Federal Prompt Payment for Construction Work Regulations (Criteria, Time Limits, Interest and Circumstances): SOR/2023-269

Canada Gazette, Part II, Volume 157, Number 26

SOR/2023-269 December 8, 2023


P.C. 2023-1217 December 8, 2023

Her Excellency the Governor General in Council, on the recommendation of the Minister of Public Works and Government Services, pursuant to section 23 of the Federal Prompt Payment for Construction Work Act footnote a, makes the annexed Application to the Federal Prompt Payment for Construction Work Act Regulations (Criteria, Time Limits, Interest and Circumstances).

Federal Prompt Payment for Construction Work Regulations (Criteria, Time Limits, Interest and Circumstances)

Definition of Act

1 In these Regulations, Act means the Federal Prompt Payment for Construction Work Act.

Criteria for designation

2 A province may be designated under subsection 6(1) of the Act if it has enacted, by its laws, provisions requiring

Days to exclude

3 The following days and periods are excluded from the computation of time for the purposes of the time limits referred to in sections 9 to 11 of the Act:

Interest on unpaid amounts — computation

4 (1) Interest awarded under subsection 14(2) of the Act is calculated as simple interest that is equivalent to the average bank rate plus 3% per year, from the due date until receipt of payment.


(2) The following definitions apply in this section.

average bank rate
means the simple arithmetic mean of the bank rates that are established during the month before the month in respect of which interest is being calculated. (taux d’escompte moyen)
bank rate
means the rate of interest established periodically by the Bank of Canada as the minimum rate at which the Bank of Canada makes short term advances to members of the Canadian Payments Association. (taux d’escompte)

Prescribed circumstances

5 An adjudicator is not required to determine a dispute in the following circumstances:

Coming into force

6 These Regulations come into force on the day on which section 387 of the Budget Implementation Act, 2019, No. 1, chapter 29 of the Statutes of Canada, 2019, comes into force, but if they are registered after that day, they come into force on the day on which they are registered.


(This statement is not part of the Regulations.)


The Federal Prompt Payment for Construction Work Act (the Act) received royal assent on June 21, 2019, as part of the Budget Implementation Act, 2019, No. 1. The proposed Federal Prompt Payment for Construction Work Regulations (Criteria, Time Limits, Interest and Circumstances) [the Regulations] would complement both the Act and the Federal Prompt Payment for Construction Work Regulations (Dispute Resolution).


The construction industry in Canada is a significant employer and driver of the Canadian economy. Approximately 7.5% of Canada’s gross domestic product is related to construction, and the industry employs an estimated 1.4 million people.

In 2016, at the 50th annual joint meeting of the Canadian Construction Association and the federal government, industry stakeholders raised the long-standing issue of payment delays along the contracting chain of contractors to subcontractors for federal construction contracts. A 2015 survey available from the Canadian Construction Association indicated that approximately $46 billion in payments remained unpaid after the conventional 30-day period, which represented about 16% of the estimated $285 billion in construction contracts in Canada that year.

The federal government was asked to take a leadership role and engage in dialogue with construction industry stakeholders to identify, assess, and implement possible measures to address timeliness of payment, which was of particular concern to small and medium enterprises (SMEs) in the construction industry. To date, the avenue available to SMEs affected by delayed payments or non-payments has been to seek redress through the courts, which is not a viable option for most SMEs. It usually involves long timelines to reach a judicial decision and legal costs are high, often exceeding the amounts being sought. At the time, with the exception of the province of Ontario (the Construction Act), no jurisdiction in Canada had a broad legislated prompt payment regime in force with a relatively fast and low-cost dispute resolution and enforcement mechanism in place.

While the federal government itself maintains a good payment record and pays on time for completed construction work and services as per Treasury Board policy, there remain inconsistent payment contract terms and payment delays further down the chain. This inconsistency drives the cost of federal construction up and ultimately does not support growth, innovation, and employment. For workers, delayed payment means fewer opportunities for apprenticeships or working for firms unable to invest in technology or future work. For Government, delayed payment throughout the payment chain on federal construction projects erodes its buying power, increases financial risks, and escalates costs for construction.

