Specialist contractors express concern over construction firms’ payment times

The Specialist Engineering Contractors’ (SEC) Group is the latest industry body to express its concern about the publication by Build UK of the payment performance of its leading member companies, which comprise the largest UK construction companies.

While welcoming Build UK’s decision to publish its members’ payment performance, SEC Group expressed concern that none of the published figures showed payment times of less than 30 days. This means that these companies would not be able to comply with the law (under the Public Contracts Regulations 2015) applicable to payment times on public sector works, which require payments to be made within 30 days.

SEC Group also pointed out that the companies are not complying with the requirement under the Supply Chain Payment Charter (published by the Construction Leadership Council in tandem with BEIS) to discharge payments within 30 days.

SEC Group’s CEO, Rudi Klein, said that the figures remain disappointing. “I am concerned that the existing legal requirements and charters are being ignored,” said Klein. “We are urging the government to put in place project bank accounts on all public sector projects. These will enable SMEs in these companies’ supply chains to be paid within 12-15 days; everybody gets paid from the same “pot” without cash having to travel along the cascading layers of contracting,” he said.

Recently the Public Accounts Committee recommended that (post-Carillion) government procurers should be protecting firms in the supply chain from payment abuse.  The Committee recommended the greater use of project bank accounts and the ring-fencing of the much-abused cash retention system.  The Small Business Commissioner has also expressed support for these measures.

Klein also said that he is also concerned about insolvency risk posed by the balance sheets of some of the largest companies, with trade credit insurers now reluctant to provide cover in the event of the insolvency of some of the largest companies. “In my view, public sector procurers should have a statutory right to pay firms in the supply chain directly if they can’t obtain credit insurance,” Klein said.

Earlier this week, the National Federation of Builders, which represents small and medium-sized businesses and regional contractors, said the payment data published showed “utter disregard” by Build UK members for their failure to follow best practice and fulfil a legal requirement.