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Government to act on late payment

The Government is working with subcontractors on ways to increase enforcement of prompt payment guidelines to keep down the cost of public sector projects, Construction News understands.

The National Specialist Contractors Council and the Forum for Private Business have stepped up the pressure on Whitehall to ensure its supply chain is paid on time.

Former chancellor Alistair Darling this year introduced a requirement for all central government departments to include a clause in contracts with suppliers to ensure all tiers of the supply chain were paid within 30 days.

But the NSCC said this week that 90 per cent of its members were waiting longer than this, and the FPB highlighted the case of a firm made to wait 60 days on a defence job.

The NSCC said its members had a total of £650 million owed to them that was being withheld by main contractors. The body is in talks with the Office of Government Commerce, which said an announcement would be made shortly.

NSCC chief executive Suzannah Nichol told CN: “We have very clear data and we know that main contractors are getting paid within 10 to 18 days and not passing it on further down the supply chain.

“This is inexcusable and contractors found to be withholding money should not be getting on future public sector frameworks.”

She added that if late payment was monitored effectively, subcontractors would get paid earlier and would not have to build in extra margins to cover the costs of chasing money.

“Main contractors could reduce the cost of projects by paying on time. If we maximise efficiencies then costs come down.

“Subcontractors would not need to factor in overdraft payments, wages for staff to chase payment, and extra costs for paying their own suppliers late.”

Options being discussed include project bank accounts, a clear structure for supplier feedback and the appointment of a payment monitor on each project.

Meanwhile, the FPB spoke to minister for defence equipment Peter Luff about Glasgow-based member EG Heating and Plumbing, which claims it had to wait 60 days to be paid for its work on a defence job.

FPB head of policy Matt Goodman said: “What is the point in main contractors being paid within 10 days if firms further along the supply chain have to wait considerably longer for their money? The risk is that more firms go under because they are unable to maintain any kind of cash flow because of late payment from larger companies.”

The MoD said latest figures showed that 97.5 per cent of invoices submitted directly to it were paid within 10 days. A spokeswoman said: “We pay the contractor and it is then up to them to pay their subcontractors.”