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‘Payment charter is within reach of almost all clients and contractors’, says NSCC chief

Business secretary Vince Cable has failed to respond to a letter seeking support for fair payment on public sector projects, sent by the National Specialist Contractors’ Council three months ago.

The letter was sent on 1 September on behalf of the NSCC’s 30 member trade associations and sought a public declaration that companies working on public sector projects would have to comply with commitments set out in the Construction Supply Chain Payment Charter, as published by the joint industry and government Construction Leadership Council, which is co-chaired by Mr Cable, in April.

The NSCC also sought Mr Cable’s support to work with the CLC to develop a process for monitoring and enforcing compliance with the charter, which seeks to reduce standard payment terms in the construction industry to 30 days by 2018.

NSCC chief executive Suzannah Nichol said: “[Mr Cable] should have no problem standing up and saying every central government project will only employ contractors who abide by the principles of the charter.

“Why is he employing anybody that starves the supply chain of cash? It’s the supply chain that employs apprentices and keeps our local economies moving.

“If you’re not paying those businesses and they’re not spending money locally, then actually we’re holding back the growth that we all need.”

A new survey of Federation of Master Builders and NSCC members has revealed that 92 per cent of respondents agreed contractual payment terms with their clients of 45 days or less, which the CLC’s payment charter requires from June 2015.

However, only 57 per cent of the 719 respondents said that they received payments within those contractual terms.

FMB and NSCC payment survey results

Ms Nichol told Construction News the results proved that 45-day contractual payment terms were “within the reach of almost everybody”.

She said to address the gap between contractual terms and the “reality” of payment, tier two contractors needed to tighten up their own accounting processes and “put more concerted effort into chasing money” when it is not paid on the due date.

When working for the public sector, 56 per cent of NSCC and FMB members received payment within 30 days, compared with 32 per cent across all projects.

Ms Nichol said local authorities were consistently named among the best payers and the worst payers in the industry.

She declined to “name and shame” poor payers, but said that private clients, including domestic clients, “came very high up on best payers” while a number of main contractors “were consistently put down” as poor payers.

To improve payment practices within the industry, Ms Nichol said the priority was to “embed” the payment charter with agreed key performance indicators and client and contractor support.

A Department for Business, Innovation and Skills spokeswoman said: “All government construction contracts require sub-contractors, up to tier three, to be paid within 30 days.

“The monitoring and reporting framework to support the construction payment charter is currently being developed. Once the processes are in place for reporting progress against the charter, BIS will work with the Cabinet Office to determine whether procurement policy might work further with the charter.”

Readers' comments (1)

  • With the upturn together with the lack of skilled labour available, this should be a good time for specialist subcontractors. The payment charter can give a false sense of security and subbie bashing is still going on by some Main Contractors.
    Sub-contracts are getting more and more complicated and hard to understand and more and more risk is being pushed on to the subbie. When we start a contract we have to put the finance in place to allow us to pay our men weekly. It seems that the MC use our cash to fund their works. 45 or even 30 days is too long for most small subcontract companies to wait to be paid! Using subcontractors takes away all the responsibilities and cost of the payroll/employment and endless other legislation and I'm sure if they employed their own labour direct they would get a bit of a shock. Time for them to treat the people who earn them their money better I think.

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