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Building Services bodies demand public sector action on poor payment practice

FoI request from BESA and ECA finds large number of surveyed councils failing to meet their legal requirements on ensuring payments on construction work are made in 30 days

Almost nine out of ten local councils in the UK are failing to pay companies for construction work within the legally required 30-day period, according to findings from BESA and the ECA.

A Freedom of Information (FoI) request sent out by the organisations also found that just under half of local authorities queried were either unaware or had failed to include contractual requirements for 30-day payment in any agreements for construction or building services work.

18 per cent of the surveyed authorities responded that they were not intending to implement 30-day payments as part of any future service or construction contracts, despite legal obligations to do so.

A joint statement said, “The Public Contracts Regulations 2015 state that 30-day payment down the supply chain is mandatory, and that public bodies should take steps to ensure this takes place.”

“The FoI data therefore shows that many councils are not meeting their legal requirements.”

Publication of the findings comes six months after the collapse of Carillion, which resulted in the construction supply chain facing significant financial losses tied to unpaid fees and cash retentions.

BESA and the ECA have been among industry bodies pushing for regulatory reforms of payment practices in the industry. The worked with the SEC Group on drafting a bill that was introduced to parliament earlier this year by MP Peter Aldus that would ringfence cash retentions. A second reading of that bill has been delayed twice, with backers now hoping to expand MP support for pushing the reforms.

Rob Driscoll, deputy director of business and policy for the ECA, said that pledges in recent months from senior government figures to address payment practices now required decisive action, especially in enforcing late payments.

He said, “Non-compliance by the public sector with the Public Contracts Regulations is unacceptable.”

“This is especially significant given the cautionary tale of the collapse of Carillion – one of the key strategic suppliers to government – which ultimately had a wider impact on SMEs.”

Alexi Ozioro, public affairs and policy manager at BESA, said that it was vital for public sector bodies to lead by example in ensuring good payment practices in their contractors.

He said, “The industrial strategy calls for a fairer payment system, the Chancellor has highlighted the need to tackle late payments and a Crown Commercial Services consultation even poses excluding bad payers from public contracts. We applaud the government for engaging with the poor payment debate, but it is about time action matched words.”

Parliamentary pressure

Pressure for regulatory reform of payments across the supply chain has intensified both from industry and key parliamentary bodies following following Carillion’s collapse in January.

Last month, parliament’s Public Account Committee recommended that the government consult with SMEs on the best ways of introducing project bank accounts and retentions reform into public sector contracts.

The recommendations were made in a report from the committee into the stability of public sector procurement after the collapse of Carillion.

PAC chair MP Meg Hillier said the latest findings built on its ongoing warnings about weaknesses in how the government contracts services. She cited Carillion’s collapse earlier this year as having “sharpened” the committee’s focus on how government manages over £100m worth of contracts with strategic suppliers.

Mr Hillier added, “There must be clearer specification of contracts, properly scoped, so that when any deal is signed there is an agreed understanding between government and supplier of what is being paid for, and over what timescale.”

“There are many areas in which the Cabinet Office can drive compliance across departments—not least turning its proposed ‘playbook’ of guidelines, rules and principles for contracting into a set of mandatory requirements.”

 

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