the federal regime should set a benchmark… It’s probably one of the biggest changes to the construction industry in decades in terms of process.”
Bill C-97, the Budget Implementation Act, 2019, an act to implement certain provisions of the budget, was tabled in parliament in March. Division 26 of Part 4 enacts the Federal Prompt Payment for Construction Work Act to establish a regime to “provide prompt payments to contractors and subcontractors for construction work performed for the purposes of a construction project in respect of federal real property or federal immovables and a regime to resolve disputes over the non-payment of that construction work,” states the act.
The prompt payment scheme provides that payment deadlines on all contracts in the construction chain are triggered by the prime contractor’s delivery of a proper invoice. The Crown or the service provider must pay the contractor for all of the construction work no later than the 28th day after the day on which the proper invoice is received. The contractor must pay each of its subcontractors on the 35th day after the day on which the proper invoice is received. A subcontractor that is paid by the contractor must pay each of its subcontractors 42 days later.
The key to all of this is having that adjudication system in place,
— Sandra Skivsky
National Trade Contractors Coalition of Canada
The deadlines to decline payment of an invoice are also triggered by the delivery of a proper invoice. The Crown or the service provider may decline to pay for some or all of the construction work if they provide the contractor with a notice of non-payment no later than the 21st day after the day on which the proper invoice is received. The contractor may do the same if they provide the subcontractor with a notice of non-payment no later than 28 days later. For the subcontractor it’s 35 days.
The act also provides a dispute resolution mechanism. If payment is not provided to a contractor or subcontractor within the time limits outlined in the act, that party is entitled to seek a determination from an adjudicator which will be binding.
“They (government) have put out a request for information on the adjudicating nominating authority,” said Skivsky. “That is really the key to all of this is having that adjudication system in place because that is what gives teeth to prompt payment — if you don’t get paid you have a speedy recourse during the course of the project as opposed to waiting to the end and going to court.”
Skivsky said the NTCCC has been driving hard to have federal prompt payment adopted for over a decade.
“This is an exercise in persistence and resilience,” Skivsky stated. “We have had a few setbacks over the years but we got here… It took a big village to move this mountain but it all started with 10 trade contractor associations sitting there saying ‘our members aren’t getting paid what are we going to do about it?’ ”
As a national coalition made up of trade contractor associations, members recognized the importance of big and small businesses getting paid on time for work that has been certified and completed. Over the years they lobbied the federal government and even got involved in getting prompt payment legislated in Ontario.
“There were a lot of the same people involved in the Ontario project and the federal initiative,” Skivsky pointed out.
Bruce Reynolds and Sharon Vogel of Singleton Urquhart Reynolds Vogel LLP, who were instrumental in informing construction lien act reform in Ontario, were retained by Public Services and Procurement Canada to lead a federal review. They authored a report entitled Building a Federal Framework for Prompt Payment and Adjudication. They were also retained for a second phase of their mandate, to assist PSPC as they instructed the Department of Justice in relation to the drafting of the legislation.
“They had already done an extensive consultation process in Ontario and they were much further up the learning curve than anybody else,” said Skivsky.
It will likely be another year or two before the prompt payment regime is implemented at the federal level as regulations have not yet been proposed or drafted, Skivsky noted.
Recent Comments
comments for this post are closed