Update: Federal Prompt Payment Legislation Comes Into Force

The Minister of Public Services and Procurement has announced (here) the coming into force of the Federal Prompt Payment for Construction Work Act (the “Act“) as of December 9, 2023.

This is an important conclusion to an effort commenced several years ago involving Singleton Reynolds in respect of its retainer by Public Services and Procurement Canada (“PSPC”). Specifically, Singleton Reynolds was retained to conduct an expert review of prompt payment and adjudication in respect of federal construction projects. This mandate, which was undertaken by Bruce Reynolds, Sharon Vogel, James Little, Jesse Gardner, and Evan Rankin of our Toronto office, involved conducting a total of 55 stakeholder engagement sessions, followed by the delivery of a final report and recommendations package to the federal government.

Notably, the legislation implements several of the most important recommendations included in Singleton Reynolds’ recommendations package with respect to prompt payment and faster dispute resolution, including the following:

• Payment by the federal government to a contractor 28 calendar days after delivery of a proper invoice, at which point the contractor will have 7 days to pay its subcontractors, and so on down the construction chain;
• Prescribed content for notices of non-payment; and
• The implementation of an adjudication procedure as an enforcement mechanism for prompt payment.

The Act also provides the federal government with the ability to “designate” a province or territory if that province or territory has a “reasonably similar” prompt payment and adjudication regime. Such a designation makes federal construction projects within those regions automatically exempt from certain provisions of the Act, including the prompt payment provisions, and instead make those projects subject to the provincial regime.

Currently, only Ontario, Saskatchewan, and Alberta have fully-established prompt payment and adjudication regimes, and as such, have been designated under the Act. A number of provinces – including Nova Scotia, Manitoba, and New Brunswick – all have prompt payment and adjudication legislation that has received assent but has yet to come into force, suggesting that these provinces might similarly be designated in future.

Finally, we note that all existing federal construction contracts must comply with the Act within one year of December 9, 2023. Accordingly, parties on current or future federal construction projects would be well advised to begin taking steps (if they have not already) towards ensuring that their payment procedures are consistent with the timelines contemplated by the Act.

Overall, the coming into force of the Act represents the culmination of a significant effort by a number of stakeholders over a period of years, including a strong and committed team of federal officials. We are encouraged that those efforts have come to fruition and look forward to seeing prompt payment and adjudication develop on federal construction projects in the coming years.

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