In 2017, the Prime Minister mandated the Minister of Public Works and Government Services to modernize practices to ensure the prompt payment of contractors and subcontractors that do business with the Government. To consider this issue, a government-industry working group was established, composed of Public Works and Government Services Canada (PWGSC), Defence Construction Canada and the Canadian Construction Association. The working group was established to consider ways to improve the speed of payment on federal construction jobs. In 2018, a 14-point action plan was developed, which included a recommendation to develop legislation as a key action item. The legislation was deemed essential to ensure appropriate promptness of payment through all levels of the construction supply chain. The Regulations respond to that recommendation.

The Act addresses the timelines of payment down the construction supply chain. The Act stipulates that payment will be due from the federal government 28 days after receipt of a proper invoice from the contractor. The contractor will then have 7 days to pay its subcontractors, and those subcontractors will then have 7 days to pay their subcontractors, and so on down the chain.

To ensure greater consistency and ease to construction firms in the province where a reasonably similar prompt payment regime exists, the Act allows the Governor in Council to designate that provincial prompt payment legislation as applicable instead of the federal legislation, and the designation also requires that the provincial legislation include an adjudication regime that is similar to the one set out in the Act to handle cases of non-payment of contractors or subcontractors in the designated province.

If there is a dispute between parties working on the construction project related to payment anywhere down the chain of payment, the Act introduces an adjudication process. Adjudication is a pragmatic, swift, and flexible dispute resolution mechanism. An adjudicator reviews evidence and arguments presented by opposing parties and arrives at a timely decision to determine the rights and obligations between the parties involved. Ultimately, adjudication allows a swift determination of a dispute, enabling a project to proceed and payments to flow through to lower tiers within the payment chain. The adjudicator’s determination is binding on the parties to the dispute unless they come to a written agreement or the determination is set aside by a court order or arbitral award.

PWGSC is responsible for procuring the services of an Adjudicator Authority. The Adjudicator Authority will be responsible for establishing a training and certification program for adjudicators, as well as to establish a code of conduct for adjudicators and methods to ensure adherence to that code. The Adjudicator Authority will also be responsible for maintaining a national list of adjudicators that it has certified, and will make this list available to industry, so that a certified adjudicator can be identified to resolve a dispute amongst parties.

Finally, the Adjudicator Authority will be responsible for tracking information about the various adjudications and will publish statistics on an annual basis to enable industry to see the status of prompt payment adjudications related to federal construction projects. PWGSC will approve the format and content of the annual statistics prior to posting and address any performance issues raised by industry.

The Act has set out the adjudication process as a dispute resolution process. It identifies how the adjudication is to be started (with a notice of adjudication), that the adjudicator is to be chosen from a list of adjudicators established by an Adjudicator Authority, and that the determination of the adjudicator is binding, unless the disputing parties come to a written agreement, or the determination is set aside by a court order or arbitral award. The Act also stipulates that the two disputing parties must pay their own costs, and an equal portion of the adjudicator’s fees, unless the adjudicator rules differently.

The Regulations aim to define key administrative aspects related to the designation of provinces and the adjudication process that allow the Act to function, namely



The Federal Prompt Payment for Construction Work Regulations (Criteria, Time Limits, Interest and Circumstances) [the Regulations] define the criteria for the designation of provinces that have enacted a reasonably similar prompt payment and adjudication regime as well as the time limits, interest and circumstances of the adjudication process. The criteria for the designation of provinces establishes that the following aspects of a provincial legislation would have to be reasonably similar to those of the federal regime set out in the Regulations:

In addition, the Regulations outline the time limits, interest and circumstances of the adjudication process as follows:

Regulatory development


Upon royal assent of the Act, PWGSC continued to engage an advisory group comprised of key representatives from real property construction associations (i.e. the Canadian Construction Association, the National Trade Contractors Coalition of Canada, and the General Contractors Alliance of Canada), construction law experts, and interested individuals to ensure continued support and to clarify items to be included in the proposed Regulations. This advisory group was established during the build-up to the development of the Act, with expert industry representatives selected by a third-party construction-focused legal firm. The advisory group provided its feedback on multiple occasions during 2020. All feedback that was received from the advisory group informed, and was integrated into, the regulatory policy position.

