PAYMENTS FOCUS
Time’s up for risky business
As the problems of procurement increase, we need a regulator to battle bad behaviour plaguing the industry
By Professor Rudi Klein SEC Group CEO and Barrister
T
raditional construction procurement is expensive and wasteful. According to UK Government research, there are between 50 and 70 sub-contractors on the
average project. Each requires a margin, each wants full overhead recovery and each will, no doubt, put in a contingency for risk.
In addition, each interface has to be
managed. The scope and opportunities for disputes are endless. Risk is not managed – it is transferred along the supply chain facilitated by onerous supply chain contracts. It is no wonder that countless inquiries and reports on construction (including reports on the Edinburgh
schools defects and the Grenfell fire tragedy) have concluded that the extent of the fragmentation in the delivery process, combined with lowest price and wholesale risk transfer, are driving poor quality. The Carillion collapse also highlighted the risk of placing large volumes of work with the UK’s big outsourcing companies.
“Te scope and opportunities for disputes are endless”
Is anything changing? The answer to the above question is a resounding no. A year ago, a House of Commons Select Committee observed: “UK Government has often transferred risks to contractors that they cannot possibly manage.”
This observation can equally be applied to most public sector procuring organisations. Moreover, as we all know, risks passed on to Tier 1 contractors are
32 CABLEtalk AUGUST/SEPTEMBER 2019
invariably dumped on their supply chains.
The Procurement Reform
(Scotland) Act 2014 was introduced to bring about greater fairness and transparency in the procurement process. It places a duty of sustainable procurement on public bodies, which includes improving SME access to public procurement. Again, this has made little difference.
Te need for a regulator Changes in the way that public bodies procure will not happen of their own accord. This is the reason for the campaign run by SELECT and SEC Group Scotland to persuade the
OUR KEY MESSAGES ON PUBLIC SECTOR PROCUREMENT
●●No retentions or, at least retention monies to be protected ●●Public bodies should insist on using Project Bank Accounts to ensure everyone is paid within 30 days ●●Public bodies should collect data on the payment performance of all
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