Behind the headlines
Behind the headlines News Analysis with B&ES, the Building & Engineering Services Association Wales sets the pace for payment reform
Welsh politicians have taken significant steps to improve cash flow in the construction supply chain. Mike McDonald, vice chairman of B&ES Wales, explains why this is important for the country’s whole economic recovery
Finance Jane Hutt, recognised some time ago that tackling late payment in the construction supply chain should be a key priority for the Wales government.
Speaking at the launch of the Building & Engineering Services Association (B&ES) Wales/Cymru, at the Senedd (Welsh parliament) building in Cardiff earlier this year, the Minister said “prompt payment is vital and we know there is a serious problem in the supply chain”. She also condemned the “unfair practices” that under- mine confidence among special- ist contractors and promised “no sympathy for people who with- hold payment for work that has been satisfactorily completed”. The Welsh government has been working closely with B&ES and the umbrella contractors’ body the Specialist Engineering Contractors’ (SEC) Group, of which it is a member, ever since to introduce and extend the use of Project Bank Accounts (PBAs). PBAs are now being widely adopted throughout the UK on public sector projects as a way of improving security of payment for sub-contractors to safeguard the supply chain and eliminate the risk of insolvencies down the supply chain. There are now three major public sector trial projects proposed in Wales that use PBAs as their payment mechanism.
Disrupted
Public sector construction procurement is worth £346m to Wales and, according to Mrs Hutt, 86% of that has been rein- vested in the region by employ- ing local firms. It has also contributed 13,000 weeks of training to local apprentices. Ensuring this vital and growing work stream is not disrupted by
An Ecofit Energy Systems solar thermal installation
payment delays and the legal disputes that follow is, therefore, crucial to the Wales govern- ment’s infrastructure plans and, with them, the whole economic recovery of the region.
There are serious moves afoot to ensure that main contractors only get access to public sector projects in Wales if they treat their suppliers fairly by either agreeing to use PBAs, which places project money into a Trust status account. Similar moves are underway in Scotland and Northern Ireland following in-depth reviews of public sec- tor procurement policies in those countries. The devolved assemblies are blazing a pro- curement trail for the rest of the UK to follow.
Supply chain security is vital to the economic revival in our in- dustry especially when work- loads are improving. It is at times like this that sub-contractors can become even more vulnerable as they risk over-reaching themselves in a bid to secure a share of the new workload. The renewables sector, in par-
ticular, is benefitting from the improving economic situation, but it is even more crucial with so-called ‘emerging’ technolo- gies that companies feel confi- dent enough to invest in expanding and improving their skills base. Strangling cash flow to small businesses can lead to bankruptcy and the consequent loss to the economy of vital employment opportunities.
My own company Ecofit
Energy Systems has taken off rapidly in the past year as demand for specialist renew- ables expertise has soared, both in Wales and further afield. However, margins remain very tight and often main con- tractors impose 90-day payment terms on their suppliers. In real- ity, this can mean waiting 120 days and beyond for the money to actually reach your account because they will only initiate the 90-day period once certain assurances have been received.
It is very hard for a small business – in any industry – to function on those terms and to bear that level of risk. We all have suppliers and staff to pay as well as the basic overheads any business needs to maintain. Specialist contractors also carry an unusually high administrative burden to achieve pre-qualifica- tion status with many industry clients despite the ongoing ef- forts of B&ES to persuade the industry to accept a standardised and streamlined process. There is an opportunity for
Wales to become a centre of excellence for this industry for the delivery of high quality renewable solution; as well as the better procurement practices that underpin the burgeoning supply chain required to deliver them. As a smaller market, we have an advantage over the businesses in England where it i
Head of new department
Following the retirement of Gareth Keller from the B&ES, Mark Oakes has been appointed to the new post of head of spe- cialist group services and Association secretary.
Mark will provide the secre- tariat for the Association’s four specialist groups – covering ductwork, heating and plumbing services, refrigeration, air conditioning and heat pumps, and service and facilities – and to the B&ES Council, the Association’s governing body.
He joined the staff of the Association as a specialist group services officer in 2006, and in the past eight years has taken on re- sponsibilities for the Joint Major Contractors’ Group – comprising the UK’s largest mechanical and
electrical specialists – and the Building & Engineering Services Employers’ Alliance, which is committed to the modernisation of the sector’s industrial
relations landscape.
He previously held a wide variety of marketing and commu- nications management posts. “I am delighted Mark has agreed to take on this important role, which lies right at the heart of the Association’s relationship with its members,” said B&ES chief executive Roderick Pettigrew. Under the new arrangement, responsibility for the technical aspects of the work of the specialist groups will pass to Bob Towse, B&ES head of technical and safety.
For more information on the B&ES and its members, contact Val O’Reilly on 020 7313 4907 or email
val.oreilly@b-es.org 12 | October 2014 | HVR Daily news update at
www.heatingandventilating.net
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