Nelligan O’Brien Payne gratefully acknowledges the contribution of Avery Ross, Student-at-Law in writing this blog post.
Ontario’s new Construction Act is set to fast-track payment for federal construction projects and is designed to help ensure swift resolution of payment disputes.
But, in cities such as Ottawa, where federally owned property is often developed and renovated, the Construction Act leaves a gap for contractors, subcontractors, and suppliers seeking prompt payment for their work. The newly proposed Federal Prompt Payment for Construction Work Act (“Federal Act”) is slated to fill that gap.
The Federal Act was drafted as part of Bill C-97, following a report commissioned by Public Services and Procurement Canada. The report outlines industry challenges resulting from delayed payment, namely:
- disruptive gridlock in the construction pyramid caused by delayed payment;
- the need to inflate bids in order to compensate for potential payment delays; and,
- insolvency of those in the pyramid.
If passed, Bill C-97 will address these concerns.
The Bill provides that contractors invoice the federal government monthly for the work performed, sets a timeline for the federal government to pay these invoices, and should result in quicker payment to subcontractors and suppliers down the line. To achieve this goal, the bill proposes a dual-pronged approach, mirroring the Ontario legislation, including a prompt payment scheme and an adjudicative scheme.
Prompt Payment to Standardize the Payment Timeline:
The prompt payment scheme creates timelines for the government to pay the contractor, the contractor to pay the subcontractor, and so on, all the way down the construction pyramid. This payment timeline is based on the date that the government receives their monthly invoice from the contractor. The legislation also imposes a timeline for notifying the contractor or subcontractors of non-payment.
Adjudication to Quickly Resolve Disputes:
If someone within the pyramid fails to pay for the invoiced work, the legislation instructs parties to adjudicate their payment disputes. Filing and payment deadlines are also outlined within the legislation. The intention is that parties will move swiftly through the dispute resolution process, will receive a decision from the adjudicator more efficiently than they would through the court system, and will be paid more quickly when they receive a favourable decision from an adjudicator.
Impact of this new proposed prompt-payment scheme:
Bill C-97 has not yet received Royal Assent. Until it receives Royal Assent, contractors, subcontractors, and suppliers cannot benefit from a prompt payment scheme nor from an adjudication process when construction projects are on federal property.
If you are a contractor or a subcontractor entering into a contract involving federal property, or if you are awaiting overdue payment from construction work on federal property, contact our Construction Law Group.
For more information on the provincial legislation, which applies to construction on any property that is not owned by the federal government, visit our blog post on the new Construction Act (replacing the Construction Lien Act).