labour, time and materials – a point which we made at our meeting with the minister. We discussed the immediate threat to the
survival of businesses in the construction supply chain – particularly SMEs – that can arise from poor payment practices, as well as the long-term effects of payment insecurity. This can result in perfectly healthy and viable businesses hitting a ‘glass ceiling’ where they are afraid to risk expansion and instead take the strategic decision to stay put. This seriously stifles innovation and growth, not only of the business concerned, but also, ultimately, UK plc, as without growth there is no investment in new services, and no job creation or training of apprentices to secure the future of the industry.
Top of the agenda Payment continued to figure highly on the
political agenda in July as, hot on the heels of the ICS, came a report into late payment in SMEs. The report, which was developed by a group of MPs from across the political spectrum led by Debbie Abrahams MP, also shone a light on the construction sector as a particular payment blackspot. It offered some innovative solutions, including: nThe establishment of a Construction Code of Conduct, similar to the Grocery Code, with an independent adjudicator
for mediation, as a way of penalising poor payment practices
nGovernment contracts that insist on money being passed down the supply chain
nRequiring government to include past payment performance in prequalification questionnaires (PQQs) for contracts it tenders. Add this to Lord Young’s recommendation
regarding the mystery shopper scheme – which involves an enforcement body rather than anonymous contractor tip-offs – and it looks like government has recognised the need to bump the issue of poor payment in our sector towards the top of its list.
Next steps To ensure that the Fair Payment Charter
– which builds on the Prompt Payment Code – is tough, meaningful and fit for purpose, the ECA, through our umbrella organisation SEC Group, will seek to engage with the Institute of Credit Management, which has been tasked with developing the charter. Our overall aim is to ensure that the intent of the Late Payment of Commercial Debt regulations, which came into force for new contracts in March 2013, is effectively applied. We will also look to meet with Debbie Abrahams, the MP who led the all-party report into SME payment,
Government has recognised the need to bump the issue of poor payment in our sector towards the top of its list
and will explore the possibility of bringing interested stakeholders – including main contractors – together to debate the issues at a roundtable event. Through our grass-roots lobbying campaign, we hope to engage with business secretary Vince Cable, who is supportive of tough measures for late payers. We will also brief the Department for Communities and Local Government on the issue of favourable payment terms, offered to main contractors on public sector contracts, being passed down the supply chain. In a recent survey, more than half of ECA members said that, over the last 12 months, when working on public contracts they were only paid within 30 days just 20 per cent of the time. We will share this data, which highlights that, despite local authorities paying within 30 days and often 10 days, money still fails to trickle down the chain.
The ECA is more than a badge: it’s a valuable business benefit. An ECA member can get free, informed advice on contractual matters ranging from loan labour agreements to tender pre- qualification, from conditions of contract to payment issues and CDM qualifications.
ECA Members also get:
• Technical advice on design, installation, inspection and maintenance
• The ECA Guarantee of Work to give your customers peace of mind
• Discounted training courses • Credit rating and debt recovery services
• Advice on employee relations, recruitment, disciplinary matters, employment law and industrial relations
• Reduced rates for BUPA cover, life insurance and pension scheme
Ruth Devine, Director, SJD Associates Ltd
• Heath and Safety advice on how to reduce risks and comply with legislation
ECA. Here to help your business.
eca.co.uk
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