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Public Ombudsman: a clear way forward for construction payment

The government has generated an array of initiatives in the run-up to the general election, and several of these have been about payment.

One of its most recent consultations asked whether trade associations would like to represent their members in situations where the contract terms might be ‘grossly unfair’.

The expression derives from the 2013 amendment to the Late Payment Act, part of several legislative and voluntary initiatives that have been parachuted in recently to try and fix payment and contractual abuse.

In the latest consultation, the ECA was not alone in advising government that the real issue is not whether trade associations can help their members to go to court in order to get paid.

“Time and again contractors tell us about their often unfair, and occasionally downright brutal, experience of poor payment practice”

It is that small businesses - and that definitely includes small construction businesses - simply don’t want to go to court over payment issues.

A mammoth ask

Time and again contractors tell us about their often unfair, and occasionally downright brutal, experience of poor payment practice in the industry, but we have seldom come across a company who wanted to talk about it publicly, much less take it to court - even if they are still standing and haven’t been forced into insolvency.

In practice, the notion of small and micro businesses regularly going to court to fight their own buyers and secure fair payment is ridiculous.

It will become even more ridiculous in April when court fees rise dramatically.

Yet we certainly need something to help suppliers, and we suggest that ‘something’ should include a new public sector ombudsman for our industry.

A box to stand on

The principal benefit of having an ombudsman – which would operate in the public sector supply chain – is the ability to address ‘grossly unfair’ payment terms before they set in and cause real damage to a supplier, thus removing the need to go to law further down the line, when significant harm may have already been done.

We know that government understands the problem of payment abuse, and what it can do not just to small businesses, but to our industry in general.

What we need next is for government to back practically useful measures to help small companies ‘survive and thrive’.

“The principal benefit of having an Ombudsman… is the ability to address “grossly unfair” payment terms”

It can do that, right away, by setting up an effective ombudsman to deal with public sector supply chain contracts.

What we don’t need is a new route to adversarial law.

Because if you build that, they definitely won’t come.

Paul Reeve is director of business services at the Electrical Contractors’ Association

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