Construction Leadership Council co-chair Andy Mitchell has said he does not think “many” tier one contractors are delaying payments or abusing terms.
Speaking to Construction News at a CLC briefing on Wednesday, Mr Mitchell said he believed payment problems were chiefly located elsewhere in the supply chain.
“The majority of people at tier one and client level would sign up and say yes they agree [with prompt payment].
“The problem is that that gets lost I think as you go further down [the supply chain], because I don’t think there are many tier ones at all who are abusing the payment terms and delaying payments.
“Certainly in the infrastructure space I’m in, it’s a specification of the contract: thou shalt pay promptly.”
Mr Mitchell has been chief executive of the £4.2bn Tideway project since 2014 and said payment on the project was monitored, but that the effectiveness of this oversight was questionable.
He said. “As a client we do [monitor contractor payments], but how effective is that? I don’t know.
“We think we’re aware of the promptness of payment throughout the supply chain – but if I can be honest, we’re aware probably of the first two tiers; it does get quite hard thereafter.”
Asked whether he would look closely at prompt payment as co-chair of the CLC alongside construction minister Richard Harrington, Mr Mitchell said: “We have to; 98 per cent of companies in this industry are the people who are likely to suffering from that kind of stuff [late payment].
“If you can’t address that, you’re not really working on behalf of the industry, are you.”
Mr Mitchell said improving payment terms for SMEs was essential for the health of the industry.
“We’re never going to get a sustainable industry if we don’t sort this out, because cashflow is the lifeblood of most small companies,” he said.
He added: “If you talk about innovation, where does it come from? It comes from the lower tiers, it comes from the SMEs.”
To improve prompt payment for the supply chain, Mr Mitchell said the government could have a big impact by changing the way it procured work.
He said: “We should be saying to government that there should be a whole bunch of […] requirements.”
He added: “If you can’t show how you’ve addressed the environmental requirements, if you can’t show that you’ve thought through the whole-life cost, if you can’t show you can manage the supply chain fairly, then you shouldn’t be getting any money. It should be that simple.
“That’s what we can do here, but we’ve got to be bold enough and believe we’re speaking on behalf of the industry to say to government, ‘Look, this is just how it has to be’ – that will shake things up.”
The CLC is now in its fifth year and Mr Mitchell said it had moved from being a quasi-think tank and was now in its “doing phase”.
With the £420m sector deal in place, the CLC said it wanted to maximise returns on the investment by improving industry productivity.
Among its stated aims were to increase the use of new digital technology to improve certainty of delivery, boost the amount of offsite construction through new manufacturing techniques, and focus on the whole-life performance and value of assets rather than just construction costs.
To implement the changes outlined by the CLC, Mr Mitchell told CN he wanted to make the organisation more representative of SMEs.
“For me, a really, really important first step is to get that representation right, to talk to those organisations and say, ‘Right, how do you want to fit with this and how are we going to make this work?’,” he said.
Without more involvement from SMEs, Mr Mitchell said the CLC would be “just talking to ourselves”.
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