The Building Engineering Services Association (BESA) has welcomed the latest government measure to tackle persistent late payment in construction supply chains.
Main contractors will now have to prove they have paid at least 85% of invoices to sub-contractors inside 60 days or face being barred from bidding for lucrative public sector work from next April under new rules introduced by the Cabinet Office.
Currently, procurement rules state that 75% of invoices must be paid within that timescale in at least one of the last two six-month reporting periods. However, BESA along with a number of other trade bodies, has been calling for tougher targets since the rule came into effect a year ago.
“We are pleased to see the Cabinet Office is now pushing for companies to do better” said the association’s director of legal Debbie Petford. “After all, 60 days is not exactly generous, and SMEs should be receiving money they are owed even quicker than that.”
BESA is concerned that the current COVID-19 crisis is being used as an excuse by some large firms to delay payments; putting further pressure on already stretched sub-contractor cashflows. There is also some evidence of the pandemic being used as a smokescreen for more unfair contract conditions.
However, a survey carried out by the consultant Gleeds suggested there is optimism in the industry that the crisis could make it less adversarial in the long run. It revealed that the number of firms who believe a more adversarial future is inevitable has fallen by 30% since earlier in the pandemic.
“It would appear that many in the industry are taking a longer-term view, recognising the importance of supply chain stability and smarter, more collaborative procurement to achieve better project outcomes,” Gleeds said.
Speaking at last week’s BESA National Conference industry safety champion Dame Judith Hackitt also called for the industry to speed up reforms to working practices that would improve quality standards including more collaborative working. She also announced plans to reward ‘early adopters’ of her reforms with a special accreditation.
“Treating your supply chain partners fairly and with respect is the bedrock of a collaborative culture,” added Petford. “Unless specialist contractors can feel confident about their financial future, the industry will continue to struggle to achieve Dame Judith’s vision of a fully joined up approach.”
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