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Councils should enforce prompt payment by contractors, say MPs

Councils must include clauses in their contracts obliging their contractors to pay their subcontractors on time and carry out spot checks to ensure this happens, a group of MPs has recommended.

The report on improving local government procurement by the communities and local government committee, which was published today, added that councils  should take into account late payment by a contractor when assessing tenders for any future work.

Local authorities should also consider placing similar information provision their contractors as apply to public bodies under the Freedom of Information Act as part of efforts to increase transparency and prevent fraud, the paper said.

The report also recommended that the Local Government Association, which represents England’s councils, establish a “flying squad” of procurement experts to train regional teams of trainers which could be bought in to help councils carry out complex procurement exercises if they lacked the skills in-house.

It said money could be saved through collective buying arrangements in some circumstances and the Local Government Association should identify ways of aggregating spending on key categories of purchases including construction. The report estimated £1.8bn could be saved if collaboration were the “default option” but added that savings should not be made at the expense of other benefits of procurement such as supporting the local economy.

The report said pre-qualification questionnaires were a useful way of pre-selecting viable tenderers but said they could be standardised more. It said the LGA should lead in ensuring they are as simple as possible. The committee also supported the government’s idea of a national database collecting information from tenderers.

The CBI, which gave evidence to the committee, cited the example of a construction company which spent about £1.6m on pre-qualification in a year while The Specialist

Engineering Contractors’ Group said its members spent over 60,000 days a year filling questionnaires and duplication in the process in England and Wales cost them £20m a year. The report said companies could spend £50,000 on a tender for council business – far more than in many other European countries.

It said councils should consider sub-dividing at least part of frameworks to allow smaller companies to bid for smaller parcels of work . It also said that policies that disproportionately favoured small or local businesses could cost taxpayers more and shut out firms from the wider region. But it added that carefully framed policies could give small and local firm the same opportunities as larger companies to compete for work. The report said councils should consider how contracts could benefit the local areas, through apprenticeships and training opportunities for example, rather than just selecting on price.

Clive Betts MP, chair of the committee, said: “Procurement is too important to be viewed as a niche function conducted in back offices. It is central to delivering and managing the services that people rely on every day, from having their bins emptied to receiving social care. Without effective procurement local government will cease to operate.

“We need investment now so that staff right across councils gain the skills needed for effective procurement. At times staff, unsure of the needs of local residents and business—especially small local businesses—fall back on wasteful bureaucracy. This has to stop.”

Alasdair Reisner, director of external affairs for the Civil Engineering Contractors Association, said he was “delighted” the committee had taken up CECA’s recommendation of a procurement “flying squad” to help councils. He said: “The establishment of a dedicated ‘flying squad’ of infrastructure professionals who will be able to upskill regionally-based teams of trainers would spread best practice in the sector.

“This should streamline procurement and reduce the burden on contractors. CECA also called on councils to be bolder in their willingness to engage early with the supply chain, rather than taking the misguided view that such contact would breach EU law.

“Today’s report recommends that the UK needs to tackle an ‘over-zealous’ application of EU guidelines, and calls on government to spell out a proportionate approach that both meets EU guidelines and streamlines procurement.”

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