Payment abuse still rife among public clients

Aaron Morby 9 years ago

Landmark research by specialist engineering contractors has exploded as myth the claim that public bodies now lead the way as fair payment clients.

The shocking truth about how councils regularly delay payment and use retention cash to fund capital programmes has been exposed after a year-long research project using the Freedom of Information Act.

This uncovered that 38% of public bodies are still failing to pay main contractors within 30 days of invoice.

Around 90% said they still deduct retentions, with most admitting they plunder retention cash to supplement their working capital.

Three councils even admitted they demand retentions as high as 10% from contractors.

SEC Group chief executive Professor Rudi Klein said: “This is scandalous given that the bulk of retention monies are provided by small firms which continue to have major difficulties in accessing finance.

“We also discovered that some local authorities – Kent CC, Nottingham CC, Hasting Borough Council for example, were deducting 10% retentions – double the 5% norm.

Klein said: “Since 2006 there have been almost 20 initiatives and reports on payment coming out of government and Parliament.

“In its report, Paying government suppliers on time, the NAO stated that there is little evidence that wider initiatives aimed at improving payment of suppliers and sub-contractors have had significant impact on payment performance in public sector supply chains.”

The Specialist Engineering Contractors’ Group quizzed the majority of local councils, universities, fire and police services and NHS trusts in what is the most in-depth payment research ever conducted.

Only a quarter of those surveyed could confirm that they had measures in place to track payment performance in the supply chain.

Although around 30 local authorities and police services in England are putting in place project bank accounts, as a simpler means of ensuring better payment practice.

Furthermore 86% of respondents did not make exclusive use of the PAS 91 standard pre-qualification questionnaire, with the health sector being the worst offender.

Fair payment campaigner Debbie Abrahams MP said: “The public sector should be setting an example in how to manage and treat its construction supply chains and should be the foundation on which we build a fair payment culture in this country.”

“Tax evasion is in the news, yet again.  Unfair payment practices should be regarded as unethical as tax evasion.”

In an attempt to galvanise Government into tackling public body inaction, the SEC Group has launched a six-point action plan.

Klein said: “The fair payment charter will not make a difference. We need robust measures to ensure things change, at the moment we just have good intentions and rhetoric which is not working”

Six-point plan for prompt payment

  • All public sector work payments must be made within 30 days of the end of the month in which the work was delivered.
  • Any main contractor failing to pay its supply chain within 30 days to be excluded from further public contracts for 12 months.
  • Introduce legislation to place all cash retentions in trust for the benefit of the firms putting up the cash.
  • Set hard targets to introduce project bank accounts across the public sector.
  • Standardise public sector pre-qualification through the introduction of a British standard.
  • Appoint a Public Procurement Ombudsman to monitor and police poor practice.

Klein stressed that the ombudsman needed to be a high profile role.

“The regulator would have the power to challenge poor practices and to order recalcitrant public bodies to mend their ways.”

He added: “There is an expectation that construction SMEs will invest in skills and training and smart technologies with the efficiencies thereby created directly benefiting the public sector.

“But this is not achievable unless robust measures are adopted to improve cash flow throughout the supply chain.”

Latest news

Taylor Wimpey chief honoured with CBE

Jennie Daly recognised in King's Birthday honours
7 hours ago

Geoffrey Osborne supply chain hit for £26m

More than 500 suppliers and subcontractors left holding unpaid bills
1 day ago

SME contractors agree 4% pay rise for site workers

Workers will also get an extra day of holiday
1 day ago

Labour to mothball £320m A27 job to fix potholes

Manifesto confirms Arundel Bypass canned as "poor value for money"
2 days ago

Lendlease’s £1.9bn Smithfield Birmingham scheme approved

Initial work to start later this year despite questions over Lendlease's degree of involvement
2 days ago

Crest Nicholson rejects £650m Bellway bid

Second Bellway approach rebuffed
2 days ago

Hill submits £800m East London estate rebuild plan

Over 1,900 homes to be built in five phase at Teviot Estate in Poplar
2 days ago

Plan approved for 8,500-seat Edinburgh indoor arena

Construction expected to start next year once a contractor is appointed
1 day ago

Statom starts on £25m Bristol Airport precast car park

Major work package on transport upgrade being overseen by Griffiths Farrans JV
2 days ago

Build problems plunge Crest Nicholson to a £31m loss

House builder unearths more defects on completed sites
2 days ago

Rebooted Amey lifts contract win rate to 1 in 3 bids

Amey chief says firm exceeded expectations in first year under new owners
2 days ago

BAM Nuttall fined £2.3m after worker drowned

Court hears how series of safety failures led to tragedy
3 days ago

OCU buys Scottish civils contractor RJ McLeod

Deal takes multi-utility infrastructure specialist revenue to over £800m
3 days ago

£220m plan to restore secret wartime tunnels approved

Tunnels under High Holborn to become cultural exhibition space
3 days ago

Galliford Try wins £69m Scottish school job

Deal sealed on Paisley Grammar School project in Renfrewshire
3 days ago

Balfour wins design for £690m Skye transmission job

Main work contract for 137km power line to be awarded later this year
3 days ago

Student and resi developer Fortis goes under

Cheshire based developer follows construction arm into liquidation
4 days ago

Construction output falls for third month running

Heavy rain and strong winds blamed for sharp fall in activity in April
4 days ago

Plan in for Leeds 27-storey block of flats

390 flats planned at former Morgan Sindall office site
4 days ago

Firms readied for £1.5bn Parliament estate upkeep deal

Invitation to tender due to go out next month
4 days ago

Amey switches kit supplier

Deal with HSS was worth £24.5m a year to rental specialist
4 days ago

Track workers scatter to avoid runaway rail trolley

Track trolley careers 1km towards work site
4 days ago

Direct delivery model pays off as Murphy profit soars to £67m

Group operating margin jumps from 3% to 5% in record year
5 days ago

Ex-Galliard boss to lead Battersea next building phase

Don O’Sullivan joins as plans advance to start phase 3C of power station redevelopment
4 days ago

£100m Digbeth 33-storey flats job out to bid

483 flats will be delivered for Clarion housing association
4 days ago

Van Elle fined £233,000 after piling rig kills driver

Court hears how tragedy was caused by poorly maintained plant
5 days ago

Renew buys utilities contractor Excalon

Infrastructure giant expand into electricity transmission market with £26m deal
5 days ago

Planning for new homes plunges to record low

Home builders call for urgent action from incoming government
4 days ago

JTRE starts £400m 21-floor London tower scheme

Office block and 64 affordable homes to be built at 220 Blackfriars Road site
5 days ago

R G Carter construction profits up despite 24% revenue fall

Selective client choice help profit jump to £6m from £1m previously
5 days ago

Contractor services