Lord Mandelson, Business and Enterprise Secretary, recently announced that government will pay suppliers within ten days.
Reports are coming thick and fast that businesses in construction supply chains are getting 120 days even on public sector projects. Some clients simply haven’t got the message yet.
Government announcements on tackling the economic crisis must be translated into deeds - and in the supply chains that actually deliver the work. Now is the time for firms in the industry to make their presence felt by pestering their MPs. Give MPs my list and ask them what they propose to do.
Stop deducting retentions on all public sector projects.
At a recent dinner of the Electrical Contractors’ Association, president Alan Littler made a very significant statement. If the public sector stops deducting retentions now it would put £1.25 billion back into the pockets of SMEs in the industry. The Government has already been told by the Business and Enterprise Select Committee that it should get rid of retentions as soon as possible. I will add a further point. There should be a review of all public sector projects to establish the extent of outstanding retentions along the supply chain, with the aim of securing the release of retentions immediately (unless there is a genuine current dispute over workmanship).
Where a significant amount of work is carried out off-site, public sector clients should make advance payments in respect of such work, and they must ensure that such arrangements are applied along the supply chain.
Bank guarantees or payment bonds
Lead contractors on public sector projects should provide bank guarantees or payment bonds to their supply chains. If they are not able to provide these guarantees they shouldn’t be doing the work in the first place.
Project bank accounts
The New Engineering Contract and PPC 2000 (the partnering contract) both have project bank account provisions. Barclays Bank and the Bank of Scotland have put together project bank account packages. The 10-day payment periods can be delivered through these
Cut the cost of prequalification in the public sector
SMEs in the industry are spending a small fortune on vetting processes every time they go for a job. Mark Prisk, Conservative shadow business minister said that he will legislate to reduce the burden of pre-qualification. But in the meantime, public sector organisations must act to reduce this burden. Let’s develop a badge to identify competent firms.
Professor Rudi Klein is chief executive of the Specialist Engineering Contractors’ Group.