Industry bodies welcome government action on prompt payment

Leading construction body the Specialist Engineering Contractors’ (SEC) Group has welcomed the government’s announcement of a package of measures to support SMEs supplying to government, including excluding contractors with poor payment records from bidding on public contracts.  

Cabinet Office minister Oliver Dowden yesterday announced proposals to exclude firms that cannot demonstrate fair payment practices with their subcontractors from government deals.

SEC Group’s CEO, Rudi Klein, said that he was particularly pleased that the government intends to exclude poor payers from government procurement. “We have been urging the government to introduce a yellow/red card system for a long time,” said Klein. The yellow card is a warning to improve payment performance and the red card excludes a continuing poor performer from bidding for government contracts for a period of two to three years.”

Klein said that if such a system had already been in place then Carillion would have been excluded from government contracts. However, SEC Group said that on payment security the government needs to go further. It called for legislation to require that project bank accounts are put in place for all public sector projects and called for government support to a private member’s bill (submitted by MP Peter Aldous) that will protect cash retentions.

SEC Group also welcomed the prime minister urging government departments to nominate a minister as small business champion. Klein said this was, again, heading in the right direction, but more still needs to be done. “The Carillion debacle has revealed the appalling level of abuse heaped on construction supply chains,” Klein said. “We should also be considering the introduction of a statutory regulator (similar to the Groceries Code Adjudicator) to challenge the behaviour of large firms and, if necessary, fine them in the worst cases of abuse,” he said.

Building Engineering and Services Association policy manager Alexi Ozioro said: “There are a few ways to report poor payment performance already, but if this one has teeth and direct consequences backed by government, it could see a huge culture change that will benefit thousands of SMEs. It is very encouraging to see, for perhaps the first time, government make the connection between fair payment and winning public contracts.”