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Welsh authorities must do more to improve payment practices

A Freedom of Information Act survey of Welsh health authorities has revealed a lack of action in curbing payment abuse of SMEs in construction supply chains.

The survey was carried out last year which saw the collapse of Dawnus Construction which left £40 million owing to SME trade contractors across Wales. The survey was carried out by the Specialist Engineering Contractors’ (SEC) Group Wales/Cymru which represents the largest value sector in Welsh construction.

The survey revealed that the majority of health authorities were not taking steps to ensure prompt and speedy payments to SMEs in construction supply chains. Welsh Government’s guidelines are that sub-contractors (and sub-subcontractors) should be paid within 19 and 23 calendar days respectively.

Only three respondents (Aneurin Bevan, Cwm Taf Morgannwg and Swansea Bay health boards) took any measures to ensure that sub-contractors were paid within 30 days of their payment applications. Where major capital projects are let under the Designed for Life framework there is some level of compliance with the Value Wales Fair Payment Charter.

Project bank accounts (PBAs) have yet to gain traction with health sector construction procurement in Wales. They enable all firms on construction projects to be paid from the same ‘pot’ without payments having to cascade down the different layers of contracting.  In this way payments can be made to small businesses within 20 days.

It is expected that take-up of PBAs will increase following the pilot PBA being undertaken by the Aneurin Bevan University Hospital Board.

SEC Group Wales national executive officer, Cat Griffith-Williams, said: “On a positive note, health authorities were paying their first tier of suppliers within 30 days but there was little monitoring to ensure that this was reflected along the supply chain.”

“As from 1 January 2018 the Welsh Government mandated the use of PBAs on public sector projects above a £2 million threshold.  We would now like to see every health authority in Wales using PBAs.”

SEC Group Wales also expressed concern that five health authorities were making use of early payment facilities. “It is unfair that firms should have to pay in order to get paid earlier,” added Cat Griffith-Williams.

SEC Group Wales is urging the Welsh Government to implement the following three recommendations:

  1. All public bodies should maintain data on payment performance along their supply chains;
  2. Procurement staff in health authorities should be made aware about the use of PBAs with a target date by which all authorities must use PBAs;
  3. All serial poor payment performers should be excluded from bidding on Welsh public health sector works.
29 January 2020

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