Action plan on prompt payment in the construction industry
From: Public Services and Procurement Canada (PSPC)
Consult the action plan developed by the government-industry working group, made up of the Canadian Construction Association, Defence Construction Canada and Public Services and Procurement Canada, to learn more about some of the proposed solutions being explored to improve payment timeliness in the construction industry. In the first phase, the working group is focusing on construction contracts valued over $100,000 managed by Public Services and Procurement Canada and Defense Construction Canada.
A guiding document that describes the commitments made by Public Services and Procurement Canada, Defence Construction Canada and the Canadian Construction Association to collaborate through a government-industry working group to improve the timeliness of payment throughout the contract tiers on Public Services and Procurement Canada and Defence Construction Canada contracts above $100,000. This document identifies context and objectives.
- Government-Industry Working Group Prompt Payment Initiative Engagement Strategy (PDF, 652KB) (Canadian Construction Association)
Prompt payment principles
Our principles advocate for a prompt payment culture and mirror the Canadian Construction Association's policy statement 4.15 and Defence Construction Canada's principles on prompt payment.
More information - Prompt payment principles
- Prompt payment principles (Public Services and Procurement Canada)
- Canadian Construction Association's public policy statement on payment
- Defence Construction Canada
Transparency and prompt payment disclosure
Disclose on a public website information on payments made to Public Services and Procurement Canada's (PSPC) and Defence Construction Canada's construction prime contractors and businesses (such as payment date, company name, and contract and project numbers).
Status: Completed. PSPC has developed a publicly-viewable payment disclosure website.
More information - Transparency and prompt payment disclosure
Fair terms throughout the construction supply chain
Address fair terms of payment throughout the construction supply chain by seeking feedback via the industry engagement initiative, and identify the fair terms in the proposed legislation. This will require the federal government to pay prime contractors within a certain time period, prime contractors to pay sub-contractors within a certain time period, and so on down the payment chain.
Status: Completed. Fair terms throughout the construction supply chain are identified in the “Federal Prompt Payment for Construction Work Act”, and are aligned with industry feedback. The Act was introduced in the House of Commons on April 8, 2019, as part of the 2019 Budget Implementation Act and received Royal Assent on June 21, 2019.
Payment certification process
The department has reviewed the payment process from receipt of invoice to issuance of payment to assess any opportunity to reduce timeframe.
Review of payment terms
Review payment terms in federal construction contracts and assess against industry standards.
Status: Completed. Public Services and Procurement Canada has compared its contractual practices and payment terms with those of the provinces, territories and Defence Construction Canada. Overall practices are fairly similar.
The Canadian Construction Association will review existing process and consider establishing a set timeline for resolving disputes.
Status: Completed. The Canadian Construction Association has completed its review of the Canadian Construction Document Committee's and the federal government's processes for dispute resolution and concluded that both are well aligned.
Next Steps: The development of the Prompt Payment Regulations shall outline the adjudication process which could be used as a recourse for payment dispute.
Develop metrics and a method to measure prompt payment improvements.
Status: In progress. The Canadian Construction Association is developing a survey to be administered through local construction associations to capture industry feedback on the current situation and allow the working group to establish a baseline.
Review the need and purpose of holdbacks on Public Services and Procurement Canada and Defence Construction Canada construction contracts (such as where lien legislation does not apply). Consider progressive release of holdbacks for completed portions of the work.
Status: Completed. The department has examined the use, benefits and purpose of holdbacks and will continue to use holdbacks in their current state at this time.
Develop and roll-out an industry-led education program to ensure contractors and sub-contractors throughout the contracting chain are aware of their responsibilities and remedies, especially on federal construction projects.
Status: In progress. The working group is drafting some educational content around contract terms, service standards, frequent bottlenecks, remedies for delayed payment, and payment best practices on federal construction contracts.
Next Steps: The development of a training package will be developed for use by local construction associations.
Treasury Board 30-day payment period
Review the Treasury Board 30-day mandated payment period to determine if there is flexibility to reduce this payment period.
Status: Completed.Treasury Board Secretariat has reviewed its Directive on Payments which has now been in effect since April 1, 2017.
Prompt payment codes and protocols for the industry
Similar to the "better business bureau" idea, this action would look at a protocol and opportunities for companies to self-identify as adhering to prompt payment principles.
Status: Completed. There are concerns with the validity and accuracy of data related to promptness of payment that may be provided. The industry has looked at examples in other jurisdictions, and will not use third party applications or services at this time to enable construction contractors and sub-contractors to self-identify as adhering to prompt payment principles.
Consider opportunities to improve project close-outs on federal construction contracts and release of final payments. Opportunity to build on work already underway by an Alberta taskforce working on this issue.
Status: Completed. The Canadian Construction Association has consulted with the Province of Alberta and shared results with the working group. Best practices information will be included in the training material.
Public Services and Procurement Canada commissioned a third party expert to lead a national industry engagement initiative to explore the concept of a federal legislation on prompt payment. A recommendations report based on industry feedback was presented to the federal government for consideration and to inform the development of an effective legislative solution.
Status: Completed. On April 8, the “Federal Prompt Payment for Construction Work Act” was introduced in the House of Commons, as part of the 2019 Budget Implementation Act and received Royal Assent on June 21, 2019
Next steps: Develop the Prompt Payment Regulations for carrying out the purposes and provisions of this Act.
Link to the "Federal Prompt Payment for Construction Work Act" .
Additional initiatives led by Public Services and Procurement Canada
National Trade Contractors Coalition of Canada
Public Services and Procurement Canada has consulted with the National Trade Contractors Coalition of Canada in order to consider their concerns and point of view on the various action plan initiatives.
Next steps: The department will continue to meet with the National Trade Contractors Coalition of Canada to ensure that potential prompt payment actions have an impact at all levels of the construction supply chain.
Public Services and Procurement Canada continues to engage with provinces and territories to discuss common issues and share best practices. In general, practices regarding construction contracting at the provincial and federal levels are fairly well aligned.
Status: Public Services and Procurement Canada has surveyed the 13 provinces and territories and Defence Construction Canada to gather data on current contractual practices. Discussions with provincial and territorial counterparts and the gathering of data will help identify opportunities for alignment among federal and provincial/territorial initiatives.
- Prompt payment in the construction industry (Public Services and Procurement Canada)
- Government-Industry Working Group on Prompt Payment Interim Status Report (PDF, 1,68MB) (Canadian Construction Association)
- Working with Defence Construction Canada (construction payment disclosure)
For more information on the government-industry working group:
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