More Measures To Deal With Late Payments On UK Construction Contracts

Author:Mr Akin Akinbode, Gurbinder Grewal, Kirsti Olson, Mark Macaulay and Tracey Summerell

As of 6 April 2017, certain large businesses are required to report on their payment practices, policies and performance. (See Reporting payment practices: line of duty.) This obligation is just one of a number of measures implemented by the government to clamp down on poor payment practices in the construction industry as well as other sectors. More measures are in the pipeline as we report below.

Bidders will have to give proof of fair payment practices to secure public contracts

The government has announced its intention to introduce proposals to level the playing field so that small and medium sized enterprises (SMEs) can more easily access government contracts. The proposals demonstrate the government's commitment to improving UK payment practices and include plans to:

"exclude suppliers from major government procurements if they cannot demonstrate fair and effective payment practices with their subcontractors"; allow subcontractors greater access to buying authorities so that they can report poor payment practices; make public procurement more transparent; introduce requirements for suppliers to advertise sub-contracting opportunities on the Contracts Finder Website and supply data to the government on how businesses in their supply chain (including SMEs) are benefitting from supplying to central government; make it easier for SMEs to supply goods and services to the public sector; ensure 33% of procurement spend is with SMEs by 2022; and ensure each government department has a Small Business Champion so that SMEs are given a fair opportunity. (.Gov.UK source)

Have your say! How should the government take into account poor payment performance in procurement processes?

On 10 April 2018, the Crown Commercial Service launched a consultation seeking views on how the government should take account of a supplier's approach to payment in the procurement of major contracts. How exactly will a supplier's approach to payment be assessed to see if it demonstrates a fair, effective and responsible approach?

The consultation flags up action the government has already taken including: 30-day payment terms for public bodies under the Public Contract Regulations 2015 (PCR); its strengthening of the Prompt Payment Code (the Code) (including working towards 30-day payment terms); the use of Project Bank Accounts; setting up a channel for subcontractors to report late payment to the Crown Commercial Services Mystery Shopper team; and, creation...

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