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Public Contracts Regulations: A path to prompt payment?

The government has continually expressed its commitment to help smaller businesses but, when the government talks about SMEs, it doesn’t always have smaller construction businesses in mind.

Like it or not, construction - and its supply chain - often works differently to other sectors, and measures aimed at helping SMEs in general can miss the mark when it comes to smaller construction companies.

While the Cabinet Office’s consultation on its plans for the Public Contracts Regulations 2015 was eagerly anticipated, further amendments are needed if they are going to offer significant help to construction SMEs.

For example, draft regulation 112 - ‘Payment of… invoices within 30 days by authorities and subcontractors’ - should have promised prompt supply chain payment along the public sector supply chain.

“We trust that the draft regulations will be amended so that Lord Young’s recommendations on ensuring prompt payment can be delivered”

But, as drafted, the proposals didn’t allow properly for contracts made under The Construction Act, and in our sector they would still allow lengthy payment times to lower tier contractors on public sector projects.

This problem can be fixed by applying current good construction payment practice, and we trust that the draft regulations will be amended so that Lord Young’s recommendations on ensuring prompt payment can be delivered.

Similarly, we anticipated some useful legislation to help overcome excessive public sector PQQs.

However, if they are to work in construction, the proposed 2015 Regulations need to focus more on using PAS 91, the existing draft Standard for construction PQQs. This is particularly so because of growing interest in making PAS 91 a full British Standard in light of its increasing recognition by major contractors, local authorities, and others.

“The latest consultation offers a real opportunity to address the perennial issues of slow payment and excessive paperwork”

To encourage even more public bodies to use PAS 91 pre-qualification questions, the new legislation needs to require any public body that opts for another type of construction PQQ to explain why this is, to the Cabinet Office. This will need to be backed up with clear guidance on what a reasonable explanation would look like, and the consequences if it falls short.

Many in the industry appreciate Lord Young’s thoughtful and pragmatic recommendations for helping SMEs, which are fully supported by the government.

The latest consultation offers a real opportunity to address the perennial issues of slow payment and excessive paperwork. Some final, sensible adjustments to the forthcoming Public Contracts Regulations 2015 could still provide a much needed boost for construction SMEs.

Paul Reeve is head of business policy and practice at the Electrical Contractors’ Association.

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