[ Update: Fair payment ]
provide greater certainty on payment to everyone in the supply chain – particularly SMEs – and to set ‘reasonable’ payment periods (at the time, 30 days). Whilst these developments and recommendations were a step forward, they applied on a voluntary basis but, before long, although some improvement could be detected, it was apparent that the step change in payment performance intended would not be delivered.
Making fair payment in construction a contractual requirement There has been a signifi cant development and substantial progress. The Cabinet Offi ce (of which the OGC is now part) has made payment practices as outlined in the OGC guide a contractual requirement. This requirement has also been made more prescriptive, by defi ning payment periods to each tier in the supply chain. The result has been that the government has moved from voluntary proposals to a mandatory contractual requirement. Consequently, since September 2009, all procurers in
central government departments, their agencies and non departmental public bodies have had to ensure that the requirements set out in the Cabinet Offi ce Information Note 2/2010 are incorporated into the contract forms entered into between the relevant parties (which includes Tier 2 specialists). Payments down the supply chain must be made ’within a prescribed period of time from the due date‘ (NEC terminology) in the main contract.
Payment time periods The defi ned payment timescales are as follows: ■ Client to Tier 1 (main contractor) – within 14 calendar days from the due date.
■ Tier 1 Contractor to Tier 2 (subcontractor) – within 19 calendar days from the due date in the main contract.
■ Tier 2 subcontractor to Tier 3 (sub-subcontractor) – within 23 calendar days from the due date in the main contract.
Project Bank Accounts (PBAs) As a key component of the fair payment contractual requirement, the OGC has advised that central government departments, their agencies and non- departmental public bodies should move to a position where PBAs are adopted unless there are ‘compelling reasons not to do so’. This represents strong endorsement for the promotion and use of PBAs, which aligns well with the fair payment
Non-compliance reporting
If you are experiencing payment problems on a public sector project, SEC Group want to hear about it. If you provide details of the ‘non-compliance’ SEC Group will make sure that OGC are aware. They in turn have committed to see that non-compliance is corrected and not repeated. You can be certain that every part of this process will be confi dential and at no time will the contractor involved be named. To contact SEC Group, email the executive secretary John Nelson at
contact@secgroup.org.uk or phone him on 020 7313 4819.
Specialist Engineering Contractors’ Group
Engineering in construction represents over 40 per cent of the work done on many projects. Consequently, SEC Group is a major player in the industry representing the industry’s premier trade bodies, including:
■ Association of Plumbing and Heating Contractors ■ British Constructional Steelwork Association ■ Electrical Contractors’ Association ■ Heating and Ventilating Contractors’ Association ■ Lift and Escalator Industry Association ■ SELECT (Electrical Contractors’ Association for Scotland).
Together, these organisations act on behalf of a sector comprising over 60,000 fi rms and a workforce of more than 300,000. They account for the largest single component (by value) of construction output.
More info
The OGC’s Guide to best ‘Fair Payment’ practices and the Cabinet Offi ce Notice 2/2010 on ‘Making fair payment in construction a contractual requirement in central government contracts’ are available on the SEC Group website at
www.secgroup.
org.uk
About the author
Trevor Hursthouse Trevor Hursthouse has been chairman of the Specialist Engineering Contractors’ (SEC) Group since 1999. He was awarded the OBE for services to the construction industry in the 2011 New Year Honours.
contractual requirements because the PBA process automatically provides clients with visibility over payment behaviour and timescales in the supply chain.
Example set by Crossrail, Defence Estates and Highway Agency to use Project Bank Accounts Crossrail – The Crossrail project is currently the largest infrastructure project being undertaken in Europe. In line with OGC guidance, Crossrail will use project bank accounts to support its approach to fair payment across the supply chain. Defence Estates – Defence Estates will introduce Project Bank Accounts to allow direct payment to supply chain members, subcontractors and main contractors under future commercial arrangements on its estate, including those being developed across the UK under its’ Next Generation Estate Contracts (NGEC) programme. Highways Agency – The Highways Agency will utilise Project Bank Accounts on its future Maintenance and Capital Works contracts. Transport for London – Transport for London’s new East London line extension (due to be completed in May/June) has a project bank account facility.
Monitoring implementation Signifi cant progress has been made. There can be no doubt that the OGC is committed to seeing its payment policy implemented, but they rely on the supply chain to monitor the extent to which the fair payment objective is being achieved. ECA members’ contribution to help monitor progress on the implementation of fair payment requirements on public sector projects is essential. It is in all our interests that fair payment principles and practices are promoted and adopted in the public sector but, if non-compliance is disregarded and not reported, any case for further action to eliminate payment abuse will be seriously undermined. A clear understanding of the fair payment process is
essential, and so ECA in conjunction with SEC Group and Rider Levett Bucknall plc (RLB) will engage in a series of Regional Awareness Seminars. They will explain the new contractual requirements and entitlements, as well as the non-compliance reporting arrangements.
March 2011 ECA Today 41
SHUTTERSTOCK
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72