The Regulations were prepublished in the Canada Gazette, Part I, on February 24, 2023, for a 30-day public consultation period, which ended on March 27, 2023. The 34 comments received were mainly from stakeholders interested in becoming the Adjudicator Authority. There were also comments from industry stakeholders that had been consulted over the years, reiterating previous feedback that had been taken into consideration prior to the drafting of the Regulations.

The comments were carefully considered in collaboration with the Department’s legal counsel and the consensus was that there were no concerns that would require changes to the proposed Regulations. The majority of the items that these commenters felt needed to be addressed were deemed to be more appropriate to include in a contract, as they related to the Adjudicator Authority operations and were too detailed for legislation. There were also no comments and therefore no public concern about the criteria for the designation of provinces.

Modern treaty obligations and Indigenous engagement and consultation

PWGSC conducted an assessment to determine the implications of the legislation and resulting regulations on modern treaties. As the Act and Regulations deal with prompt payment for the delivery of federal construction projects on federal lands only when the contracting authority is a federal department or agency, the Regulations have no implications on modern treaties.

Instrument choice

The Act establishes that the details of the adjudication process are to be included in the Regulations and they would become a fundamental element in the overall prompt payment regime. The Act assigns the details of the adjudication process to regulations because adjudications related to construction payments are new to the federal construction payment regime, and minor adjustments may be required to the process in the years following implementation. Adjustments can be more readily made to regulations compared to legislation.

Regulatory analysis

Benefits and costs

The costs to businesses as a result of the Regulations are seen to be neutral or potentially resulting in cost savings. Adjudication is likely to be a significant benefit as it allows for a quick and cost-effective way of obtaining a determination on amounts owing. Industry has stipulated that a real cost is incurred when payment is not completed promptly. In order to recover these amounts owing, firms must engage lawyers and seek determinations through the courts. This litigious process is expensive and often more costly than the amounts that are being sought, resulting in firms not collecting the amounts that are owing. Countries, such as Australia and the United Kingdom, have found that with the introduction of adjudication, payment practices significantly improve, and when adjudication does become necessary, it is faster and less expensive than proceeding with a court action.

The Regulations would not create additional costs to industry as they simply define the adjudication process to be followed as per the Act. Ultimately, adjudication costs are seen as regular dispute costs associated to the construction project itself as opposed to a government-wide cost. As costs related to mediation and arbitration are only accounted for at the individual project level, so too would any adjudication costs associated with Government of Canada payment disputes with the Contractor. As adjudication is seen as a quick and efficient method for settling disputes related to payment, it is likely that overall dispute costs will drop with the introduction of adjudication. Thus, no additional costs or funding have been identified for this element.

Small business lens

The Act and the Regulations are designed to support the construction industry which is made up of predominantly small businesses. The Canadian construction industry employs an estimated 1.4 million people. Over 99% of the firms are micro (1–4 employees), small (5–99 employees) and medium-sized (100–499 employees) enterprises. Large businesses with more than 500 people on the payroll account for 0.1% of establishments. Of the 382 437 construction businesses, 61% have four employees or less.

The Act, supported by the Regulations, articulates a payment regime that is to be followed throughout the construction supply chain on construction work on federal property, including that payment disputes should be addressed through adjudication, which is a quick, efficient and a relatively inexpensive way to resolve the dispute. Without the regime established by the Act and Regulations, businesses would be required to engage legal counsel and await a decision by the courts — ultimately resulting in a long and expensive process. The Regulations will produce a greater benefit to small businesses by speeding up payments and providing an effective method of resolving payment disputes quickly and efficiently, since going to court is even more cost prohibitive for them than it is for larger businesses.

The designation of provinces based on the criteria set out in the proposed Regulations will also benefit small businesses by allowing them to apply the provincial prompt payment legislation to all construction contracts instead of having to apply federal legislation for some contracts and provincial legislation for others.

One-for-one rule

The one-for-one rule does not apply as there is no incremental change in the administrative burden on business.

The Regulations establish criteria to determine equivalency for provincial programs, ensuring consistency across jurisdictions in Canada under which construction businesses operate, and provide clarity to the adjudication process. Neither of these would directly result in an increase in the administrative burden on business as defined by the Red Tape Reduction Act.

