Majority of Councils Are Breaching Rules on Payment
The Facilities Management Journal has reported on the six months post the collapse of Carillion.
New data obtained by the Electrical Contractors’ Association (ECA) and the Building Engineering Services Association (BESA) has revealed that almost nine in 10 (89 per cent) local authorities are not monitoring if their supply chain is getting paid within 30 days for construction work. Are you seeing similar issues in your contracts?
The freedom of information request also revealed almost half (49 per cent) of local authorities do not have, or don’t know whether they have, a built-in contractual requirement for 30-day payment. Almost one in five (18 per cent) councils also say they have no intention of building in contractual requirements for 30 day payment.
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.
Alexi Ozioro, Public Affairs and Policy Manager at the BESA, commented: “There has been much talk of the payment culture change needed in the industry, and public bodies need to lead by example. 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.”
Rob Driscoll, Deputy Director of Business and Policy at ECA, commented:“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. If Government purports to support fairer payment practices, these findings show that there is work to be done. ECA and BESA will continue to work with industry and Government to deliver a fairer payments system in construction.”
Carillion, a strategic supplier to Government, went into compulsory liquidation on 15 January 2018. It was later revealed Carillion owed suppliers tens of millions of pounds in unpaid fees and cash retentions. ECA and BESA are calling for Whitehall to take steps to enforce the Public Contracts Regulations.
In addition, both trade bodies are supporting the progress of a parliamentary bill, launched by Peter Aldous MP, which calls for cash retentions to be held in trust.