Cabinet Office turns screw on late paying contractors

Aaron Morby 4 weeks ago
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The Cabinet Office is ratcheting up prompt payment requirements on main contractors when bidding for public work.

A year ago rules were introduced in bid documents requiring all public clients to vet main contractors’ payment records to suppliers for projects worth over £5m.

Under the procurement rules, main contractors pass scrutiny if they can demonstrate 75% or more of invoices are paid within 60 days in at least one of the two previous six month reporting periods.

Those that fail the payment test are barred from bidding contracts.

Originally, the Government aimed to lock-out any contractor failing to pay 95% of invoices within 60 days.

But this regime had to be watered down at the last minute after warnings that most major players would fail the prompt payment test.

Now the Cabinet Office is raising the threshold requiring 85% of invoices to be paid in 60 days, taking effect from April 2021.

It comes amid industry concern that the strains of Covid-19 on cashflows could see main contractors regress to onerus payment practices.

Firms will also be expected to demonstrate a compliant action plan is in place to meet the 95% standard in future to get the leeway.

Bidder action plan for 85% provision


Main contractors must identify:

1.The primary causes of failure to pay: (a) 95% of all supply chain invoices within 60 days; and (b) (if relevant) all supply chain invoices within agreed terms.
2. Actions to address each of these causes.

3. Regular reporting on progress to the pass level

On average, main contractors now pay 92% of their invoices within 60 days and 75% within terms, according to the last Build UK survey.

But a handful of its main contractor trade body members would struggle to meet the new invoice targets on the strength of their last returns.

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