Regulatory cooperation and alignment

Engagement continues through provincial and territorial meetings focused on the administration of real property. Direct engagement with provincial and territorial officials is ongoing, to ensure information sharing (both related to legislative measures, but also for other contractual/administrative measures that may support the promptness of payment). PWGSC will continue to monitor provincial and territorial prompt payment initiatives, and will keep provinces and territories informed of the status of the federal regime to ensure alignment where possible.

Strategic environmental assessment

In accordance with the Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals, a preliminary scan was conducted to identify environmental impacts. Although construction can have an impact on the environment, the Regulations deal only with prompt payment and enforcement through adjudication. As such, there would be no environmental impacts.

Gender-based analysis plus

The Regulations deal with the adjudication of disputes related to prompt payment down the construction supply chain thus assuring the orderly and timely building of federal construction projects on federal property. The Act and Regulations do not address the determination of who will do the work and where the work will be done. All firms will be paid on time, regardless of their ownership and irrespective of sex, ethnicity or culture.

Recognizing that the direct impacts of the Regulations are neutral from a gender-based analysis plus (GBA+) perspective, there is an expectation that there will be some indirect socio-economic benefits created from the Regulations. For example, by paying promptly, industry has indicated that firms would be able to take on more business and potentially hire more workers. Due to the current demographic of workers within the industry, this is expected to benefit more men than women. Additionally, some federal land (and thus some federal construction contracts) will be in remote locations, which would provide for economic benefits to those remote areas. This would benefit both women and men in remote locations but once again, because of industry worker demographics, there would be greater benefit to men than women.

The construction industry includes a range of occupations, such as administrative, welders, bricklayers, sales, accountants, electricians, etc. Although the majority of the construction workforce is male and will likely benefit the most from the indirect benefits of the Regulations, the 13% female segment is actively being targeted through a number of outreach initiatives led by major construction companies and key industry associations, e.g. the “Talent Fits Here” program of the Canadian Construction Association.

While the Government of Canada has no influence over the gender representation within construction companies, it is important to note that Canadian construction firms must abide by the human rights legislation of their respective province, and larger firms may have signed the Agreement to Implement Employment Equity under the Federal Contractors Program to ensure employment equity.

Implementation, compliance and enforcement, and service standards


Implementation of the entire federal construction prompt payment regime required four key elements to be in place: the Regulations to be in force, the Adjudicator Authority to be created, the standard Government of Canada construction contract to be revised, and the Act to be force.

This Regulatory Impact Analysis Statement addresses the Federal Prompt Payment for Construction Work Regulations (Criteria, Time Limits, Interest and Circumstances), which is linked to the Order Designating Provinces, and the Federal Prompt Payment for Construction Work Regulations (Dispute Resolution).

In February 2023, competitive solicitation for the Adjudicator Authority was issued in tandem with the prepublication of the Regulations in the Canada Gazette, Part I, and a contract was awarded to the winning bidder in July 2023. Adjudicators were identified, trained and certified, and the Adjudicator Authority is created upon the coming into force of the Act.

The standard Government of Canada construction contract has been adjusted to bring the basis of payment timelines in line with the Act and to add adjudication as a method of dispute resolution. This revised contract will be used for new solicitations issued after the Act comes into force.

The Act comes into force on the day after the day on which the Governor in Council makes the Coming Into Force Order, brought forward concurrently with these Regulations.

Pursuant to the Act, any contracts for federal construction work on federal property that were underway at the time the Act and Regulations came into force, and which will end more than one year after, have one year to adjust to the payment periods and adjudication process, and ultimately follow all the requirements under the Act and Regulations.

Compliance and enforcement

Adjudication has been identified in the standard government construction contract as a means of payment dispute resolution. Compliance and enforcement with the adjudication process will be monitored by the Adjudicator Authority, once established. If a party does not adhere to the terms of the contract regarding payment dispute resolution, it could still be resolved through litigation.


Communications, Issues, and Strategic Relations
Real Property Services Branch
Public Services and Procurement Canada
Place du Portage, Phase III, 9A1
11 Laurier Street
Gatineau, Quebec
K1A 0S5
Email: Biensimmobiliers.RealProperty@tpsgc-pwgsc.gc.ca